New report urges action against Huawei, ZTE

New report urges action against Huawei, ZTE
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A new report is urging the Trump administration to take action against a pair of Chinese telecommunication giants over the firms’ alleged misconduct, including claims that they work on behalf of the Chinese state government.

“Huawei and ZTE represent a serious, long-term national security threat to the U.S. that expands exponentially with the advent of 5G,” reads the report released from researchers at The National Security Institute (NSI) housed within George Mason’s Antonin Scalia Law School.

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"Both Huawei and ZTE have their origins in the Chinese state, remain integrated with the Chinese Communist Party, and are bound by Chinese law and policy to serve state security and economic interests," it continues.

The report refers to past allegations that Huawei has offered bribes in order to further its agenda, and that both companies have violated sanction orders issued by the U.S.

“Both companies have a history of actions ranging from troublesome to illegal — involving bribery, corruption, and sanctions evasion, as well as a record of supplying technological tools being deployed by authoritarian regimes to suppress dissent."

The crackdown recommended by the report’s authors, Andy Keiser and Bryan Smith, would include an investigation from the Department of Commerce into the companies for potential trade violations and calls for the Department of Justice require representatives from the firms register as foreign agents.

“The National Security Council and the National Economic Council should devise a strategy to counter any Chinese retaliation,” the report states.

The report also calls for the State Department to work with security allies to “adopt protections” as well as to condition the participation of Five Eyes allies, which includes the U.S., the U.K., Australia, New Zealand and Canada.

Both companies have faced bipartisan scrutiny in the U.S. over their alleged ties to the Chinese government.

Lawmakers from both parties rebuked President TrumpDonald John TrumpConway defends herself against Hatch Act allegations amid threat of subpoena How to defuse Gulf tensions and avoid war with Iran Trump says 'stubborn child' Fed 'blew it' by not cutting rates MORE last year when he sought to lift restrictions on ZTE even after the Commerce Department determining that it had violated U.S. sanctions.

The administration eventually lifted those restrictions, despite the widespread outcry.

The NSI researchers say this effort to evade sanctions was the "most serious" violation of a Chinese telecommunications company to date.

“The most serious, proven violation by a Chinese telecommunications company was ZTE’s massive conspiracy to evade U.S. sanctions,” the firm says. ZTE admitted last May to "committing 380 violations of U.S. sanctions and engaged in an elaborate scheme to prevent disclosure to the U.S. government, including forming a group to destroy, remove and sanitize all evidence relating to its dealings with Iran.”

Huawei is now in the spotlight, with several lawmakers in recent weeks offering up legislation that would crackdown on Chinese telecommunication firms. The Wall Street Journal also reported earlier this month that federal prosecutors have opened a criminal probe into Huawei for allegedly stealing trade secrets from American companies.

Tensions escalated after Canada arrested Meng Wanzhou, the chief financial officer of Huawei and the daughter of founder Ren Zhengfei, for allegedly violating U.S. sanctions on Iran. 

Since the arrest, which was made at the request of the U.S., three Canadians have been detained in China.

The U.S. is expected to move to formally extradite Meng from Canada, according to reports citing Canada's ambassador to the U.S.

The report warned that the country has retaliatory options prepared to hit the U.S.’s estimated $23 billion in annual telecommunications and internet exports to China.

“Beyond tit for tat, Beijing could attempt to link U.S. restrictions on Huawei and ZTE to the U.S.’s two broad and critical U.S. policy interests with China — reducing unfair Chinese trade practices and gaining Chinese support in persuading North Korea to denuclearize,” the report warns.

The alleged theft of intellectual property by the Chinese has also played a significant role in the trade dispute between the U.S. and China, with administration officials saying no deal can be reached unless China agrees to stop the practice. China has denied the theft of any trade secrets.

The report, however, points to a series of ties that these two companies operate with the Chinese government. These ties, the experts warn, could also pose a serious threat to U.S. national security including the cybersecurity and espionage risk of having Chinese-linked companies operating inside U.S. 5G internet networks.

“The most direct threat is from Huawei and ZTE equipment and services being deployed in the U.S.,” the report says. “Potential U.S. vulnerability only grows as 5G enables connected devices and applications to flourish, becoming a central part of commercial and national security operations.”