Huawei Fight Sees EU Hit by Crossfire in Tech War's Key Battle

(Bloomberg) -- The global tech war over Huawei Technologies Co. saw the European Union come under pressure from both the U.S. and China on Saturday as they fought over whether the company’s equipment should be banned from future 5G networks.

"Chinese law requires them to provide Beijing’s vast security apparatus with access to any data that touches their networks or equipment," U.S. Vice President Mike Pence said at the annual gathering of senior security officials in Munich. "The United States is calling on all our security partners to be vigilant and to reject any enterprise that would compromise the integrity of our communications technology or national security systems."

Chinese politburo member Yang Jiechi was up next on the same stage and he hit back hard.

"Chinese law doesn’t require companies to install backdoors or collect intelligence,’’ Yang said in English, urging the Europeans to consider whether the U.S. had their interests at heart, or its own. "Huawei as a company is cooperating very closely with European countries."

Huawei Fight Sees EU Hit by Crossfire in Tech War's Key Battle

Next-Generation Networks

The pressure is ramping up as Europeans try to work out a common approach toward the risks of using Chinese kit in the next generation of data networks.

Telecom companies are preparing to build out so called 5G networks which will deliver a quantum leap in the speed and capacity of mobile data transmission. But officials are concerned that Huawei equipment could be vulnerable to state-backed hackers and the U.S. has sought to make it a wedge issue in its broader trade offensive against Beijing.

At present the 28 EU members all have different rules on how to protect their communication systems and that has allowed Huawei to get a head start, particularly in eastern Europe and countries where Chinese investment during the debt crisis has given them a bridgehead. A common approach would likely squeeze China’s attempt to extend its footprint.

Test for Europe

But European governments are waiting for Germany, the bloc’s biggest economy, to decide how far to restrict the use of Huawei equipment, rather than making themselves a target for Beijing’s ire.

“5G has become yet another litmus test for European unity,” Janka Oertel of the German Marshall Fund in the United States said in a note published on Friday. "Others expect Germany to take a stand. Smaller EU member states want a joint European position on the issue, which would shield them from the direct gaze of Beijing’s potential anger.”

Chancellor Angela Merkel’s administration has ruled out an outright ban on Huawei and indicated that any restrictions will apply to all potential equipment providers.

"We are in a deep discussion process right now on how to deal with that," German Defense Minister Ursula von der Leyen said in a Bloomberg Television interview in Munich. "We have to figure out how we secure our communication and how we make sure that everyone supplying it is confident and trustworthy. And therefore we are at the beginning of this process but it is an urgent one.”

Chinese Threat

U.S. envoys, meanwhile, have toured Europe to pressure their allies, threatening countermeasures against any nations allowing Chinese equipment to be used in critical infrastructure.

EU officials have recognized the risk of partnering with Chinese companies and intelligence agencies from the continent have increased documentation on potential Chinese cyber attacks. But they are mulling how to deal with the threat without provoking Beijing.

“We are ready to explore new ways with China, but not at the expense of general interest or at the expense of our security interests,” Latvian Foreign Minister Edgars Rinkevics said in an interview Friday in Munich.

Rinkevics said Europeans discussed how to forge a joint approach at a meeting in Bucharest in last month.

“We need more integrated, more common and more cooperative internal EU approach when we are formulating our policy toward China,” he said.

©2019 Bloomberg L.P.