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The European Union has come under intense pressure from U.S. President Donald Trump to block equipment made by Chinese tech giant Huawei from its 5G networks. Now, a new administration is set to take power in Washington and the 27-member bloc is anticipating what stance it will take in relation to China.   © Illustration by Michael Tsang
Asia Insight

EU hopes for 'tech alliance' with Biden after Trump Huawei 5G ban

But cutting dependence on cheap Chinese network equipment to keep testing allies

GIANNIS SEFERIADIS, contributing writer and RHYANNON BARTLETT-IMADEGAWA, Nikkei staff writer | Europe

ATHENS/LONDON -- The year 2020 marked a major shift in Europe's policy toward Chinese tech giant Huawei in that the company will be excluded from fifth-generation digital infrastructure in most European Union member states.

But on another front, it was a different story. The EU and China finalized a comprehensive investment agreement in December despite differences over human rights. The deal will create opportunities for European companies in China but could also spur disgruntlement toward the EU from the incoming government of President-elect Joe Biden and Vice President-elect Kamala Harris, set to be sworn in on Jan. 20.

"The Biden-Harris administration would welcome early consultations with our European partners on our common concerns about China's economic practices," Jake Sullivan, poised to serve as Biden's national security adviser, said in a tweet, hinting at Washington's eagerness to start building a united front in relation to the Asian giant.

But like Janus, the two-faced god of ancient Roman mythology, the EU continues to see China as both a rival and a partner. So how will that influence the 27-member bloc's relations with the U.S. under Biden?

President Donald Trump has pressured Western allies to exclude Chinese tech giant Huawei from 5G networks, claiming national security risks such as key information ending up in the hands of Chinese authorities, something the company has denied. "Huawei remains committed to serving our customers and partners. We offer some of the best solutions and products on the market," it said in a written statement to Nikkei Asia.

For European countries that already procured Huawei's price competitive equipment for their existing networks, banning the company from the 5G rollout has been a difficult decision. Europe was stuck between "the US, the biggest problem, and China, the biggest fear," Jeremy Shapiro, research director of the European Council on Foreign Relations, wrote in an essay on Europe's digital sovereignty, or reducing dependence on cheap Chinese gear.

In January 2020, the European Commission -- the EU's executive branch -- recommended that member states "avoid dependency on suppliers considered to be high-risk." In response, some countries went for an all-out ban on Huawei, while others only restricted its core components.

In order to coordinate the various approaches, the European Court of Auditors, an EU institution auditing the EU's budgets and policies, announced last month that it would conduct an audit over the deployment of 5G networks in member states.

"Member states have had diverging responses regarding cooperation with China on 5G," Annemie Turtelboom, the European Court of Auditors member leading the audit, told Nikkei Asia. "[W]e launched an audit on the security of 5G networks in the EU," she said, adding: "One of the key topics is whether the EU member states have a concerted approach towards implementing secure 5G networks. Our audit also touches upon the role of vendors such as the Chinese Huawei."

A woman attends the "2020, The Year of 5G for Europe" conference at the the Huawei Cyber Security Transparency Centre in Brussels on Jan. 16, 2020. European countries are increasingly avoiding the Chinese technology company's equipment as they upgrade to 5G networks.   © Reuters

Though it left the EU completely on Jan. 1, the U.K. was one of the first countries to take decisive action against Huawei in Europe. Initially only excluding the company from core components, the government decided on a total ban in July last year and said that telecom companies should not have Chinese equipment in their networks by 2027.

A growing number of lawmakers within the ruling Conservative Party had started to demand that the U.K. reduce its dependency on China, amid deteriorating bilateral relations over Beijing's treatment of Hong Kong and distrust around the initial response to the outbreak of the coronavirus early last year.

When the U.K. was making its initial decision on Huawei's 5G infrastructure involvement at the beginning of last year, Trump had reportedly threatened there could be a negative impact on free trade negotiations between the countries and suggested the result could compromise bilateral intelligence sharing to pressure London into excluding the Chinese company.

That marked the starting point for a wave of Huawei exclusions in Europe.

On the other hand, Germany, the country boasting Europe's largest telecommunications market, has been cautious on a total ban. Chancellor Angela Merkel first ruled out the possibility of blocking Huawei but after pressure from Washington she had to manage a dispute within her coalition government over the issue.

Hardliners were the Ministry of Foreign Affairs, controlled by the junior coalition partner Social Democratic Party, and the Federal Intelligence Office. Alternatively, the business sector assumed a softer position, arguing that Huawei should be curtailed but not excluded as a total ban would impede Germany's digital transformation. Fast forward to last month and Germany discussed a draft law that would restrict Huawei's access to critical components of the country's network, stopping short of an all-out ban.

The coronavirus pandemic also influenced European policy decisions as the global health crisis has become a catalyst for the EU's realization that its digital infrastructure is dependent on external actors.

"After the COVID-19 pandemic, many politicians in the West realized that telecommunication is a fundamental infrastructure of modern society, likewise electricity and water," said John Strand, head of Denmark-based telecom advisory group Strand Consult. "Taking into consideration the escalating aggressive behavior of China, like in Hong Kong, Europe came into the realization of the security risks in doing business with Chinese companies," Strand said. "Europe actually realized what the U.S. had realized years before."

Trust in China was also diminished due to its initial coronavirus management in the city of Wuhan, attempts to spread disinformation about the virus in Europe and cyberattacks by Chinese hackers to critical facilities in the EU such as hospitals.

As a result, European states one after another sought ways to reduce their dependency on Huawei equipment.

French authorities have told telecom operators planning to buy Huawei 5G equipment that they won't be able to renew licenses once they expire, effectively phasing the Chinese company out of France's mobile networks by 2028. Eastern European countries where China had a large influence through the Belt and Road Initiative signed a deal with the U.S. and joined the U.S.-backed Clean Network initiative that aims to limit Huawei's role.

Greece, a country where the 4G network depended 52% on Huawei gear, decided to exclude the company, opting instead for Sweden's Ericsson to provide its core network. And in June 2020, Athens joined the Clean Network which by the end of last year had grown to include every EU member but Hungary.

Keith Krach, the State Department undersecretary leading the initiative, told Nikkei that the future of EU-U.S. tech relations lies in "continued alignment based on the success of the Clean Network alliance of democracies."

But the EU's policy change on Huawei could become a burden on Europe's new digital era. A Strand Consult report shows that in 2019, Huawei had 44% of 4G network customers, while in 16 out of 31 European countries more than 50% of 4G equipment comes from Chinese vendors.

Given the EU's weak post-pandemic economic outlook, it remains unclear how states will find the resources to invest in their 5G digital transformation while at the same time achieve digital sovereignty. In that sense, the role of European companies such as Ericsson and Finland's Nokia could be crucial.

"The EU worries about digital sovereignty, but 5G does not raise this issue since the U.S. depends on European telecom suppliers," said Jim Lewis, a senior vice president and director of the Strategic Technologies Program at the Center for Strategic and International Studies. "That makes it a good starting point for a new alliance of democracies."

And while Biden is preparing to lead a new U.S. administration, all eyes are on his position on China. Will he be hawkish like Trump or more dovish like Barack Obama, whom he served for eight years as vice president?

A veteran British diplomat, for one, thinks things ultimately won't change much for Huawei.

Peter Ricketts, former permanent undersecretary at the Foreign and Commonwealth Office and who was the U.K.'s first national security adviser, told Nikkei that U.S.-China tensions will continue in the high tech sector, stressing a big shift in the U.S. over the last five years. "A tough China policy is bipartisan now in America," he said.

"I think maybe Biden will put less emphasis on tariff wars, and more on the issue of high tech sovereignty, supply chains, ensuring that the Western countries keep control of key technology, don't outsource it to China," Ricketts said. He also suggested that Biden is likely to tell allies to look to the West for solutions rather than to Chinese technology by using Western supply chains for important technological infrastructure.

As the world readies for the Biden administration, the European Commission announced last month areas where it hopes to cooperate with the U.S. Besides COVID-19 and climate change, 5G was among issues on the list. "The EU will also propose to the U.S. to build on Europe's technological leadership to press for secure 5G infrastructure across the globe," it said. "This should be part of wider cooperation on digital supply chain security."

Some expect that could have a positive effect on the trans-Atlantic alliance undermined during the Trump administration.

"The U.S., with Japan and Europe, developed policies for secure 5G supply chains," said Lewis from CSIS. "That effort creates the possibility of a 'tech alliance' with the EU. Rebuilding the trans-Atlantic partnership is a priority for the Biden administration."

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