US Secretary of State Mike Pompeo’s claim that ‘the tide is turning against Huawei’ seems to have been vindicated by a series of negative decisions in European countries regarding Huawei’s involvement in their next-generation telecoms networks. Most notably, the UK government has changed its’ February decision allowing Huawei’s participation as a ‘high-risk vendor’, in consequence of a new security review.  Similarly, the new progress report on implementation of the European Union’s ‘5G Toolbox’ risk mitigation framework recommends member-states to establish plans to phase-out ‘high-risk suppliers’.

These developments reflect growing distrust of China around Europe aggravated by Chinese economic practices, the COVID-19 pandemic and events concerning Hong Kong. They coincide with enhanced US efforts to check expansion of Chinese firms’ global role in 5G networks. Pompeo’s recent call for struggle against Beijing’s totalitarianism as ’the mission of our times’, in which he singled out Huawei, has framed the issue of global 5G leadership in ideological terms. Yet it is doubtful that current US measures add up to an effective strategy for Washington’s declared goal to ‘lead the development… of secure and reliable 5G communications infrastructure worldwide’.

A stepped-up US global campaign against Chinese presence in 5G networks

In March the US government published a ‘National Strategy to Secure 5G’ that aims to ‘promote responsible global development and deployment of 5G’.  The next month, 5G became the leading edge of a State Department-led ‘Clean Networks’ initiative, which was recently expanded to other lines of effort.  Described as an ‘all-of-government, enduring strategy built on a coalition of trusted partners’, the stated objective is to secure critical assets against intrusions by ‘malign actors… such as the Chinese Communist Party’.  The April announcement declared that 5G network traffic entering US diplomatic facilities will need to follow an end-to-end ‘clean path’ that is free of equipment from Chinese vendors.

To address pushback that cites a lack of alternatives to Huawei, US interests have also promoted ‘Open Radio Access Networks’ (O-RAN) as a 5G solution that’s hoped to facilitate growth of a ‘trusted vendor’ community, by opening up network architectures and so disrupting a global telecoms equipment market presently dominated by a handful of vendors.  Two draft bills to support O-RAN development are going through Congress, and the proliferation of O-RAN standardisation groups recently added a US-led and dominated industry coalition that conspicuously omits Chinese members.  The US State Department in May convened a conference on ‘integrated and open networks’ aimed at reconciling competing interests among US and European firms.  This approach was presumably pushed by Trump’s National Security Adviser during his July visit to Europe’s 5G battleground states.

But the critical factor leading third parties to reconsider Huawei has been expanding US export controls to penalise foreign parties that supply Huawei with components for its most advanced equipment, including 5G base stations. By cutting Huawei off from the Taiwanese firms that manufacture cutting-edge processing chips using US-origin technology, the US government has cast a shadow over the firm’s ability to deliver on third countries’ 5G infrastructure roll-outs. 

Even if Huawei successfully substitutes non-US controlled technology to deliver products with a comparable performance level – a massive re-engineering exercise that would probably take years – this re-engineering effort will harm customers’ confidence in the equipment’s reliability and security. This latter factor was cited by the British government as the reason for its changed security assessment. 

This is a textbook case of ‘weaponized interdependence’, with the US government leveraging control by US firms of upstream technologies in the global semiconductor supply chain to exert power against China and, indirectly, against those allowing Huawei even a limited role. Yet the same interdependencies raise doubts about the long-term viability of this approach.

No silver bullets: O-RAN and export controls

O-RAN is not a stand-alone 5G solution that can be developed from ground-up by a ‘trusted vendor’ community. It builds on existing standards developed through a transnational collaborative process in which Chinese contributions have been foundational, and through which Huawei has – arguably – become the largest single holder of 5G standard essential patents. The leading industry group promoting O-RAN still has various Chinese contributors. Even if ‘open architecture’ 5G networks were equipped wholly by vendors deemed ‘clean’ by Washington, they would be built on Chinese patents with royalties payable to Chinese firms. 

Diverging from this common foundation raises the prospect of incompatible standards ecosystems, without certainty that foreign firms and governments would choose a US-led ecosystem – unless Washington starts applying significantly greater pressure. Whether this is achieved by the ‘Clean Networks’ program remains to be seen, but the history of ‘open’ approaches to ICT progress means that non-US actors may well perceive a US-led, Chinese-exclusive O-RAN market as a vehicle for oligopoly by US firms.  This would align neither with other countries’ ambitions for ‘digital sovereignty’, nor incentives of the existing oligopoly.

At this stage of O-RAN’s development, telecom operators seem reluctant to bet nationwide 5G roll-outs on solutions that lack proven deployments at scale, established systems integrators, or performance competitive with Huawei’s current offerings. Meanwhile, the transnational 5G standards-setting process keeps adding functions that enable real-world applications – the real prize motivating countries to lead in 5G. Washington recognised this reality in June by relaxing export controls so US firms can exchange information with Huawei in global standards-setting forums, in order to ‘not cede leadership in global innovation.’

US export control measures have undermined Huawei’s prospects outside China, but their long-term efficacy is uncertain.  ‘Weaponizing’ networks of interdependence leads those affected to develop alternative networks insulated from these effects. Indeed, non-Chinese players in the semiconductor ecosystem are already taking steps to circumvent US export controls, or openly lobbying against them. The US government’s capacity to monitor work-arounds by US firms and foreign competitors while coordinating responses is questionable, while the growing role of open-source development further complicates the challenge. The history of US export controls failing to prevent technological diffusion raises doubts that they will preserve the level of US dominance allowing the current knee-capping of Huawei.

A fragmented 5G world?

Unless Washington significantly raises the stakes, the odds seem against most nations committing to 5G networks that are ‘clean’ of Chinese technology.  Most will keep seeking the middle road typified by Singapore, which in June announced that European vendors will supply its major 5G network cores without excluding Huawei, while also signing agreements to accelerate national integration with China’s Shenzhen-oriented digital tech-ecosystem. Others, like Japan and India, appear to be hedging by indigenising development of next-generation networks, potentially accelerating global technological fragmentation. 

Even in Europe, the situation remains unclear. The ‘5G Toolbox’ progress report urges member-states to institute plans for mitigating extant dependencies on ‘high-risk suppliers’ and avoiding such dependencies in the future. That most have yet to do so is unsurprising, given that Chinese vendors’ share of 4G RAN products across Europe is estimated at over 50 percent. Banning Huawei implies a massive exercise in physically replacing gear, and in the absence of proven O-RAN solutions, at least temporary dependence upon one or two vendors whose equipment may not meet performance expectations. 

Fundamentally, few foreign actors see the 5G issue in Pompeo’s stark ideological terms, while Washington’s capacity to force choices through ‘weaponized interdependence’ will likely be diluted the more it is used. The outcome of a ‘scorched earth’ approach to 5G decoupling is less likely to be a future networked world safe for like-minded democracies, than acceleration of a ‘6G arms race’ and the emergence of a global Splinternet.

An earlier version of this article was published by The Diplomat on July 31, 2020.

The post The global contest for 5G escalates: Huawei, ‘clean networks’ and digital decoupling appeared first on The China Story.

A grand strategic approach

Like any strategic process, grand strategy balances ends, ways and means, seeking an outcome that is feasible given the ‘operating conditions’ and available resources. It is ‘grand’ in uniting actors from across society in a shared decision-making framework, directed at shaping the international order in ways both favourable and sustainable. This provides the best prospect for addressing all aspects of the national interest with all tools available.

Three long-term parameters shape the conditions and resources that Australia has to work with in our policy towards China. First, the economic bases of national power have become transnational. Production and technological progress have become extensively integrated across borders and now leverage global economies of scale. This means that any effort to bring production back within the nation-state, or even a group of like-minded states, will involve significant trade-offs, and a long, messy process of corralling myriads of actors.  

China’s weight in these transnational systems, especially within our region, creates huge inertia against re-arranging such relations by government policy alone. The snowballing costs of the pandemic will constrain the resources available, both for firms to ‘decouple’ from China and for governments to support this, even if the costs of fragmenting global supply chains are deemed worthwhile. Australia’s own trade exposure to China, as well as the importance to Australia of countries with economic ties to China that continue to grow, highlight how the resources needed to pursue national security are bound to the same systems from which insecurity derives.

While some decoupling in some sectors from China is justified, maintaining the means to prosecute an independent national strategy will likely require tolerating a large degree of ‘managed interdependence’ — a system of calibrated exchanges with a sometimes-hostile state. In a similar way to how mutual deterrence and arms control frameworks gave the Cold War a degree of stability despite nuclear arsenals, frameworks are needed to govern economic interdependencies that can be potentially weaponised today.  Devising a logic of strategic assets that integrates the costs and benefits of foreign inter-dependencies for all actors across society is the first step to deciding which exchanges are in the national interest and which are not.

Managed interdependence and fluid politics

Second, national power is increasingly based on leadership in high technology fields that are far beyond Australia’s capacity to independently master, including in computer processors, artificial intelligence, quantum systems and other fields. Progress in these technologies is driven by firms and research actors that leverage transnational networks, markets and labour pools. Again, China’s role in developing and deploying these technologies on a global scale means that our policymakers face a complex balancing act, bringing together government, private sector and university actors to mitigate risks from weaponised interdependence without hurting the future bases of our national power. 

This balancing imperative is reflected in the graduated approach that even the Trump administration has found prudent when expanding export controls against Chinese firms like Huawei. Such caution reflects fear of hamstringing US firms that depend on foreign markets and international collaborations  to maintain technological leadership. To maintain global economies of scale, technological progress cannot simply exclude Chinese actors, but should seek to allow continued collaboration while protecting the most important interests. The European Union’s 5G toolbox provides an example of an approach focused on building high fences around small yards, rather than trying to decouple across the board in a self-harming quest for absolute security.

Third, China is rising in a world where international relations and national interests are fluid. The world Australia had known since European settlement, of dominant like-minded powers and relatively fixed international alignments, has given way to one in which countries are likely to take different stances towards China depending on issues and circumstances. As one official of a key US ally recently put it, fealty on China policy is not on offer. Betting that other states will consistently align against a nation that is their largest trading partner and increasingly prominent in advanced technologies is not a strategic approach to Australia’s China policy.

Using national agency in a changing world

This does not mean that Australia is hostage to the will of foreign actors, or to the forces of a Thucydides trap that will simply sweep us along. Grand strategy is a proactive method, focused on shaping the environment while being adaptable to changing conditions. Other states too have concerns about China’s expanding military power, offshore island-building, prosecution of territorial disputes and quest for leadership in strategic technologies, which all provide levers for Australian foreign policy. The key will be flexibility: a commitment to working not just with ‘like-minded partners’ but with all actors as necessary, including China itself.

Grand strategy is important because Australia has agency to pursue its national interest. The challenge is to use that agency in a world with ‘operating conditions’ very different from those in times past, and to define the ‘national interest’ in a way that incorporates all of Australian society. This will serve to harness all our resources towards common goals.  Focusing on threats stemming from the political nature of the Chinese Communist Party, or on commercial benefits from engaging with China, will not provide a sustainable foundation for long-term policy.  A truly strategic approach starts from uniting actors from across society in an agreed and integrated use of national power, and from recognising the structural conditions for a realistic policy towards a rising China.

The post Principles of Australian grand strategy for China appeared first on The China Story.

Uneven 5G roll-outs stoke concerns about China

By the end of April, China’s three state-owned telecoms operators had awarded nearly $US10 billion worth of 5G equipment contracts.  These three operators are projected to collectively spend $US25.5 billion on 5G equipment over 2020, installing half a million base stations that will provide 5G coverage to every city in China.  So far nearly 90 per cent of contract value has gone to the Chinese firms Huawei and ZTE, with Sweden’s Ericsson receiving around 10% and Finland’s Nokia nothing to date.  Given Huawei’s extensive presence in European telecoms networks, this will fuel discontent over China’s reciprocity in affording market access to foreign firms. 

Coronavirus-induced delays to 5G roll-outs in Europe have amplified concerns that China’s state-led drive to 5G connectivity will help Chinese firms capture the first-mover advantages that will likely follow in development of the technology and commercial applications.  Anger over China’s propaganda campaign concerning the pandemic has amplified growing wariness about Chinese companies’ presence in European economies.  Even in the UK, which in January green-lighted Huawei’s involvement in its’ 5G networks, the Foreign Secretary has warned that “we can’t have business as usual [with China] after this crisis”, while a Parliamentary caucus has been established to ‘promote fresh thinking’ about commercial engagement with Chinese interests.

Likewise citing China’s alleged cover-up of the pandemic’s origin as justification, the US government is now threatening to revoke operating licenses for Chinese telecoms firms, as it conducts a “bottom-up review of every single company that could be controlled by the communist regime” and whether they should be allowed to connect to US networks.  This darkening US regulatory environment is now retarding global telecoms infrastructure connections to China.

China’s imperatives for upgrading to 5G

In this context, China has redoubled efforts to leapfrog the US and Europe in the race to next-generation digital networks.  China was already committed to rapidly building-out next-generation information infrastructure and constructing an ‘internationally leading mobile telecommunications network’ by 2025.  Expanding US export controls on transfers to Chinese firms are driving the latter to accelerate development of alternative suppliers and indigenous capabilities, with Huawei now shipping large numbers of 5G base stations without US-origin technology.  The combined effect of US government-imposed restrictions and Chinese telecoms operators’ vast demand for first phase 5G deployment is re-shaping the supply chain for supporting technologies such as optical transmission components, with Huawei starting to supplement US suppliers with in-house capabilities.

These imperatives have been amplified by the global pandemic.  Rapid expansion of 5G services is aimed at enabling industrial automation to help Chinese enterprises cope with coronavirus restrictions, and at ‘unleashing new consumption potential to offset the epidemic’s [economic] impacts.’  Meanwhile, with export markets depressed and China’s domestic demand unable to fuel private sector expansion, state-led investment in new infrastructure will be needed to achieve even trimmed GDP growth targets likely to be announced at next month’s national ‘two sessions’.

Achievement by winter 2020 of nationwide first-phase 5G deployment and commencement of the second-phase build-out of full stand-alone services would showcase the dirigiste aspect of China’s economy, with state-owned firms driving procurement for base stations and construction of the infrastructure back-end, facilitated by cooperative provincial governments across the country.  Exploiting this infrastructure’s potential falls to Chinese private firms and their proven ability to quickly develop and scale out commercial use cases.

Global fragmentation in telecommunications technology?

Such aggressive scaling underpinned the varying success of national economies in capturing value from 4G mobile networks, at the expense of foreign competition.  This will likely be even more true for 5G, as it enables transition to a world in which the Internet facilitates not just communication, but the thorough integration of digital technology with the physical world.  Chinese firms leading this transition could expand into foreign markets and lock foreign economies into technological ecosystems that amplify the already massive gravitational pull of China’s economy.

One potential game-changer are non-proprietary network architectures that open up the supplier field, with the recent launch of a virtualised 5G network by Japan’s Rakuten offering a potential model for multi-vendor solutions.  The international Open-RAN industry alliance has attracted digital sector leaders to support development of such open network architectures.  Elements within the Trump administration are coordinating with US corporate giants to ‘create an American soup-to-nuts infrastructure for 5G’, and a bill before the US Senate would commit over $1 billion towards promoting O-RAN and thereby “Western-based alternatives to… Huawei and ZTE.”  The recently announced ‘Open RAN Policy Coalition’, dominated by US companies and directed by an ex-Trump administration official, completes the picture of a US effort to establish viable alternatives to the proprietary network solutions upon which Huawei has built its’ market leadership.   

Yet O-RAN remains shadowed by concerns about performance and scalability, with one senior US official calling it ‘pie in the sky’ next to China Inc.’s roll-out of established network technology.  Apart from the US no longer having the industry profile to dominate O-RAN development, the numbers associated with it pale next to the $20 billion Huawei will spend on R&D this year, or estimates that China will account for almost half the global 5G market over the next few years.  Promotion by Washington’s fiat of 5G solutions excluding Chinese firms is less likely to preserve US leadership in cellular telecommunications than to drive global market fragmentation. 

This would jeopardise the economies of scale and transnational industry collaboration that has fostered the rapid development and global spread of cellular networks.  In a fragmented world, technological leadership would go increasingly to those fragments with greater size and dynamism.  And in a world of pandemic-depressed economies, this appears for the moment to be China’s game.

An earlier version of this article was published by The Diplomat on May 6, 2020.

The post China steps up the long march to 5G appeared first on The China Story.

Exporting digital authoritarianism?

Recent reporting by the Financial Times (FT) claims that China is on a “mission to reinvent the Internet”. It concerns a proposal made last September to the International Telecommunications Union (ITU) for a ‘New IP’ to replace the current Internet Protocol (IP), which determines how data is transmitted across the Internet. Chinese interests allegedly plan to “push through the standardization of New IP” at the ITU conference this November.  

Citing inadequacy of the Internet’s current architecture to meet future requirements, the Huawei-led proposal advocates a ‘top-down design’ to replace the extant modular architecture. The FT paints a picture of closed-door efforts by China Inc. to “embed a system of centralised rule enforcement” through the state-dominated ITU, giving telecoms operators, and hence governments, control over access to the Internet at the expense of civil society. The result would be to “bake authoritarianism into the architecture underpinning the web”.

This claim may have intuitive appeal, but is a stretch from the documents obtained by the FT (which were in fact already publicly available online). The September proposal only suggests principles to guide research over the ITU’s next study period (2021-2024), reflecting arguments made in Huawei documents (also publicly available) going back at least two years. Another document given to the FT – which is not an ITU submission, but a paper for an April 2020 professional conference – provides some technical details, but nothing resembling the centralised “shut up command” allegedly described by Huawei at the September meeting. Collectively, these documents are a slim basis on which to finalise a lengthy ITU standard by November.

The most tangible concern raised about ‘New IP’  is that “internet service providers…would have control and oversight of every device connected to the network”. This reflects similar concerns raised around IPv6, which was agreed a quarter-century ago as the Internet’s next-generation standard, concerning the increased potential for surveillance and control. Yet governments from Japan to the European Union are transitioning to IPv6, for the good reason that IP addresses available under the previous standard are running out. China began work on an IPv6-based ‘Next Generation Internet’ in 2003, showcasing applications at the 2008 Beijing Olympics.

Internet standards are always political

With IPv6, privacy concerns were partially addressed by removing physical identifiers from the standard’s specification. Likewise, the potential for ‘New IP’ to enable state authoritarianism seems far from ‘baked in’, and it should not be viewed with suspicion simply because it comes from Chinese actors. There is an arguable case for Huawei’s claim that “IP technology has not kept up with the needs of the industrial Internet.” By comparison, the European Telecommunications Standards Institute has just launched its own process to develop non-IP networking technology better suited to the Internet of Things.

Internet standardisation has always been political. Selection of IPv6 reflected a contest for control between a hierarchical process dominated by governments (the ISO) and an engineering community dominated by American ICT firms (the IETF). In the 1990s, telecoms operators used the ITU to promote a competing networking standard to IP, the successful technology being ultimately decided by market forces.  

Likewise, the debates around ‘New IP’ are less likely to reflect a novel Chinese master plan for exporting digital authoritarianism than the long-entrenched institutional politics of Internet design.  As one response put it, “evolution [of the Internet] should take place from within the organisations that invented the Internet” and “build upon existing structures”, whereas ‘New IP’ “represent[s] a departure from the Internet’s fundamental values”.  The issue with the proposal is less that it comes from Chinese actors than that it threatens orthodox principles of Internet design such as interconnectivity and bottom-up ‘permissionless innovation’, raising the prospect of a greater role for hierarchical, proprietary development and state-dominated institutions.   

China and technical standards

The FT’s reporting raises questions about how we view increasing involvement by Chinese actors in global technical standard-setting. These processes do reflect competing interests, but they do not “magically embed better or worse values” in technology: the politics that technology enables are expressed through social environments involving many actors, interests and relations of power. We need to examine this context before we can conclude that ‘New IP’ represents a Chinese conspiracy to enact authoritarianism worldwide through the Internet.

The Chinese Communist Party (CCP) has limited incentives to redesign the global Internet from the bottom up simply to enable political repression. Cyberspace inside China has already been largely secured against domestic challenges, through a combination of regulatory and technical measures that leave no place to hide. At the international level, Chinese actors have already made attempts at changing the global domain name system to allow a nationally configured Chinese Internet, enhancing authorities’ control over which websites can be accessed within China’s borders.

Yet China’s networks remain connected and compatible with the global Internet. Xi Jinping himself has made clear that China’s development requires a balance to be struck in cyberspace between control and openness. Given the massive benefits China reaps from the global interoperability of networks that characterises the current Internet, the CCP has a strong interest in not fragmenting it, as critics have claimed that ‘New IP’ threatens to do.

‘Reinventing the Internet’ would require influencing the whole array of institutions and interests that shape this global technological artifact. While this proposal by Chinese actors might move the distribution of Internet design and governance in new directions, this implies neither a monopoly of Chinese interests, nor the absence of technical justifications that have nothing to do with the CCP’s ideology. ‘New IP’ has after all emerged in an environment where increasingly, “traditional notions of Internet freedom are disconnected from actual technical, political and market conditions”. 

What are China’s interests here

Seen in this context, the goals behind ‘New IP’ are more likely to be what the documents say they are: enabling new economy applications that China, and the CCP, has hitched its future to.  In a world where the Internet is ‘in’ everything, leadership of Internet design is a path for Chinese firms to capture first-mover commercial advantages. Unsurprisingly, criticism of ‘New IP’ by the IETF and American business lobbies has focused on how it would promote monolithic (rather than heterogeneous) development of the Internet, and thereby “certain technical leadership ambitions.”

Beijing does in fact have well-publicised political goals for transforming global Internet governance, in line with a vision of national ‘Internet sovereignty’ that is both state-centric and adaptable to evolving conditions. But this doesn’t mean that every technical proposal from Chinese firms is a Trojan horse for authoritarianism. The role of Chinese actors should be measured against political and technical realities, not against a fetishized ‘free and open Internet’ ideal that many would argue has already failed. 

The post Will China reinvent the Internet? appeared first on The China Story.