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DONE DEAL?

Britain’s Huawei decision will be its first major trade test in a post-Brexit world

Huawei
Reuters/Edgar Su/File Photo
To Huawei or not too Huawei.
Jane Li
By Jane Li

China tech reporter

After two misses, the UK is finally set to leave the European Union on Jan. 31, a move that will reshape its trade relations with the rest of world. While many of the implications remain TBD, Britain is already facing one of its first major challenges: how to tread a fine line between China and the US.

At the core of the issue is Chinese tech giant Huawei, the world’s largest telecom equipment maker, which is waiting to hear from the UK in coming weeks on how it intends to deploy the firm’s equipment in its 5G network rollout. Washington, which has long seen Huawei as a major national security threat, is urging London to ban the Chinese firm from building its next generation of wireless networks—US envoys, including from the National Security Agency (paywall), will be in the UK today for last-mile lobbying. Citing these security concerns, the US put Huawei on trade blacklist last May, cutting off the company from US suppliers.

China, for its part, has also been exerting pressure on the UK, as well as other European countries. Its went as far as to threaten Denmark that it would drop a trade deal with a self-governing Danish territory over the matter, while the Chinese ambassador to Germany warned that there would be “consequences” if the country excludes Huawei. Deutsche Telekom has frozen 5G deals for the moment.

London’s decision on Huawei is a tough one. It’s hoping to deepen its special relationship with the US, its largest individual trading partner, with bilateral trade crossing more than $260 billion (£200 billion) in 2018. In the run-up to Brexit, prime minister Boris Johnson has made it clear he’s keen to secure a favorable trade deal with the US, with political observers noting that calculus shaped his careful response to the US killing of a top Iranian general. Acceding to US wishes on Huawei could help.

However, Huawei has long been a key provider to the British telecom sector, and there aren’t a lot of alternatives, meaning that not using Huawei could slow down the UK’s 5G development. While that might be one of Beijing’s own arguments (paywall), it’s also what British telecom firms say. In addition, with the post-Brexit relationship with Europe still unclear—the bloc is UK’s largest trading partner if taken as a whole—Britain’s $87 billion (close to £70 billion) of trade with China, its sixth biggest trading partner, isn’t insignificant.

Boris Johnson’s comments at a NATO meeting last month appeared to hint the US lobbying is proving successful. The prime minister noted that the issue of being able to cooperate with key partners on intelligence-sharing “will be the key criterion that informs our decision about Huawei.” As part of its lobbying, Washington has warned that its intelligence-sharing with the UK could be curtailed if the latter decides to use Huawei, though the head of Britain’s MI5 on Sunday (Jan. 12) said he didn’t expect using Huawei’s equipment to hurt such cooperation.

The delay in announcing a clear stance, however, means the decision might have to bow to the existing situation on the ground. British telecom firms have already started using Huawei equipment in “non-core” parts (paywall) of the next-generation wireless network, in line with a leaked decision reached by the Theresa May government last year. In October, Huawei said it had secured more than 60 commercial 5G contracts (paywall), about half of them with European carriers, including several British ones.

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