December 10, 2023

In 2019, the White House declared that the phone and internet gear of Chinese tech companies should be torn from every corner of the United States because it posed an unacceptable risk of snooping or sabotage by the Chinese government.

More than three years later, most of the equipment still exists.

Today I’m going to see how the US handles equipment from two Chinese companies, Huawei and ZTE. I’ll explore what this can tell us about the U.S.’s ability to effectively deal with concerns about other Chinese technologies, such as apps like TikTok, and its efforts to become more self-sufficient in computer chip manufacturing and design.

Technology will no longer be the near-monopoly of the United States as it has been in the past half century, and the United States needs to develop and execute plans to help it benefit from global technological developments while protecting American security and innovation. But the story of Chinese gear shows that we still have a long way to go.

Some U.S. officials see continued use of Huawei and ZTE equipment as a graveyard threaten National security of the United States. Other policy experts I spoke with said the risk it poses is negligible, and it may not be worth removing all devices right away.

To be clear, the U.S. said the Chinese tech ban was urgent, but failed to make it stick.

Removing Huawei and ZTE equipment, which is mostly used in rural America, is no mean feat, and pandemic-related complications have made it worse. But critics of the U.S. approach also say the way officials have handled it hurt U.S. businesses and consumers without making the country safer.

Let me get back to how this all started. For about a decade, U.S. officials have said repeatedly that phones and internet equipment from Huawei and ZTE could be used as a gateway for Chinese government espionage or to interfere with basic U.S. communications. The warnings persuaded America’s largest phone and internet companies, such as AT&T and Verizon, to stop buying such equipment.

Almost everyone in the U.S. government and business community working on the issue says it’s the right thing to do. (There is less consensus on whether it would be wise to restrict Huawei smartphones.) Huawei and ZTE have consistently said these security concerns are unfounded, and the U.S. government has never provided public evidence to support its allegations.

Smaller companies, mostly in rural areas, did not strongly oppose buying equipment from Huawei and ZTE. A good chunk of them continue to buy goods from these companies, such as devices like home internet modems and devices used to bounce mobile signals.

The U.S. government has declared that the risk is too great. Starting in 2019, the U.S. effectively ordered all companies with Huawei and ZTE equipment to replace them. The government has promised taxpayers money to help buy similar equipment from U.S. or European companies.

The FCC has estimated the cost of replacing Chinese equipment about $2 billion. Updated estimates disclose Last month it was shown that it was approximately $5 billion. It will take time for the FCC and Congress to figure out how to pay the small telcos what they say they need. At the same time, many of these suppliers have not even started replacing equipment from Huawei and ZTE, such as Politico report last month.

There are many accusations as to how this happened. Congress imposed a mandate on small companies and then failed to deliver on the money. U.S. officials have debated which types of Huawei and ZTE equipment should be replaced. Delays and confusing official information have slowed the process.

Naomi Wilson, an Asia policy expert at ITI, a trade group for US technology and telecommunications companies, told me that initial estimates for replacement equipment were the best guesses, but turned out to be too low. Inflation, supply chain issues and the trade war between the U.S. and China have pushed up prices.

The big question is whether the drama can be avoided. I asked Paul Triolo, senior vice president of China at Albright Stonebridge Group, a strategy firm, whether the U.S. had a good plan that was wobbly, or that the strategy was misguided in the first place. He said a little of both.

Triolo said the U.S. government could have phased out Huawei and ZTE equipment over a number of years — similar to what the U.K. has done — and quickly removed certain types of Chinese near sensitive locations, such as near military installations equipment or equipment. While the U.S. says it needs to quickly de-risk the equipment, all of that stuff remains, he said.

Triolo and some other China policy experts I spoke with worry that the U.S. approach to Chinese tech is not always effective or focused on the right things.

The United States is also concerned that TikTok or other apps from Chinese companies could steal sensitive data on Americans or spread Chinese government propaganda. Policymakers have yet to figure out how to address these concerns or make much progress in China’s relentless cyberattacks on U.S. government agencies and companies.

Officials have not always had a consistent message on building a homegrown computer chip industry to counter China. If the U.S. wants to keep American technology strong, it can do more to support immigration of technologists or repeal Chinese tariffs that hurt Americans.

In theory, the U.S. can do it all. Officials can insulate the country from potential foreign dangers and invest the necessary time, money, and ingenuity to support the best policies for American innovation. Instead, we have some parts that haven’t yet added up.

Read past On Tech newsletters on how the U.S. is responding to Chinese technology:

  • Taiwan produces the most important electronic equipment on earth: My colleagues Paul Mozur and Raymond Zhong explain why advanced computer chips are part of the context of Speaker Nancy Pelosi’s controversial Taiwan visit this week.

  • There is no simple blueprint for internet fame and fortune: The how-to course suggested that people could become famous online by paying freelancers to create YouTube videos with similar ingredients, such as invisible narrators, catchy headlines, or top 10 lists about celebrities. My colleague Nico Grant reports that this can’t-lose proposition is certain to lose.

  • She makes a living by roasting hot guys online. Bloomberg News, Drew Afualo, who made some of the most popular TikTok videos, verbally slams people for racism, fatphobia and misogyny report. (Subscription may be required.)

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