Trump’s Huawei Concession Leaves Stakeholders Guessing Effects

Trump announced Saturday he will let U.S. companies resume shipments to Huawei, though that company for now remains subject to Commerce Department Bureau of Industry and Security export administration regulations and entity list restrictions (see 1905160081).

“It will leave many U.S. allies and partners frustrated,” said Zack Cooper, China expert at the American Enterprise Institute. “For the last few months, the United States has been pushing its friends to take a harder line on Huawei and other Chinese companies, but the announcement that the United States is itself loosening its restrictions on Huawei will undermine these efforts.”

The moves reinforce the perception internationally "that there is a Trump administration policy and a Trump policy, and that those two are quite different when it comes to China," Cooper said. "The president said as much in a press conference over the weekend when he called China a ‘strategic partner’ rather than a ‘strategic competitor’ as the White House’s National Security Strategy states."

The FY 2020 National Defense Authorization Act would be the most immediate legislative vehicle lawmakers could use to rein in a pullback on the Huawei restrictions. But it’s not clear whether there will be enough time or momentum to successfully add effective language, lobbyists told us.

Hill Scrutiny

The NDAA appears to be the obvious way for legislators to make known their displeasure with Trump’s action, but it’s “an open question of how that could be used and if it will,” said New America Cybersecurity Policy and China Digital Economy Fellow Samm Sacks. There’s “bipartisan concern” over perceptions that Trump is now using national security “as a trade tool,” which could lead to a groundswell of support for legislation. In the absence of agreement on attaching anti-Huawei language to the FY 2020 NDAA, “they will probably seek some other tool” to curb a rollback, but “it’s unclear” what that vehicle would be, Sacks said.

The Senate passed its 2020 NDAA version (S-1790) in June without language from any of the three proposed anti-Huawei amendments (see 1906270051). Those proposals included one from Sen. Mitt Romney, R-Utah, on conditions for Commerce to lift BIS' addition of Huawei to the blacklist, including a finding that the company and its executives haven't violated U.S. or UN sanctions and haven't engaged in theft of U.S. intellectual property during the preceding five years (see 1906190054).

There are four proposed amendments to the House version of NDAA (HR-2500) that aim to restrict Huawei, either by name or as part of a group of China-based telecom companies. Two are led by Rep. Mike Gallagher, R-Wis., a frequent critic of China. One mirrors the Romney amendment. The other, co-authored by Rep. Ruben Gallego, D-Ariz., would direct Trump to impose a denial order on any China-based telecom company he finds violated U.S. sanctions or export controls. “Threats from Huawei cannot be mitigated, and the sooner the free world unites around the need for a secure 5G supply chain, the better,” Gallagher said in a statement. “We must act with a sense of urgency.”

A bipartisan proposal led by Rep. Vicky Hartzler, R-Mo., would modify language from the FY 2019 NDAA that bars U.S. government agencies from using “risky” technology produced by Huawei or fellow Chinese firm ZTE (see 1808130064) to also include purchases of Huawei-made video surveillance equipment. Hartzler’s amendment mirrors language earlier sought by Sen. Ted Cruz, R-Texas, in S-1790. A Gallego-led proposal would bar federal agencies from using subsidy funds to buy Huawei or ZTE equipment.

Center for Security Policy Executive Chairman Frank Gaffney believes “there will be strong bipartisan support” for anti-Huawei legislation when Capitol Hill returns next week from its Independence Day recess, “possibly on a veto-proof basis.” Lawmakers failed in their bid to use the FY 2019 NDAA to reinstate a lifted Commerce ban on U.S. companies selling telecom software and equipment to ZTE amid opposition from Trump (see 1807200053).

Gaffney said it will be easier to block a rollback on Huawei. The “groundwork hadn’t been laid” to ensure veto-proof support last year for the stronger ZTE language as has since happened in opposition to Huawei, he said. There’s more consensus now among lawmakers that Huawei is a general national security threat to the U.S., he said.

AEI Resident Scholar Claude Barfield is more dubious of legislative prospects. “Congress hasn’t been very good at stopping Trump on anything related to trade" since he first announced his shift on Huawei, Barfield said: No one is sure what the rollback means in terms of policy. “I doubt anything” to seriously restrict a Trump-imposed rollback of Huawei restrictions will be able to make it through Congress, though the outcry has made the situation “muddy enough now” that the situation is more uncertain, Barfield said.

Huawei Hurt or Helped?

Experts are split on how much Huawei is helped by the recent Trump announcement.

John Strand of Strand Consult said the concessions will help Huawei to only a limited extent. Security concerns “can’t be solved with a new trade deal,” Strand said. Huawei will remain on the entity list, “but some of its suppliers will now be granted licenses to sell their products to Huawei,” he said.

Peter Rysavy of Rysavy Research said Huawei benefits from the concessions. “The biggest security risk for countries is deploying Huawei infrastructure for cellular networks, which the United States is not doing,” Rysavy said. “But Huawei does currently depend on components and software from U.S. companies. Providing these will enable Huawei to remain a global force and to become entrenched in communications infrastructure globally. This will give China huge leverage."

“Looser restrictions should be workable because telecommunications companies and the administration have the same goals with respect to network and customer security,” said Mark Jamison, University of Florida professor who helped the Trump administration organize the current FCC.

Huawei will likely be able to source memory from Micron and other components available elsewhere, Strand said: Rules probably won’t allow Huawei to buy technology from Android, Intel or Intel subsidiary Altera, or Xilinx, which is what the Chinese company really wants. “Operators across the world have put Huawei smartphones on hold; I don’t think that will change” quickly, he said. Consumers and distributors are losing confidence in Huawei, he said. “Huawei´s smartphone business short and medium term will suffer big time.”

Commissioner Geoffrey Starks sponsored a forum on network security last week (see 1906270039). He didn’t comment Tuesday. Starks told an interviewer the administration “is very fully in its lane when they are making trade negotiations” and “that is something that is distinctly assigned to the president and obviously the cabinet secretary in the executive branch.”

“You know what helps with national security policy?” Commissioner Jessica Rosenworcel tweeted over the weekend. “Consistency. This isn’t it."

The Rural Wireless Association commented on last week’s meeting, convened by Starks. “Rural carriers want to safeguard our nation’s security and will follow whatever policies Congress, the White House, and the FCC prescribe,” RWA said in docket 18-89. “To ensure these carriers can continue to serve their current customers and build out service to unserved areas, they will need government assistance.”