Perry welcomed Chinese firm despite security concern
By Carol D. Leonnig and Karen Tumulty,
It was the kind of scene that Texas Gov. Rick Perry will point to often as he rolls out his presidential campaign: a ribbon-cutting ceremony just outside Dallas, launching a corporate headquarters, with hundreds of new jobs, and validating what he calls his “Texas miracle” of growth.
After a months-long courtship that included a trip to China, where he dined with the company’s chief executive, Perry announced that telecommunications firm Huawei Technologies would base its U.S. operations in Plano. In a video of that October 2010 event — now playing on YouTube, courtesy of the governor’s office — Perry praised the company’s “really strong worldwide reputation” and its chairman, Ren Zhengfei, whose straight talk he said reminded him fondly of West Texans.
While Perry focused on Huawei’s ability to create jobs in a sluggish economy, national security experts in both the George W. Bush and Obama administrations had concluded that the global telecom giant poses a potential cyber-security risk to the U.S. military and businesses. Three times since 2008, a U.S. government security panel has blocked Huawei from acquiring or partnering with U.S. companies because of concerns that secrets could be leaked to China’s government or military.
Perry campaign spokesman Mark Miner said that “if there are national security issues surrounding this company, they should be fully looked at.” He characterized Perry’s main involvement with Huawei as just “a ribbon-cutting for a company that was creating jobs here.”
As the Republican presidential campaign intensifies with Perry’s Saturday entry into the presidential race, trade with China and the sensitive issue of how to weigh U.S. economic interests against security concerns is emerging as a target of GOP politicians.
In last Thursday’s debate in Iowa, former Utah governor and ambassador to China Jon Huntsman Jr. pointed to China as a culprit in what he described as “the new war field” — cyber-intrusion as a way to steal corporate and government secrets. “Not only have government institutions been hacked into, but private individuals have been hacked, too. It’s gone beyond the pale,” Huntsman said.
Huntsman has said his experience in China gives him an understanding of its complex relationship with the United States. His own family business — the global chemical company Huntsman Corp. — had done business in China and saw its China-based revenue rise 57 percent during his tenure as ambassador there. Huntsman’s brother Peter, the company’s chief executive, told The Washington Post that the company avoided seeking embassy help while his brother was ambassador.
Front-runner Mitt Romney has vowed to “get tough” on trade with China and called the superpower one of the “worst offenders” of global trade rules, suggesting in an interview that the United States must clamp down on China’s use of pirated technologies.
Romney’s former investment company, Bain Capital, worked on behalf of at least two Chinese companies trying to acquire U.S. technology firms. One case involved Huawei, which Bain joined in its failed bid to buy the software firm 3Com. Romney left Bain Capital in 1999, and aides say he had no role in those deals.
Perry’s relationship with Huawei “raises questions he’s going to have to answer in this race,” said Michael Wessel, a former Democratic aide who is a member of a bipartisan congressional advisory panel that unanimously agreed that Huawei posed a cyber-security risk to the United States. “Was he willing to put short-term economic interests ahead of broad national security concerns?”
As governor, Perry has made international recruiting a centerpiece of his economic policy, and more than two dozen Chinese companies now have a Texas presence. China is the state’s third-largest export-import partner.
In June 2010, the governor led a delegation to the Shanghai expo and hosted a “Texas Week” at the USA Pavilion. Perry said that trip, which was financed by the state and business groups, was intended to promote jobs and business investments.
While there, Perry made time for a dinner with Huawei’s chief executive, Ren, according to a news release. The Chinese executive is a former leader in the People’s Liberation Army who helped oversee the Chinese military’s telecom intelligence in the 1980s, according to a Rand report. Huawei disputes this, saying he helped lead an engineering department of the PLA. His company had grown rapidly to become the world’s third-largest telecom equipment provider, with about 1,100 jobs in North America. It opened its first research office in Texas in 2001.
After encouraging Huawei to make Plano the center of its U.S. operations, Perry’s office again noted the significance of the dinner with Ren, saying Perry encouraged “Huawei’s continued investment in the state.”
By the time of the announcement, security concerns about Huawei were well publicized. In 2005, a Rand report questioned Huawei’s “deep ties with the Chinese military, which serves a multi-faceted role as an important customer, as well as Huawei’s political patron and research and development partner.”
In 2008, the Committee on Foreign Investment in the United States, a multi-agency government panel, blocked Huawei’s plan to buy 3Com.
In late 2009, The Post reported, the National Security Agency privately urged senior executives of AT&T not to purchase Huawei equipment for a planned phone network. The article reported that U.S. officials feared that Chinese intelligence agencies could insert “digital trapdoors” into Huawei’s technology to serve as secret listening posts in the U.S. communications network.” AT&T did not discuss the warning but later announced it had chosen other providers.
In August 2010, eight Republican senators, including Jon Kyl of Arizona and Richard Shelby of Alabama, urged the Obama administration to investigate Huawei’s effort to sell equipment to upgrade Sprint Nextel’s mobile network. They argued that Huawei’s involvement “could create substantial risk for U.S. companies and possibly undermine U.S. national security.” The Committee on Foreign Investment rejected Huawei’s partnership with Sprint later that year.
Huawei says that these fears are unwarranted and appear based on political tensions between the United States and China. Huawei spokesman William Plummer said the company helps sustain thousands of U.S. jobs, and purchased $6.1 billion in U.S. goods in 2010. In an open letter to the U.S. government, Huawei called the claims of ongoing military ties “falsehoods.”
“The allegation that Huawei somehow poses a threat to the national security of the United States has centered on a mistaken belief that our company can use our technology to steal confidential information in the United States or launch network attacks on entities in the U.S at a specific time,” the letter said. “There is no evidence that Huawei has violated any security rules.’’
Research editor Lucy Shackelford contributed to this report.