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Barr suggests U.S. consider investing in Nokia, Ericsson to counter Huawei

Attorney General William P. Barr delivered his first major address on China on Feb. 6.
Attorney General William P. Barr delivered his first major address on China on Feb. 6. (Jim Lo Scalzo/EPA-EFE/Shutterstock)
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Attorney General William P. Barr on Thursday suggested the United States consider taking an ownership stake in Finland’s Nokia and Sweden’s Ericsson to counter China’s bid to dominate the burgeoning 5G wireless market.

In his first major speech about China, Barr said the United States and its allies must “act collectively” or risk putting “their economic fate in China’s hands.” He focused particular ire on Huawei, the world’s largest supplier of 5G telecom gear that will power self-driving cars, smart homes, smart transportation systems and more.

Ericsson and Nokia are the other two big suppliers, but they have “neither Huawei’s scale nor the backing of a powerful country with a large market, like China,” Barr said.

“Some propose that these concerns could be met by the United States aligning itself with Nokia and/or Ericsson through American ownership of a controlling stake, either directly or through a consortium of private American and allied companies,” Barr said in a speech at the Center for Strategic and International Studies, a Washington think tank.

“Putting our large market and financial muscle behind one or both of these firms would make it a more formidable competitor and eliminate concerns over its staying power. We and our closest allies certainly need to be actively considering this approach,” said Barr, who was a top lawyer for telecom company Verizon before joining the Trump administration.

Ericsson and Nokia declined to comment.

Barr’s 5G remarks echoed frequent Trump administration warnings about China’s efforts to steal American innovation and unseat the United States as the world’s technology leader.

He described China as a country ruled by a “dictatorship under which the Communist Party elite jealously guards its monopoly on power.” He criticized the party’s repression of religious minorities, its “rounding up” of Muslim Uighurs in the northwest, its opposition to self-determination efforts in Hong Kong and its limits of expression online through a censorship system often called the Great Firewall.

In training his fire on China’s drive to conquer the world market for 5G, he was lending his voice to the administration’s push to keep Chinese suppliers out of the super-fast networks.

“If China establishes sole dominance over 5G, it will be able to dominate the opportunities arising from a stunning range of emerging technologies that will be dependent on, and interwoven with, the 5G platform,” Barr said.

Britain, resisting U.S. pressure, to allow some Huawei equipment in 5G networks

From a national security standpoint, he said, if the Internet becomes dependent on Chinese technology, “China would have the ability to shut countries off from technology and equipment upon which their consumers and industry depend. The power the United States has today to use economic sanctions would pale by comparison to the unprecedented economic leverage we would be surrendering into the hands of China.”

The Trump administration has branded Huawei in particular as a security threat, saying China could tap into Huawei gear installed in the West to spy on communications or disrupt infrastructure — claims Huawei has dismissed as groundless.

White House efforts to convince other countries to eschew Huawei equipment have faltered, however. Despite massive U.S. pressure, the United Kingdom said last month it would use Huawei gear in part of its 5G network, although it would limit the Chinese company’s market share and block it from the sensitive network core.

Floating the idea of the United States investing in Ericsson and Nokia marked an escalation in the anti-Huawei campaign, and an unusual proposal from a country that typically rejects the idea of governments taking ownership of enterprise, or advising private investors where to direct their funds.

“I do not know of another instance when a U.S. executive branch official has called for U.S. private investment in a foreign company to advance national security,” said Mary Lovely, an economics professor at Syracuse University.

There is precedent for the U.S. government intervening in the economy to back technology that it sees as critical to national security, however. In the 1980s, Congress appropriated hundreds of millions of dollars to a government-industry consortium called Sematech that was founded to help U.S. semiconductor companies catch up to Japanese rivals.

How China’s Huawei took the lead over U.S. companies in 5G technology

In an emailed response to Barr’s remarks, Huawei said it is “wrong and inaccurate to conflate Huawei with China,” and accused the United States of becoming “consumed by politics when it comes to 5G and Huawei.”

In a separate move Thursday, Huawei escalated a long-running dispute with U.S. telecom company Verizon, filing two patent-infringement lawsuits against Verizon in federal court in Texas. Verizon called the lawsuits a groundless “PR stunt.”

Barr mentioned another approach to countering Huawei that has been backed by some U.S. senators and companies: developing technology known as OpenRAN, which would allow telecom companies to buy network parts and software from a greater variety of suppliers.

Barr called this a “pie in the sky,” saying the approach “would take many years to get off the ground.”

The Trump administration has been more hawkish on China than its predecessors. Just last week, Secretary of State Mike Pompeo called China’s ruling Communist Party, led by President Xi Jinping, “the central threat of our times.”

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The Justice Department in late 2018 launched an initiative to combat Chinese criminal economic activity. But the administration’s message — including efforts by Vice President Pence and others to curb Chinese human rights abuses — has been complicated by President Trump’s singular focus on achieving a trade deal with Beijing. In his State of the Union address Tuesday, Trump said, “We have perhaps the best relationship we’ve ever had with China, including with President Xi.”

Barr warned that the Chinese “are using every lever of power” to expand their market share globally and that the race for 5G will be determined in the next five years. “The time is very short” to counter China’s moves, he said. “We and our allies have to act quickly.”

Barr asserted that “China has stolen a march and is leading in 5G.”

In fact, a handful of countries are only now rolling out their 5G networks, and many countries have not awarded contracts. Certainly in China, which accounts for almost half the world market, domestic suppliers — primarily Huawei and partially state-owned ZTE — have the lion’s share. The Chinese government’s stated goal under its Made in China 2025 initiative is for domestic companies to own 75 percent of the Chinese market. In reality, it will be closer to 90 percent, industry experts said. Already, Huawei has the contract to run 5G in 40 of 52 Chinese cities, they said.

But Western suppliers are leading in the rest of the world that has begun to deploy 5G, they said. Chinese companies are effectively banned from the U.S. 5G market, and they are not present in 5G systems in Australia, Japan or New Zealand. Chinese firms have a small share of South Korea’s network, the most advanced deployed 5G system in the world. But Huawei is aggressively pushing its equipment in Africa and Latin America.

“China is offering over $100 billion in incentives to finance customers’ purchases of its equipment,” Barr said. “This means that the Chinese can offer customers to build their 5G networks for no money down.”

The question now, Barr said, is whether the United States and its allies can mount sufficient competition to Huawei “to avoid surrendering dominance to the Chinese.”

Barr also called on the Federal Communications Commission to speed up the deployment of the spectrum necessary for a robust 5G system in the United States, and he urged universities not to allow “the theft of technology under the guise of academic freedom.”

The United States cannot “compel” the public and private sectors to work together the way the Chinese “dictatorship” can, he said, but if the United States is to maintain its technological and economic strength, and ultimately its national security, the two need to work together.