Huawei, ZTE Banned From Selling to U.S. Government

By  |  April 2, 2013, 10:00 AM

The ongoing tiff between the U.S. and China over the security of Chinese telecoms equipment took a new twist last week when Washington largely forbid several government agencies from buying products from industry giants Huawei and ZTE. While Washington’s previous moves in the dispute have been controversial and often contrary to fair trade principles, this latest act looks more reasonable because it is limited to purchasing by a small number of government agencies. This ongoing clash began last October, when a Washington report said telecoms equipment from Huawei and ZTE, two of China’s most successful high-tech exporters, posed a national security risk. At the same time, it effectively banned US companies from importing equipment from the two Chinese firms. The public portion of the report didn’t offer actual examples, but observers believed a major concern was the potential for future meddling by Beijing in the companies’ products due to the close relationships between major Chinese firms and the government.

In the latest development of this story, Washington last week ordered several major government departments, including NASA and the Justice and Commerce Departments, to seek approval from federal law enforcement officials before purchasing IT equipment from all Chinese vendors. China was predictably quick to voice its opposition to this latest restriction, expressing its “strong dissatisfaction” with the move, which comes against a backdrop of broader claims by Washington of cyber espionage by China-based entities.

Some may argue the original ban last year was counter to free trade, since Washington was effectively telling private companies like Sprint and Verizon how to run their businesses. But this latest requirement is much more reasonable because its scope is limited to purchasing by government agencies.

As the “headquarters” for the U.S. federal government, the Obama administration and Congress in Washington should have the right to decide which products and services their offices can buy. Such an approach is the norm for most companies, whose headquarters determine which vendors their various offices can buy from based on factors like price and product reliability. Thus Washington in this case is simply exercising its similar right as the head of the US government.

Beijing has made similar moves in the past, including a high-profile case in 2003 involving Microsoft. In that instance, Beijing threatened to ban Chinese government agencies from using Microsoft’s popular Windows operating system due to similar concerns that it might contain back doors that could be used for spying.

Washington stayed largely on the sidelines in that case and let the two sides handle the matter like a normal business dispute. In the end, Microsoft took the unprecedented step of releasing its Windows source code to Beijing to ease the security concerns.

This latest move in Washington looks similar to the Microsoft case, and is understandable since Washington also wants to safeguard the security of important government IT networks. Accordingly, Huawei, ZTE and other Chinese vendors could try to step in and convince Washington that their products are safe from security risks. But if Washington ultimately decides it doesn’t feel comfortable including those products in important government IT systems, it should have every right to ban departments from buying such products.

Doug Young lives in Shanghai and writes opinion pieces about tech investment in China for Techonomy and at He is the author of a new book about the media in China, The Party Line: How the Media Dictates Public Opinion in Modern China.

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