Go to any of the recent shows in technology and telecom such as CTIA Wireless and Interop (News - Alert) and you see a huge presence from Chinese telecom companies like Huawei and, to a lesser extent, ZTE. Talk to the competition and you will hear them say these companies are poised to take over the world.
This shouldn’t be a surprise because these companies have been able to benefit from the massive build-out of China’s tech and telecom infrastructure. While the rest of the world was experiencing post telecom-bubble burst syndrome, Chinese competitors were feasting on home-grown growth and rapidly expanding worldwide.
Of course these companies are said to be state-controlled, which is why they aren’t allowed to make certain acquisitions or even sales into the US. Recently, Owen Fletcher wrote about comments made by ZTE (News - Alert) chairman Hou Weigui, who said he won’t try to make core telecommunications deals in the U.S. to companies like AT&T, Sprint Nextel, T-Mobile and Verizon (News - Alert) Wireless due to political obstacles. He went on to cite a deal with Sprint that the government prevented. Interestingly the company is able to sell devices like handsets and modems in the U.S.
The policy of the U.S. seems unclear at best. The only way to determine if something is allowed seems to be to try it and see what happens. Remember, for example, in 2008 when Huawei (News - Alert) tried to buy 3COM and the government said no due to national security concerns? One wonders how these decisions are made, and who makes them. Would the military look at its inventory of equipment and decide that it has x percent of its inventory supplied by 3COM and, as a result, it is too much of a risk to have a company from China supplying upgrades, etc.?
If we block outside companies from doing business in the U.S., how does a country like China reciprocate? After all, China is a massive market, and it’s growing quickly. What are the negative economic ramifications of making decisions that directly protect national security yet hurt the U.S. economy to such an extent that we become systemically weaker because we have been financially compromised as a result of excessive debt to pay benefits to legions of unemployed and underemployed?
I am not a foreign policy expert, but it is my understanding that countries do things in their national interest. This would make sense to the extent that the U.S. doesn’t agree with China on human rights, but we are able to import cheaply so we have welcomed them as a major trading partner. Yet other countries with similar human rights abuses such as Iran and Cuba aren’t allowed to trade with us at all. I realize the differences, but just want to point out the inconsistency.
A few years back when Iran had its large protests, many Western telecom companies pulled out of the country or at least scaled back. An article in The Wall Street Journal explains how this void has been filled by Huawei. It’s not like U.S. companies were allowed to sell there anyway, but NSN was selling there and now it isn’t doing as much business. Interestingly, part of the reason Huawei is so successful in Iran, boasting 1,000 employees, is it has the ability to give excellent tracking and monitoring solutions to the Iranian government, who can arrest and detain anyone who utters something with which the regime doesn’t agree. And they can do it in a matter of minutes. Of course, you can imagine the sales pitch… Hey, we have tech that helps censor and track a billion people and keep them from organizing anything more threatening than a birthday party, imagine what we can do for your hundred million.
When looking at these situations the question Western companies has to ask is: How exactly does this embargo thing work these days? There used to be a time, about 60 years ago, when the U.S. made everything, so an embargo made sense, as it would really hurt a country’s economy. But today, regardless of where something is invented, it’s manufactured in China. So what happens is that the West funds manufacturing of products that find their way via black/grey markets and even via direct distribution to countries such as Iran.
So we not only don’t hurt the target country, but any profit Western companies could make is transferred to another country – in this case China, our largest global competitor! So we have an embargo in place to theoretically hurt one country, but the only ones who suffer are ourselves.
This article originally appeared in the Jan. issue of INTERNET TELEPHONY magazine.
Rich Tehrani is CEO and Group Editor-in-Chief of TMC. In addition, he is the Chairman of TMC�s ITEXPO (News - Alert), one of the world�s largest and best-attended communications and technology conferences. Rich has also developed a large and loyal readership for his own communications and technology blog.
Edited by Tammy Wolf