The notice banning Huawei and ZTE from participation in the rollout of the 5G network made no reference to either company and was so obscure that the Chairman of Huawei, John Lord, did not realise that it applied to his company until the Secretary of the Department of Communications, Mike Mrdak, rang and gave him the bad news.
The notice signalled the government’s intention to interpret rules announced last year as disqualifying any company that was “likely subject to extrajudicial directions from a foreign government that conflict with Australian law.”
Huawei could be forgiven for thinking the notice did not apply to them.
The government was relying, as a basis for its action, on a Chinese law that says that employees of communications companies were obliged to pass information to Chinese authorities on demand.
Huawei has legal advice that it is not a telecommunications company but an equipment manufacturer and therefore falls outside the ambit of the Chinese law.
Moreover it argues that its competitors, Nokia and Ericsson, have their equipment manufactured in China and so should be subject to the same ban.
Chinese law requires organisations and citizens to support, assist and cooperate with intelligence work, which analysts say can make Huawei’s equipment a conduit for espionage.
Mr Lord has told the media that he doesn’t want to take legal action against the government at this time.
He’s more concerned about getting to the bottom of the government’s thinking so that he can see if the situation can be remedied.
He said he was due to have meetings with ministers when the ban was imposed. To date he has not been able to explore the issues with them.
The Chinese government has reacted strongly to the Huawei ban.
Chinese Foreign Ministry spokesman Lu Kang said China expressed “serious concern,” adding that Australia should not “use various excuses to artificially erect barriers.”
“We urge the Australian government to abandon ideological prejudices and provide a fair competitive environment for Chinese companies’ operations in Australia,” Mr Lu said.
The ban on Huawei will not be without its cost. The company is the world leader in 5G technology.
It spends $13 billion a year on research and development which is more than is spent by the entire Australian government across all sectors.
A large proportion of this money has been spent on technological developments in the 5G space.
If Huawei is excluded from building the communications network then it’s likely that the build will cost more and will take longer.
These outcomes will impose costs on the Australian economy.
On the other hand there is the incalculable cost of a foreign entity controlling Australia’s telecoms infrastructure network.
As Danielle Cave, senior analyst at the Australian Strategic Policy Institute, says: “It’s difficult, as China’s large telecommunication and internet-technology companies expand throughout the world, not to put Western governments … in a position where they have to be really wary. It’s not hard to look at this [Chinese] law and say, ‘well hang on, what does this mean in terms of international espionage?’”
John McDonnell and Roger Hausmann
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