Lawmakers dismiss Chinese retaliatory threat to US tech

Lawmakers are dismissing China’s threat to retaliate against U.S. technology companies and vowing not to back down on limiting the use of Chinese telecom products from Huawei and ZTE, which they see as a threat to national security.

Beijing has reportedly ordered government agencies in the country to remove all foreign hardware and software from their systems within three years, in what is seen as a shot at the U.S. The order comes after bipartisan efforts on Capitol Hill and from federal agencies to crack down on the use of Chinese products, the latest tit-for-tat in a technology fight and broader trade war.

But lawmakers on Capitol Hill who spoke to The Hill insisted they would not be rattled and would push ahead with a tough approach to Chinese technology, even at the risk of blowback for American firms.

“I think they want Huawei to infiltrate our security system, and they are probably outraged, that is their response,” Rep. Frank Pallone (D-N.J.), the chairman of the House Energy and Commerce Committee, told The Hill. “But we shouldn’t be worried about it, because we can’t have them spying on us.”

“They are clearly just finding a way to retaliate,” Sen. Angus King (I-Maine), a co-chair of the Cyberspace Solarium Commission, told The Hill. “This is not really a trade dispute, this is a national security dispute.”

The Chinese order was first reported by the Financial Times earlier this week, which cited information on the order from broker China Securities and two cybersecurity firms.

China Securities told the Financial Times that the policy would be phased in on a “3-5-2” basis. Under the plan, 30 percent of foreign software and hardware would be ripped out and replaced in 2020, 50 percent in 2021, and 20 percent in 2022. According to the Financial Times, the Chinese Communist Party’s central office issued the order earlier this year.

The move could have a damaging effect on U.S. companies. Chinese agencies use software or hardware from American firms including Dell, HP, and Microsoft, among others. Spokespersons for those companies did not respond to requests for comment from The Hill. 

The disclosure of the Chinese government’s order comes after months of efforts by the U.S. Department of Commerce, the Federal Communications Commission (FCC), and bipartisan members of Congress to minimize the use of equipment from Huawei and ZTE.

In May, the Commerce Department’s Bureau of Industry and Security added Huawei to its “entity list,” with U.S. companies banned from doing business with groups on the list. The Commerce Department subsequently issued a temporary license to extend the time before the group was fully added to the entity list by 90 days, a license that has since been extended twice more as the Trump administration grapples with how to address Huawei, which already has important deals with many U.S. companies.

The FCC took action against both Huawei and ZTE in November when the commission voted unanimously to ban U.S. telecom companies from using money in the FCC’s $8.5 billion Universal Service Fund to buy equipment from companies deemed national security threats. The FCC also took the step of formally classifying Huawei and ZTE as threats. 

Both the FCC and the Commerce Department did not respond to The Hill’s request for comment on the new Chinese order.

Members of Congress and federal officials have pointed to a 2017 Chinese Intelligence law to justify their actions, noting that the law requires all Chinese citizens and companies to “support, assist, and cooperate with state intelligence work.”

Reports on the Chinese order to bar government use of U.S. technology also come at a sensitive time in the broader ongoing trade talks between the two countries.

President Trump has touted the completion of a “phase one” trade deal to avoid another round of devastating tariffs. But Trump has also said that could be delayed until the new year. The next round of talks over “phase two,” are likely to be more contentious, with negotiators taking up cyber espionage issues, such as theft of intellectual property. Huawei has been viewed as a potential sticking point that could hold up agreeing to that trade deal.

Despite these issues, some lawmakers insisted they are not worried about the Chinese order, and on Tuesday advocated for staying focused on the potential threats from Huawei to U.S. companies.

Sen. King said that taking action against Huawei “isn’t a matter of trying to protect our markets, this is trying to protect our national security.”

“If Huawei wants to be a worldwide telecommunications company, that would be great, but they can’t also be an agent of the Chinese government, and that’s the fundamental problem that we have here, and to construe it as a trade dispute isn’t really accurate, I mean they can treat it that way, but that’s not what it is,” King said. 

Sen. Josh Hawley (R-Mo.), a key advocate on tech privacy issues, told reporters that the Chinese order was just part of an “ongoing” confrontation with China.

“There are going to be lots of incidents like this and we have got to push forward, and part of that is we have got to do more developing these capacities in our own country,” Hawley said. 

One expert also expressed doubt that the Chinese could actually implement the order.

Rob Atkinson, the president of the Information Technology and Innovation Foundation, an independent think tank, told The Hill that he saw the order as a way for China to gain leverage in the trade talks.

“It is a little hard to say how much of this is actually real and how much of this is saber rattling,” Atkinson said. “It may be to just simply to force Trump to back off or get a better deal.”

Atkinson noted that it would take a major investment from the Chinese government to rip and replace all foreign hardware and software. And he said it would have a limited economic impact on the American companies involved. 

“It wouldn’t surprise me if this were a tactic to give the Chinese a new bargaining chip in the negotiations, to say if you don’t give up this, we are going to implement this,” Atkinson said.

But Atkinson also cautioned that it highlights how China intends to promote their own technology over the long run and limit foreign involvement.

“That is their goal, and anyone who misses that has not been studying China,” Atkinson said.