Germany and the Huawei Dilemma

In a recent interview given to Frankfurter Allgemeine Zeitung, Germany’s Interior Minister Horst Seehofer spoke against banning Huawei from building Germany’s 5G network. The minister’s comments were in line with Chancellor Angela Merkel, who till now has resisted US pressure on banning Huawei from developing Germany’s 5G infrastructure. However, like many other states, Germany faces a difficult situation concerning Huawei one that could be detrimental not just for future technological advancements, but also for its relations with both the US and China. 

The Trump administration after classifying Huawei as a national security threat on the claims that the company has close ties to the Chinese government and the military apparatus has been pushing allies to ban Huawei equipment from their telecom networks. For the US the primary concern is that the Chinese company could act as a Trojan horse that would allow the Chinese government to spy on or control European and American communication networks. US officials have made claims that there are several Chinese laws that compel Chinese individuals and organizations to co-operate with the intelligence agencies as and when the government deems necessary.

In a 2012 report by the US House Permanent Select Committee on Intelligence Huawei and ZTE Corp. were both considered as potential security threats. The US government is now taking measures to curb the global influence of Huawei and in this regard has been pushing allies like Germany to hinder Huawei from their 5G network. To this account, the US lawmakers have also introduced a bill that would impede the United States from sharing intelligence with countries that use Huawei equipment for their 5G network. The bill introduced by Senator Tom Cotton is yet to become a law, but if it does, it could have serious implications for the intelligence-sharing relationship between Washington and some of its closest allies, particularly in Europe. 

The bill is the latest move by the Trump administration to coerce allies to ban Huawei. Countries like Australia and Japan have already banned Huawei. However, two important countries in Europe- the UK and Germany have not made any decisions on what sort of relationship they will have with the Chinese company. In Germany, particularly Huawei is not excluded from participating in building the 5G network. This is made possible by the draft rules for 5G networks published by the Federal Network Agency. The text of the document does not implicitly exclude any supplier from participating in the 5G development in Germany. This means that Huawei for all its concerns can be as active a player as its competitors i.e. Ericsson and Nokia. To participate the companies would need to pass certification which would entail signing the declaration of reliability for the vendors to be assured as trustworthy and a separate certification from the cybersecurity authority (Federal office for Information Security) to participate in the development of critical component for 5G network. 

The inclusion of Huawei in the 5G rollout has sparked intense debate splitting the ruling coalition. The junior partner in the German government the Social Democrats (SPD) are against Huawei and are demanding an effective ban of any Huawei equipment. The SPD in recent weeks is pushing a proposal which would effectively shut out the Chinese firm. This is in direct contrast with the view of Angela Merkel who has so far held her ground against excluding Huawei from the 5G network race. During a speech in the Bundestag on December 18, Chancellor Merkel made her stance clear, stating that “I am against the exclusion of a company in principle. But I am in favour of doing everything we can to ensure security.”

For Merkel, the concern is about the economy as the Chinese authorities have made it very clear that if Huawei is excluded, they would retaliate, and the target could very well be the car industry.  Many of Germany’s largest corporation see China as an important market, given the economic slowdown in Germany and the falling demand for capital goods. For the top 25% of the companies listed on the German stock market, 16% of their turnover comes from the Chinese market. Although this may be less than the share that the German companies derive from the US market, the continuous threat from the Trump administration to impose 25% tariffs on the German cars makes China a lucrative partner. China in recent years has especially become important for the German automobile industry. Currently, it is the world’s largest automobile market and German manufacturers enjoy a commanding share of 24%.

Moreover, despite the Chinese government protectionist measures, German companies have invested heavily in research and development on the Chinese market. And their primary interest is the access to Chinese technologies linked to control algorithms for autonomous vehicles. Given the national security concerns in China, foreign carmakers need to work with the local companies for surveying and mapping. In recent years, major automobile manufacturers including Audi, BMW and VW have all agreed to use Chinese mapping and data providers setting aside their existing international systems in order to gain a foothold in the Chinese market. This dependency on the Chinese markets, give China an edge and there is no doubt that Beijing would use its position in the future negotiation concerning access to the Chinese markets, depending on the stance Germany would take in the US-China trade rivalry. 

The problem for Merkel is deciding once again whether to choose between economic interest or to side with the US and show solidarity to the transatlantic alliance. Completely banning Huawei would risk Chinese retaliation which could make it difficult for the German automakers to work in China. And if German automakers were forced to pull out of China it would not only mean losing the commanding market share but also the tens of thousands of jobs linked to the economic activity in the Chinese market. Allowing Huawei to participate in the 5G development would not only risk alienating Washington and a further breakdown in the relationship but would risk undermining a badly needed united European front. It would also discourage European manufacturers like Nokia and Ericsson those who have shown competence in building the 5G network by limiting their access to the sufficiently large German market. 

Merkel who is often blamed for keeping economic interest ahead of security interest as seen with her decision to go ahead with the Nord Stream II pipeline could very well approve Chinese participation in the future build-up of critical 5G infrastructure. As of December, last month, one of the leading telecom operators in Germany Telefonica Germany has provided both Huawei and Nokia with contracts to supply 5G infrastructure in Germany. Although the politically sensitive decision is pending approval from the government, it shows the direction in which Germany’s approach towards China and 5G could be heading. The potential of 5G is not just limited to super-fast mobile download speeds and autonomous cars but its effects are also well known in the ways in which it would alter the future of military operations. For Germany, the decision to allow China in its 5G infrastructure could open the door for more complex problems with the US once the future military impact of 5G technology is fully noticed.

The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of The Geopolitics.