Australia leaves Huawei standing at the altar

Author: Claude Barfield, American Enterprise Institute

The abrupt decision of the newly installed Abbott government to swat down Huawei’s ambitions to participate in the rollout of the Australian National Broadband Network (NBN) was a stunning example of diplomatic ineptitude. Though the previous Labor government had initially turned down Huawei’s bid for NBN contracts, during the national election campaign leaders of the Coalition had promised that an Abbott administration would review and possibly overturn Prime Minister Julia Gillard’s negative determination.People visit the stand of Huawei during an expo in Nanjing city, east Chinas Jiangsu province, 5 September 2011. (Photo: AAP)

In the days after the election, newly appointed cabinet ministers had further stoked the assumption that a change was in the offing. Thus, Trade Minister Andrew Robb, in Shanghai, highly praised Huawei as a ‘well-respected company within Australia … with a big future’. Incoming communications minister Malcolm Turnbull went further and opined that even if there was the possibility that they could be an ‘accessory to espionage … you then have to ask yourself, does the equipment that they would propose to sell have that capacity’. (Admittedly a somewhat dim-witted statement: of course they have the capacity; the relevant point is will they act on it.) Robb and Turnbull received strong support in their campaign to review — and change — Huawei’s status by the new foreign minister, Julie Bishop. All three ministers drew a connection between the Huawei decision and Prime Minister Abbott’s ambitious goal to complete an FTA with Beijing within a year.

Then, abruptly and without warning, Attorney-General George Brandis announced that the ban would also be upheld by the new government; and he pointed directly to opposition from Australia’s security agencies, in particular the Australian Security Intelligence Organisation (ASIO). In going along with ASIO’s veto, the Abbott government chose to privilege its security relationship with the United States over its economic ties with mainland China. Adding insult to injury, both Huawei and the Chinese government were blindsided by the reversal — though their first responses were mild and careful. Huawei stated that it was ‘mystified’ and ‘disappointed’ by the decision, and a Foreign Ministry official noted: ‘We always oppose countries using national security as a reason or an excuse to interfere in the economy and normal trade cooperation’.

So what are we to make of all of this?

First, ASIO’s veto (backed by the Australian Signals Directorate, the internet spy agency) appears to stem from fears that Huawei, possibly coerced by Beijing, would in future introduce ‘backdoors’ and so-called ‘malware’ into the backbone of the internet, or at other points in the porous telecoms supply chain where it provides equipment. In this, ASIO seems to have been guided by the much-publicised conclusions of the US House Intelligence Committee, which recommended that Huawei be banned from US contracts as a top security risk. The problem now is that the Edward Snowden leaks document that the US National Security Agency (NSA) has actually accomplished all of the espionage tasks cited as possible for Huawei and the Chinese government.

Thus, according to authoritative newspaper accounts, the agency has forced US telecoms companies to build entry points into their products for spyware; cracked encryption codes that protect global commerce, banking and consumer records, trade secrets, and medical records; and deliberately moved to weaken international encryption standards to render network penetration easier. These revelations do not lessen the gravity of documented Chinese cyber-security incursions. But they do serve to bolster Beijing’s argument that it too is a victim—as well as aggressor.

Interestingly, to date, no investigation in Australia, the United States or any of the 140-odd countries in which the company operates has found conclusive evidence of Huawei malfeasance in the cyber-security area. The US House Intelligence Committee report is widely derided as strong on assertion and weak on evidence; more importantly, the Obama White House conducted an 18-month investigation into Huawei that turned up no ‘smoking gun’. This is not to say that such evidence does not exist and is not made public for security protection reasons. But it is telling that the basis for the ASIO rationale and decision regarding Huawei is summed up in the statement of one Australian intelligence official: ‘The only reason we can make assessments like that is because we know [what] we are up to with our own firms’.

There are also oddities and questions stemming from international diplomatic and security ties. Australia is a member of the so-called Five Eyes — with the United States, Canada, Great Britain and New Zealand. Under longstanding security arrangements, these countries have agreed to certain rules regarding spying among themselves; and their security agencies have close ties, even dividing up geographic surveillance. Still, with regards to Huawei, they are clearly at odds. Snowden’s revelations demonstrate that the British intelligence agency, GCHQ, and the NSA have often collaborated in specific cyber operations. Yet the Brits have welcomed Huawei, and the government has given its blessing to jointly operated cyber-security facilities with the company. Similarly, New Zealand has allowed Huawei contracts in some of the backbone sectors. The point is that, though sharing much of the same secret information, the security agencies of the five countries have come to dramatically different conclusions about the Huawei security risk.

A final irony is that Australia awarded large NBN contracts to French-based Alcatel-Lucent. Alcatel in turn owns 50 per cent of the Chinese-based Shanghai Bell, from which it will undoubtedly source much of the equipment for the Australian project. Not to pick on Alcatel, the truth is that all of the major ‘backbone’ suppliers, including Ericsson and Cisco, source parts, components and whole systems from Chinese factories. So in the end, the question remains: just how much more secure is Australia or any other country after excluding Huawei?

Claude Barfield is a resident scholar at the American Enterprise Institute

3 Comments

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  • Michael Wulfsohn

    Thanks for an interesting article.

    Isn’t one of the main risks that, in the event that China’s diplomatic position becomes hostile to Australia at some point (potentially far) in the future, that it could force Huawei to use any power it has over Australian communications to China’s advantage? Huawei’s lack of a “smoking gun” isn’t so relevant an indicator of the likelihood of this situation.

    Also, is sourcing parts from overseas really the same as giving a foreign entity an ongoing management/maintenance role and thus control over Australian infrastructure?

    I welcome the criticism of Australia’s poor communication surrounding this.

    • Claude Barfield

      Mr. Wulfsohn: Sorry for the delay in answering, and thanks for your comment. It is true–as I note with regard to the NSA and Google, Facebook et al–that in the future the Chinese government could force Huawei to do its will. More likely—as has also happened with the NSA–Beijing’s spy masters would just go around the company and install malware on their own. The point is that the telecoms supply chain is so long and complicated that it is not possible stop all intrusions. This is why constant inspection and scrubdowns are necessary for cybersecurity systems to have any chance of working. As for your point about dangers to Australia from outsourcing parts and components, no country–even the US–can produce all parts and components domestically–nor should it as this would entail huge costs and waste without achieving much additional security. It’s a tough world out there in the internet, but that’s where the technology has taken us to this point.
      Claude Barfield

  • Josef Franek

    I think here in Australia the government’s decision has been seen as a homage to our friend, the USA without much thinking.

    It has also been pointed out that Australian intelligence agencies do not have what it takes to do what UK is doing – taking apart and inspecting the Huawei equipment software.

    I am no expert on this but I would think that no matter what is the source of NBN equipment, back door could be constructed in the future by unfriendly elements.

    The situation should be ambarrassing to the Huawei Australian branch, some of whose directors are federal and state ex-politicians.