Germany will soon decide on Chinese tech giant’s 5G participation but political winds are blowing against it
by Uwe Parpart and David Goldman – Asia Times
Germany is divided over what role China’s Huawei should play in its 5G buildout. Image:
Battle lines are being drawn in the Bundestag over Huawei’s role in Germany’s 5G broadband buildout, as Chancellor Angela Merkel’s government submits crucial draft IT security legislation later this month.
A coalition of conservative Christian Democratic party members who back US efforts to ban Huawei on spying grounds and left-wing Greens and Social Democrats incensed over China’s suppression of dissidents in Hong Kong and its Uighur minority oppose the Chinese tech giant’s participation in the nation’s 5G rollout.
German industrial companies, more dependent than ever on China’s growing economy and expanding domestic market, are lobbying for Huawei, partly because they fear Chinese retaliation against any German effort to exclude the world’s largest and most advanced producer of telecom equipment.
Germany’s new 5G network will be integrated with an existing 4G system. The costs of excluding Huawei from the rollout would hit the country’s mobile broadband providers on their bottom lines.
Deutsche Telekom, Germany’s largest telecom provider, reportedly calculated that replacing Huawei gear with other vendors’ gear would cost the company about US$3.5 billion, roughly the size of its annual profits. The company reportedly relies on Huawei for around two-thirds of its equipment.
The Merkel government’s draft legislation will set a number of hurdles before prospective broadband providers, including technological specifications that Huawei officials say they could readily meet.
However, the draft legislation contains provisions that exclude providers that are “structurally bound up in a questionable political system, for example, through organizational or legal obligations.”
Chancellor Merkel has opposed excluding Huawei in the past, but the new draft legislation requires Germany’s Interior Ministry and its intelligence services to pass judgment on this new political criteria.
The Interior Ministry has so far refused to comment. Germany’s intelligence service, the Bundesnachrichtendienst (BND), depends on American signals intelligence, and Washington has threatened to suspend bilateral intelligence-sharing if Huawei builds Germany’s 5G network.
A year ago, Germany snubbed American efforts to ban Huawei, proposing a review process that offered a “level playing field” to all vendors. In an October 19, 2019 press conference, a government spokesman said, “We are not taking a pre-emptive decision to ban any actor, or any company.”
The ground has shifted since. Washington lobbied not only the government but Christian Democratic backbenchers, who broke with Merkel’s even-handed approach.
Germany’s Green Party, now polling at 18% against the Christian Democrats’ 36% and fighting for votes on human rights issues, may replace the Social Democrats as the junior member of a governing coalition after next year’s Bundestag election. The Social Democrats, whose support has slipped in national polls to just 14.5%, are trailing the Greens.
The Wall Street Journal announced “a Huawei turning point” in an October 2 editorial that quoted US Undersecretary of State Keith Krach’s declaration that “We are seeing things moving in the right direction in Germany.”
The article said “Mrs Merkel dragged her feet over economic concerns … But Mrs Merkel is finally moving as she faced opposition from across the German political spectrum and within her own party. The Chinese government may retaliate against German companies doing business in China. But that would only validate Berlin’s decision not to trust Beijing.”
China’s own “Wolf Warrior” diplomacy has damaged Huawei in Germany almost as much as Washington’s pressure on Berlin. A recent Pew Institute survey shows a sharp increase in negative views of China worldwide, including in Germany, where 71% of respondents have a negative view of China, nearly on par with the 74% seen in the US.
The Pew survey showed that 61% think that China has done a poor job of dealing with the Covid-19 epidemic, while a whopping 84% believe the US has mishandled the pandemic.
The American news site Axios reported on October 6 that Merkel’s government suppressed a 2018 intelligence report that “examined the Chinese government’s attempts to influence every level of German government, society and business, according to two former US intelligence officials.”
Earlier this year, Reuters reported that Chinese diplomats tried to pressure German foreign ministry officials into praising China’s handling of the pandemic. Germany’s Interior Ministry wrote, “The German government is aware of individual contacts made by Chinese diplomats with the aim of effecting positive public statements on the coronavirus management by the People’s Republic of China.”
Germany protested after China’s Foreign Minister Wang Yi warned in August that Czech President Milos Vystrcil would “pay a high price for his shortsighted behavior” in visiting Taiwan, which Beijing regarded as a provocation. China views the self-governing island as a renegade province.
Last May, German media scorned Huawei for starting its own news organization in Germany, “threatening Germany with a flood of Chinese state propaganda,” as the daily Die Welt put it.
Quite apart from Green and Social Democratic complaints about China’s human rights records, the Germans do not like to be bullied. China’s arrogant demands on Germany and other European countries helped to poison the climate.
Still, Huawei’s position in Germany is far from decided. German trade with China now exceeds its business with the US, and its large industrial enterprises look to China for their future.
“China is Daimler-Benz’ new homeland,” declared a recent headline in Die Welt, the center-right daily closest to the Merkel government. Volkswagen (VW) now sells 53% of its cars in China, built in 33 plants in China. The proportion for Daimler-Benz is 45%, and 44% in the case of BMW. VW alone has invested 15 billion euros in the development and production of electric cars in China.
Mittelstand, the medium-sized industrial enterprises that form the backbone of Germany’s economy, are as committed to China as big auto and auto parts manufacturers. Around 800 German machine-tool companies have Chinese subsidiaries.
It isn’t clear yet that Chancellor Merkel has accommodated the US position on Huawei quite as much as the State Department seems to believe. Germany is likely to wait for the outcome of the US presidential election, where Trump now trails Democratic party rival Joe Biden in polls, before deciding on Huawei.
Although future US policy towards China is unlikely to change dramatically with bipartisan support for a harder line, Biden’s advisors are far less hawkish than Trump’s, with stronger representation from the US tech industry that has vigorously opposed Trump’s chip and app bans.
It is thus likely that Merkel is simply marking time until the US election outcome, avoiding a messy public conflict with a US administration that has put Huawei at the top of its target list and waiting instead to see if the next US administration will show more flexibility.