Doing Things the Huawei - 5G and UK National Security Policy Making

The British Government has decided that the Chinese company ‘Huawei’ will be permitted to provide infrastructure for non-core parts of the next generation of mobile phone networks, known as 5G. This decision, taken in the face of strident opposition from the USA, and in contrary to the actions of some allied nations has aroused a variety of responses from support to concern.

How significant is it though and what does this decision tell us about the difficult of carrying out domestic politics in an international century where local decisions can have the potential to impact on strategic relationships?

In simple terms 5G is the next generation of mobile phone capability, delivering significantly enhanced power and capability to phone networks and being the first to truly cope with the advances in how the internet has reshaped our experience with telephones. From being a means to annoy people by shouting loudly on the train, to now being an integral part of every aspect of our daily lives, the 5G network promises to make radical changes to how the UK embraces telecoms for the 21^st Century.

The problem is that 5G is very much cutting-edge technology and some providers are further ahead than others. There is only a relatively small pool of companies at present able to provide the skills and technology needed to install a 5G network, and of these, Huawei is deemed to be significantly further ahead than anyone else.

Huawei is also not new to the UK network, having had a physical presence in providing equipment to mobile phone companies for many years. The challenge is that had the UK given into US demands to ban the company from its network, it would have had an enormous cost as legacy equipment was ripped out and delayed the roll out for the next generation of networks.

The UK is absolutely clear that Huawei is not a friendly cuddly company that can be trusted in the same way as other providers. In an outstanding blog, the director of the National Cyber Security Centre (essentially a very public arm of GCHQ) sets out the risks and challenges and how they can be mitigated.

For many years the equipment being installed in the UK by Huawei has been subject to extensive scrutiny and independent testing to provide assurance that it meets UK standards and could not be used to exploit or undermine UK national security. By the fact that Huawei has continued to operate here, we should assume that this scrutiny has not identified specific concerns that could not be mitigated or called into question their presence in the UK market.

The decision then to admit Huawei into the UK 5g system suggests that there is a reasonable degree of confidence by officials that any risks can be monitored or otherwise appropriately treated. In a similar way, the decision to limit the company (and other ones designated 'high risk') to just 35% of the UK ‘non core’ sector means that the presence in the system will be limited to a very specific operating area.

The question is whether this is enough for the US Government, which had pushed extremely heavily to get the UK to not adopt the company at all. How they choose to retaliate will be interesting as given how closely entangled the intelligence and security apparatus of both states is, withholding intelligence may quickly backfire.

The UK has been clear that Huawei will play no part at all in any of the national security systems which will encompass a variety of classified IT networks able to handle material at appropriate levels of classification. It appears that the UK feels that by separating the two out and making a distinction, this is sufficient to comfortably remove the risk of compromise.

But, having set significant stock and invested capital in trying to persuade the UK not to take this course of action, it does run the risk of the US responding in a manner that doesn’t help UK interests. Coming at a time when the UK is emerging from the EU and looking for trade deals, the potential wider impact could be felt across a range of sectors for some time to come.

This whole issue highlights the challenges of how domestic political and commercial decisions can have strategic ramifications. For the UK it also brings home the real challenges of trying to manage bilateral relationships between the worlds two great superpowers.

In the case of the US, the UK has for the best part of a century enjoyed an exceptionally close knit enduring relationship built around alignment on defence, security and intelligence matters, and underpinned by shared values and interests. The relationship is genuine, and despite its occasional challenges, has endured to the present day in good health.

By contrast the relationship with China is more complex, built less around bilateral defence and security interests and more a shared sense of economic opportunity. To the Chinese the British ‘offer’ is as much about being the world of good education and the middle class lifestyle depicted in films and novels, as it is about trade opportunities. The defence and security relationship to all intents does not exist, but the economic relationship is growing and provides huge opportunity.

In the case of China a population that is growing in wealth and disposable income is hungering for access to the sort of middle class opportunities and lifestyles that are perceived to be enjoyed in the UK. There is a huge opportunity for companies able to embrace it, and who are willing to run the risks of IP theft, to sell into and engage with China.

In the world after Brexit the UK will need to carefully consider how it positions itself and what matters more. In the short term there is likely to be a shock to the bilateral relationship with the US as it responds for what it will doubtless perceive to be a snub. But in the medium term the continued strong alignment of values and interests means that shared challenges will trump over the desire to give the Brits a good kicking.

But policy makers need to balance off the desire to keep a strong security relationship intact with the wider challenge of keeping the UK economy credible and growing. The opportunities in China are vast, as is the impact back in the UK. Had Huawei been banned completely from UK shores then the potential fall out would have been significant – many UK universities rely heavily on the funding from Chinese students, who now make up a significant proportion of the overseas student body.

It is almost inevitable that the UK would have felt the full force of Chinese anger had they supported the US position. Is the potential loss of jobs in domestic political constituencies, or the long term damage to building a more effective Anglo-Sino relationship a price worth paying to remain in Washington’s good books?  Keeping the US on side may matter in Whitehall, but it won’t put food on the tables of families who have lost jobs as a result of Chinese reaction.

The UK response to this policy challenge has perhaps been a rather elegant policy compromise that should, in the fullness of time, keep both sides reasonably happy. The decision to restrict Huawei to ‘non core’ parts of the network will reduce the relative risk, while capping their presence in the system at just 35% is a very astute move.

The offer from the UK is that at least 65% of the UK 5G requirement is essentially up for grabs to other companies, who will be keen to invest in and show how their technology is on a par with, and betters the Huawei offer. The incentive here is that while Huawei may lead the technology race now, other companies have good motivation to raise their game, invest and offer products of equivalent capability.

The new UK position of saying that a high-risk vendor can only have a position in 35% of the market while no such constraints apply to other lower risks vendors is significant. It encourages companies to invest, and it encourages mobile phone companies keen to avoid being constrained by this cap to push for investment.

It is likely that as technology increases, and companies emerge with offers that could permit them to be in way more than 35% of the network, then Huawei may find itself left behind as an organisation. The markets will want efficiencies and not be constrained by a higher risk piece of equipment.

At the same time the UK is opening the door to the US and other companies to come up with equally good solutions – they know the opening offer from the Chinese and they now have to catch up and beat it. 5G has been compared to the industrial revolution in the sense that the first nation to get it will reap the rewards. There is a gap of several years till the equipment enters service, and companies have a very strong incentive to provide a better offer than Huawei in order to capture a much bigger market share than would otherwise be the case.

The UK may well reap the rewards from embracing Huawei now in a limited way, but the company may suffer as constrained by a market cap and with other companies hungry for success, it could fall by the wayside as other companies expand – again much like the industrial revolution helped kickstart Britain, only to see others reap the benefits and leap ahead.

Retaining access to Huawei equipment also effectively traps the Chinese too – having made much of the fact that they are risk free and have no idea why the US are so opposed, the Chinese now have to behave and not do anything which gets picked up. If the UK, through its independent scrutiny were to identify Chinese malpractice, the wider damage to Huaweis reputation and ability to get into other nations would probably be irrevocably damaged. It also provides the UK with a strong lever to influence Chinese behaviour – the threat to remove them from the network would be a very powerful counter to Chinese threats.

While people raise concerns about the risks of ‘bad behaviour’ using this equipment, the permanent risk that the Chinese will have to consider is ‘what happens if they get caught?’ In those circumstances the expulsion from the UK network would destroy their position in the market and make it harder to ever get back in. They are very much trapped in a gilded cage that forces them to behave, while at the same time the UK will continue to have the ability to check and assure itself that the equipment meets the baseline standards required.

This also gives the UK an ability to act as a source of information and influence on other nations. The presence of checks means that this information can be shared with allies who do not possess Huawei networks, flagging up any potential risks or challenges. It also allows the UK to share its experiences as a trusted partner with third party countries, both opening doors and offering a chance to share experience candidly.

What this decision does do though is highlight just how difficult and finely balanced national security policy making is in the 21^st Century. The range of views which need to be sought and considered are vast and there are many different equities in play.

The UK should be pleased then that this case has perhaps affirmed the value of changes to the national security apparatus over recent years that have made this sort of credible cross Whitehall decision possible. The emergence of the National Security Council and the concept of fusion doctrine which brings together many departments to work truly jointly has been essential to this.

Similarly the move to ensure that wider departments beyond the traditional security ones get a say too is key. Just look for instance at the central role played by DCMS, a department which, to put it kindly, was just a few years ago a complete backwater with little involvement in defence or national security issues.

Today DCMS is very much at the heart of these debates because the role of digital has become so central to national security. From the provision of mobile phone networks to the battle of fake news and online security – DCMS has become arguably one of the lead and most powerful Whitehall departments as a result of this shift.

While the forthcoming SDSR is going to excite attention around force levels and troop deployments, where the really interesting battles will be fought is in fact around the role that digital and other issues will play in national security policy making and alliance postures.

The concept of what is national security is changing, and changing quickly. Arguably the decision to admit a Chinese phone company into the next generation of UK networks will have a bigger impact on the evolution of our relationships with the US and other 5 Eye members than any decision on what aircraft carrier or missile to buy and deploy.

The nature of the security debate is changing, and this will pose a challenge to Defence in showing its continued relevance at a time when the national security policy debate drivers are perhaps moving elsewhere. In future its reasonable to think that digital policy, trade policy and wider issues like the impact on jobs and long term industrial capacity will be as central to the security policy debate as the number of ships to send on a naval deployment.

This is a fascinating debate to observe precisely because it captures the essence of the changing nature of security. How the UK balances off the drivers of defence and security alignment with the US, trying to protect freedom of navigation in the South China Sea with that of protecting jobs and growing the economy for the 21^st century will be fascinating to observe. It remains to be seen though how the debate ends, perhaps, like the alleged (and possibly misquoted) Chinese view about the French Revolution, it is too early to say…