Not Safe for Work?

Huawei in the crosshairs

It was once typical of countercul­ture nonchalance to dream of a benign technological future full of easy rewards. “I like to think / (it has to be!) / of a cybernetic ecology / where we are free of our labors / and joined back to nature,” the American poet Richard Brautigan wrote, in 1967. “All watched over / by machines of loving grace.” While Brautigan’s glib vision is no longer just a fanciful prospect, the reality is anything but a blithe utopia.

The domination of our daily lives by digital technologies, including those that watch and listen around the clock, has grown with remarkable speed. Global internet traffic will soon rise to 150,700 gigabytes per second, compared with 100 gigabytes per second in 2002. And the information and communications technology, or ICT, sector now represents 15.5 percent of the world’s total wealth, as measured by gross domestic product. Of the ten largest companies by market capitalization, seven are tech firms. Two on that list, Alibaba and Tencent, are based in China. The coupling of transformative cybernetic technologies and the extraordinary growth of Chinese transnationals, in particular, means more than just e‑commerce platforms and video games that free us from our labours. It reflects an increasingly defining characteristic of the global economic order itself, and a fraught testing ground for international diplomacy. Case in point: Huawei.

By now, Canadians should be uncomfortably familiar with the legal, political, and diplomatic standoff over the arrest of Huawei’s chief financial officer, Meng Wanzhou, who was detained at the Vancouver International Airport on December 1, 2018, on a U.S. extradition request, while en route to Mexico. Washington alleges she misled an American bank about Huawei’s commercial relations with Iran, while that country was under U.S. economic sanctions. In an apparently retaliatory move, Chinese authorities took into custody two Canadians: Michael Kovrig, a diplomat on leave with an international consulting company, and Michael Spavor, an entrepreneur. All the while, Ottawa has been deciding whether Meng’s company can supply Canada’s emerging 5G telecommunications network — a decision in abeyance due to national security fears.

With The Huawei Model: The Rise of China’s Technology Giant, Yun Wen offers an exhaustive history and analysis of a company in the diplomatic crosshairs. Huawei was founded in the early days of China’s “opening up” era, in the 1970s, when the Chinese Communist Party chairman Deng Xiaoping turned Maoist dogma on its head by declaring, “To get rich is glorious.” In the first days of Deng’s structural economic reforms, a former People’s Liberation Army engineer, Ren Zhengfei, “plunged into the sea” to found a private company in the city of Shenzhen, near Hong Kong. The firm was not a government entity or even a “state-owned enterprise,” but rather a wholly private concern, albeit one that drew on government connections.

The story of Huawei’s subsequent growth is one of remarkable initiative and strategic calculation, of taking advantage of economic policy shifts through the successive regimes of Deng, Jiang Zemin, Hu Jintao, and the current supreme leader, Xi Jinping. Initially established as a trading firm, Huawei branched out into supplying and later manufacturing telecommunications switching equipment. Still later, it began designing and building integrated ICT networks of its own.

Local entrepreneurs were not favoured during Deng’s “outside in” economic strategy, which encouraged inward investment by foreign multinationals. These companies, including Canada’s Nortel, came to dominate the Chinese telecom market. But once a policy of foreign investment had borne fruit — and had supercharged growth — the Communist Party wanted to take greater control of its economy by promoting homegrown companies. (The foreign telecoms came to be known as the “seven countries and eight product systems,” in an uncomplimentary comparison to the Eight-Nation Alliance of early twentieth-century imperial powers.)

Under this revised economic strategy, Huawei was particularly well positioned. The company had stood somewhat apart from the foreign investment boom, choosing to concentrate on developing its services within the underserved rural market, a choice echoed by an adopted Maoist slogan: “Encircling cities from the countryside.” By designing its own equipment and then developing its own software, it secured a strong regional presence. And when Beijing encouraged an “inside out” entry into world markets, Huawei was ready.

The company quickly leapfrogged over China’s own saturated urban markets and entered foreign ones. In ways that paralleled its domestic approach, it began “encircling developed markets from emerging markets.” Moving outward from Asia and Africa, it gradually broadened its reach and established footholds in the most advanced economies, including in the European Union, the United States, and Canada. Today, Huawei, whose name roughly corresponds to the Mandarin phrase “China can,” has proved itself an impressively successful transnational corporation.

Wen brings a cosmopolitan perspective to The Huawei Model. She was born and raised in China and obtained her bachelor’s degree from Sun Yat‑sen University, in Guangzhou. After coming to Canada, she earned a doctorate in communications from Simon Fraser University in 2017 (her book builds upon her dissertation) before joining the consulting firm Infinite-Sum Modeling as a senior economist. The account she presents is occasionally eye-popping and tests some conventional assumptions and, perhaps, our credulity. For one thing, she roots Huawei’s initial access to technology — before Deng’s reforms — in Mao Zedong’s efforts to establish indigenous ICT prowess. This part of the narrative runs counter to the consensus about Mao’s economic policies, usually deemed utter disasters, and may reflect a Xi-era sensibility of not disavowing any part of post-revolution growth. Wen also argues that much of Huawei’s domestic workforce is motivated by an ­attachment to formally socialist ideals, through which workers see themselves as contributing to the broader wealth of their society. This does not prevent her from describing with great candour their obsessive and gruelling work schedules, which make the infamous loyalty of Japanese company men seem like a stroll through cherry blossoms. Wen also notes extreme inequity in employee compensation, socialist ideals notwithstanding.

Since entering Canada in 2008, Huawei has built a significant presence. Until recently, it was the second-biggest seller of smartphones, after Apple. The company supports research at many Canadian universities. Huawei has even been a regular sponsor of Hockey Night in Canada. Based in Markham, Ontario, Huawei Technologies Canada behaves, in many ways, like any other foreign-owned subsidiary. Like its competitors, it has a business model predicated on creating value and earning profits in an internationally competitive environment, one characterized by extensive cross-border trade and widely dispersed supply chains. And these conditions depend on multilateral networks of rules, which over decades have brought about progressively lower trade barriers.

But, as the Canadian Security Intelligence Service has stressed, Huawei is also characterized by features not shared by many of its competitors. In the debate over its participation in this country’s 5G network, CSIS has repeatedly pointed out that Chinese companies are subject to their home government’s directives to “support, co-operate with and collaborate in national intelligence work.” They also must submit to Communist Party oversight committees. This potential subordination to state objectives lies at the core of Ottawa’s suspicions. In its current hesitation about whether to definitively block Huawei from 5G, Canada is alone among its Five Eyes intelligence partners, which have variously banned outright or sharply limited Huawei’s 5G activities.

For nearly three decades, I worked for the Department of Foreign Affairs (now Global Affairs Canada), and I would on rare occasions have conversations with diplomats from the Chinese embassy. When these encounters were outside of formal meetings, I would later hear from CSIS officers seeking a debrief. Each time, the agents’ preoccupation was whether my Chinese interlocutors had asked about Canadian technology.

I am sure these inquiries were based on legitimate concerns about unauthorized access to our state and commercial secrets; however, there was a certain dissonance in the interviews. Canada’s official stance in those days was to welcome China’s economic reforms and the country’s integration into the global marketplace. This shift was seen as an important geopolitical development, since the more intertwined economies became in the pursuit of prosperity and growth, the more secure and peaceful the world would be. Through mutually agreed upon initiatives, both countries promoted investments by Canadian firms, who would transfer technologies to their Chinese partners. Perhaps the diplomats I encountered were trying to steal a march on that process, but I always had difficulty viewing this potential espionage with the same gravity as CSIS did.

Discussions about Huawei and our 5G network remind me of these past exchanges. Sometimes the national security argument against the company’s participation in the network’s construction is about engineering: its equipment and software are not of adequate quality, some argue, to prevent hacking by third parties and the exposure of key Canadian assets, public and private, to malicious damage. But more often than not, the line is that Huawei would be a digital Trojan horse, installing software that could be activated for clandestine surveillance or, worse, cyberattacks on key domestic infrastructure.

Cyberattacks are not unprecedented, of course. In June 2010, the Stuxnet computer virus was used to overwhelm Iran’s security systems and cause malfunctions in its uranium enrichment centrifuges, part of its suspected nuclear weapons program. In November 2014, North Korea hacked Sony Pictures in retaliation for The Interview, a film that parodied Kim Jong Un. And, it should go without saying, Russians manipulated social media platforms to spread misinformation and political incitement during the 2016 U.S. presidential election. But were any of these subterfuges achieved by special software that the perpetrators had earlier embedded in the victims’ networks? The answer, according to the engineers and technicians who actually manage such systems, seems to be no.

Setting Huawei aside for a moment, what do we owe a regime with an aggressive bent and values that increasingly diverge from those of the West? Beijing has deployed an array of manoeuvres against Canada following Meng’s detention, including a ban on pork products, questionable phytosanitary restrictions on canola, and the abrupt end to collaboration on a COVID‑19 vaccine. Some of these actions have been cast as legitimate trade remedies, but the timing always appears calculated and the supposed infraction dubious.

More broadly, China continues to unilaterally extend its security perimeter by building militarized islands in the South China Sea; to incarcerate tens of thousands of Uighurs in Xinjiang province; to suppress freedoms in Hong Kong, in contravention of its treaty commitments to preserve the city’s liberal and democratic way of life; and to engage in hostage tactics, as in the case of Kovrig and Spavor. All this is accompanied by “wolf warrior diplomacy” that seeks to use insults, rather than carefully chosen words, to advance national interests. To put it mildly, China is a difficult global partner. In this context, Global Affairs Canada is under pressure from many, including a list of distinguished former ambassadors to China, to take a tougher line against the Xi Jinping regime; Parliament, including many members of the Liberal backbench, has declared that China is committing a genocide; and the House of Commons has called for the upcoming 2022 Winter Olympics to be relocated out of Beijing.

But back to Huawei. Although Wen draws on interviews with the company’s employees, she does not wade into the efficacy, or lack thereof, of its embedded Communist Party. Nor does The Huawei Model, otherwise so painstakingly detailed, make any mention of Beijing’s declaration that companies must serve its security aims. Wen does note an irony, however. In the wake of revelations, by the former security analyst Edward Snowden, about the U.S. government’s illegal surveillance of Americans’ personal data using privately owned networks, China itself has adopted a protective stance, with plans to “gradually remove foreign technologies from banks, the military, state-owned enterprises, and key government agencies, replacing them with homegrown technologies at all layers, including infrastructure hardware, networking equipment, servers and operating systems.” Given mutual suspicions, what is sauce for the goose may well be sauce for the gander.

The unfolding dynamic among Canada, China, and Huawei takes place within the broader deterioration of multilateral, rules-based trade, which has been under attack from populist, protectionist, and ultra-nationalist forces for years. Inward-looking authoritarianism has re-emerged in eastern Europe, the United Kingdom has withdrawn from the European Union, and a disgraced former president has unleashed nativist clamour in the United States. And while the nationalism of Xi’s regime has emerged independently of the Western backlash against neo-liberalism, it is adding to the crisis.

But more and more developments, everything from climate change and the increasing digitization of the economy to the growing power of artificial intelligence, speak to the need for a multilateral system with an even broader scope than before. It’s an expanded system of this sort that the policy and strategy consultant Geoffrey Allen Pigman considers in Negotiating Our Economic Future: Trade, Technology, and Diplomacy. With visionary qualities not normally found in books about trade policy, Pigman anticipates a world of easy physical abundance, machines more intelligent than their creators, and human populations that must increasingly find satisfaction in enforced leisure.

Given the international dimensions of such a future, now is not a time to retreat into silos or bunkers. It’s worth noting that the current Chinese government exhibits a greater authoritarianism than all of its post-Mao predecessors; as a full member of the World Trade Organization for the past twenty years, today’s China is also more integrated with the global economy. As great powers are wont to do, it feels free to bend and ignore the rules, but it at least pays obeisance to them. That is why Pigman insists that China be kept in the multilateral tent. A full break — the separation of China and the West into two “closed, exclusive economic systems”— would represent “a chilling scenario,” in Pigman’s words. “The Chinese government’s establishment of a ‘Great Firewall of China’ monitoring and limiting cross-border internet traffic has already generated fears that the global internet will become a ‘splinternet’ of ring-fenced data zones.” Further mutual suspicion and defensive posturing would be a “lose‑lose,” while the gains from “continued cross-border economic activity, extending from trade in goods, services, data, and information to investment and to scientific collaboration . . . , would be sacrificed.” Quoting the investor and philanthropist George Soros, Pigman notes that things would be even worse if a less engaged China were to oversee the growth of “data-rich IT monopolies that would bring together nascent systems of corporate surveillance with an already developed system of state-sponsored surveillance.”

It’s enough to bring to mind Orwell’s 1984, with a world divided into hardened blocs, each under its own universal surveillance system. To prevent dystopian fiction from becoming twenty-first-century reality, Pigman issues a legislative and policy call to arms, with seven key steps that are “critical to meeting the near-term challenges of the global economy and trade posed by technological change.” Right behind averting “ecological Armageddon,” he argues we must “stabilize diplomacy between China and the Western powers.”

One way to do that, Pigman suggests, is to be mindful of the interests of transnationals like Huawei: “These firms’ growth prospects are integrally linked to expanding global markets for their products, participating in global supply chains, and having access to global sources for inputs.” Companies from both China and the West have better prospects for continued profits in a single market, rather than in two autarkic ones. In other words, Huawei might represent more of an entwined Gulliver than a Trojan horse; in trying to pursue its autonomous interests in Canada and elsewhere, it could help keep Beijing from recklessly erecting barriers to the West. Because existing links of trade, investment, and technology are not easy to break, they constitute a stabilizing force for the current multi­lateral system, which is under increasing pressure. By trying to expand and strengthen the rulebook, negotiators could work toward “verifiable assurance to Western governments that Chinese technology will not be used for surveillance.”

Is Pigman simply building pagodas in the air? About a decade ago, there was a growing belief that certain business freedoms of the post-Deng era would naturally stimulate a greater civil freedom among Chinese citizens to pursue their individual interests, and that this loosening, in turn, would stimulate an open marketplace of ideas and a more democratic state. Since 2012, however, Xi’s government has moved to stifle democratic tendencies and to restrain businesses, as demonstrated by its recent refusal to allow Alibaba to launch an initial public offering for its affiliated financing subsidiary, Ant Group.

The move against Alibaba (and by extension its billionaire co-founder Jack Ma) has dampened Pigman’s hopes that Chinese businesses can help restrain state actions; he wrote to me in a recent exchange that he anticipates more “hardball diplomacy” now than he did when drafting Negotiating Our Economic Future. But there are still alternatives to autarky, if only we can keep the dialogue going. Wen’s and Pigman’s books help us do just that, by stimulating thinking about the power and influence of modern companies, their relation to governments, and their role in the global spread of technology.

The future that Richard Brautigan envisioned five decades ago still promises rewards. But we now know they won’t be won easily, and there may be little “loving grace” along the way. We must prepare for the tough diplomatic campaigns that can help us bridge divides and safeguard the promise of the digital age.