The Need for an Infrastructure Strategy

San Francisco / December 25, 2019
 
Earlier today, the Wall Street Journal published a story detailing how the Chinese government fueled the rise of Huawei (link). The Journal estimates that Beijing gave Huawei up to $75 billion in support over several decades.  The support came through a wide range of grants, credit facilities, tax breaks, and even an intervention in 1999 to rescue the company from tax fraud. For comparison, Huawei's closest competitor is Cisco Systems, Inc. Since 2000, state and federal governments have given $44.5 billion in support to Cisco.
 
Huawei is winning contracts to build next-generation 5G telecom networks around the world. As Huawei builds these 5G networks, they give the Chinese government access to information that is sent along this infrastructure. Pause for a moment and reflect on the strategic advantage this creates for China. The Trump Administration is warning the United Kingdom not to allow Huawei to build its 5G networks (link). Boris Johnson should heed this advice.
 
The United States must get smarter about fostering the growth of companies like Cisco who want to build crucial technical infrastructure. This should be a bi-partisan initiative that carries over as control of the White House shifts between Republicans and Democrats. When crucial technical infrastructure is at stake, the United States should drop its free-market mantras and advance American firms that are committed to American interests and values.
 
The free market system is a construct. The Trump Administration is fooling itself if it believes that market dynamics will give rise to viable competitors to Huawei. The State Department and Department of Defense asked Cisco, Oracle, Ericsson, Nokia, and Samsung to develop pieces that will chip away at Huawei's lead in 5G (link). The Trump Administration is learning that each of these businesses faces their own complicated problems. It is not always practical to coordinate with American strategy. That is life in the private sector. Every business must focus on its survival. The interests and goals of privately-held businesses will not magically align with the thinking of US national security types.
 
The United States should learn from how China cultivated Huawei and replicate that strategy.