US labels Huawei and ZTE a 'threat to national security'

Congressional report claims Chinese telecoms firms should not be doing business in America on national security grounds

Trade relations between the US and China took a turn for the worse after a US Congressional report labelled two of its telecoms firms a "threat to national security".

The investigative report encourages US firms to use alternative suppliers, concluding that Huawei and ZTE could not be trusted to be "free of influence from Beijing".

It stated: "The risks associated with Huawei's and ZTE's provision of equipment to US critical infrastructure could undermine core US national-security interests."

In an ironic twist, the report acknowledged that "many non-Chinese companies, including US technology companies, manufacture some of their products in China".

But the report will come as a huge blow to both telecoms firms, which have been fighting hard to establish a US presence.

In a Sky News report, Huawei representative William Plummer said the report's recommendations would set a "monstrous, market-distorting, trade-distorting policy precedent that could be used in other markets against American companies."

A BBC News article reported that China's Foreign Ministry urged the US to "set aside prejudices" regarding the two firms.

"Chinese telecoms companies have been developing their international business based on market economy principles," ministry spokesman Hong Lei told the BBC. "Their investment in the United States embodies the mutually beneficial nature of Sino-American economic and trade relations."

CRN says:

It appears political issues are creeping further into business issues and being used for cynical reasons to dent rival businesses.

This move could open up a can of worms for US companies such as Facebook and Google which obviously can be accused of collecting information for their own gain.

We are already seeing the Apple and Samsung patent battle take a similar turn.

Surely it is in the interest of fair competition and consumer choice to allow companies such as Huawei and ZTE to trade on a global basis, and for customers to insist on setting the boundaries on their data during the installation process. Is there such a thing as corporate trust?

Otherwise, we could return to a Cold War state of affairs where no foreign company is allowed to do business in another country due to heightened suspicions over national security.

The funny thing about this is, many of the parts of US companies' products are manufactured in China as pointed out by the report. Isn't that known as biting the hand that feeds it?