Germany Chooses China Over the West

Over U.S. and European Union objections, the German government is poised to put in place newly drafted security requirements that do not set clear limits on the Chinese telecommunications firms Huawei and ZTE supplying technology for German fifth-generation cellular networks.

Huawei is the top producer of parts required to build cellular networks and is well positioned to emerge victorious from the worldwide scramble to implement 5G, which promises transformative increases in data speed and low latency. But the company has run afoul of the U.S. government and the EU over concerns that China will use the company to gather intelligence and otherwise impede on the integrity of mobile networks around the world.

The new German regulations must now make their way through a consultation process. There is a fair chance that Huawei will continue to play a dominant role in Europe’s most important telecommunications market. That said, the German debate about the future of its 5G networks is not over yet. The failure to formulate a decisive and courageous policy, which would include strenuous efforts to curb the influence of Chinese companies, is indicative of Berlin’s broader approach toward China and reflects two aspects in particular: the fear of an economic downturn that could tank the German economy and the serious divisions within the German government over how it should approach China. German Chancellor Angela Merkel seems bent on avoiding alienating Beijing at almost all costs and is willing to put immediate economic considerations above long-term strategic, security, and economic interests—and above Europe’s interests. Germany’s failure to formulate a decisive and courageous policy, which would include strenuous efforts to curb the influence of Chinese companies, is indicative of Berlin’s broader approach toward China.

So far, the 5G discussion in the German government has been handled mostly by the bureaucracy. Lower-level agencies have been given the impossible task of finding a technical solution to a political problem. And they are in way over their head. Both the German agencies leading the process, the Federal Office for Information Security (BSI) and the Federal Network Agency (BNetzA), are based in Bonn, far away from Berlin. Under the leadership of Arne Schönbohm, its vocal president, the BSI especially has demonstrated that it lacks the political instincts to tackle the problem. Schönbohm is on the record stating that the risks are manageable and that testing equipment can solve the issue. The BSI has been subject to Huawei’s attention, long before anyone in Berlin started to care about the details of network security. Huawei has been highly cooperative in providing access to its technology and even source code for BSI testing and opened a security lab in Bonn last year, which Schönbohm lauded as great opportunity to “allow further and deeper technical exchange between Huawei and BSI to address the future challenges of cybersecurity.”

Bonn is also home to the headquarters of the largest European telecommunications company, Deutsche Telekom, which wields not only immense lobbying power but also has significant interests in the Huawei debate, as more than 50 percent of its German network is already composed of Huawei equipment. The company’s plan is to continue to work closely with the Chinese supplier for the rollout of 5G, which has already begun on a trial basis in select German cities, including Berlin and Munich. If Huawei were out, margins and profits would be at stake.

The BSI and BNetzA were responsible for a comprehensive review of the security criteria for 5G networks. At various points in the process, the German government has made clear that no vendor will be excluded based solely on its origin. It continues to stick to this premise. This has also been the default position of the European Commission, but with a careful and implicit acknowledgement of the challenges that the governance model and legislative and judicial environment in China pose—even for allegedly private companies. This month, the EU published a risk assessment making that abundantly clear. Brussels is willing to drive up the price of 5G implementation but lacks the capacity to do so if member states are unwilling to play along.

Germany’s role in this process is critical. The current draft security requirements are made up of technical specifications, with little to no enforcement potential. It places trust in the goodwill of suppliers, without any review or audit mechanisms assessing ownership structure, the transparency of the financing, past misconduct, or the legal framework to which a company is subject. The German government wants to set standards that fail to do justice to the reasonable security and economic concerns raised across Europe over vendors like Huawei that could pose significant security challenges. Under this new paradigm, Germany would not only fall behind in the European debate—it would henceforth stand in the way of a potential joint European policy.

In comparison to legislative approaches that have been introduced in other European capitals such as Paris or Stockholm, the German government has so far kept the legislature outside the debate—which could now come back to haunt Merkel. The question of Huawei’s business model is under significant stress due to U.S. pressure. In November, when the ban on U.S. companies working with Huawei comes into full effect, it will become clear the extent to which the U.S. Commerce Department’s measures will impact China. At the same time, a separate debate has emerged across Europe about the importance of sustaining the long-term economic competitiveness and prosperity of European technology companies.

And while it now seems that Beijing has successfully threatened to use its economic leverage over Germany and strong-armed Merkel into taking an open stance in favor of Huawei, other European countries have taken a much more subtle approach, leaving themselves more room for maneuver. Sweden’s parliament, for example, has passed a law, set to come into effect on Jan. 1, 2020, that will leave final decision-making to the intelligence agency and the armed forces, which can direct the post and telecommunications agency on national security grounds when it comes to licenses for operating radio networks. The mechanism is deliberately framed broadly. The parliament has decided to designate 5G—and existing radio networks—a matter of national security, which enables the relevant agencies, with access to all classified and unclassified information, to do due diligence with regard to Chinese vendors. This is not an outright ban but an acknowledgement of the complex security problem at hand.

Germany’s parliament could demand a prominent role in shaping the legal environment around 5G, which it has so far been reluctant to seek. The grand coalition has mulled real debate over critical issues for almost six years, and with a small opposition, options to hold the government accountable are limited. But resistance is brewing from within the governing coalition among prominent social democratic and conservative legislators. There is great potential in this, as legal changes could fundamentally put significant limitations on the bureaucracy to sacrifice security and long-term strategic concerns. A bipartisan initiative to modify the existing telecommunications law could bring Germany more in line with the EU proposals. Brussels will end the process initiated by the European Council seeking a concerted approach to the security of 5G networks by presenting a toolbox for risk management at the end of the year. If so desired by the member states, the commission could play a much more prominent role in streamlining the regulatory environment.

If the German parliament fails to act, it is almost inevitable that Berlin will continue with its haphazard approach, avoiding tough choices, leaving its security and competitiveness at risk, alienating allies, and, most importantly, weakening Europe’s overall position regarding China—and the United States—in the emerging struggle for technological autonomy.