The American intelligence community concocted a story about Huawei’s plans to steal the world’s data through control of 5G broadband, in order to cover up its failure to anticipate the most important new development in telecommunications since Marconi invented the wireless – quantum communications.

This hack-proof technology pioneered by the Chinese and likely to be embedded in the new fifth-generation networks will drastically curtail the eavesdropping capabilities of America’s spy agencies. I broke the story in a July 7 exclusive in Asia Times. America’s spies hijacked the Trump Administration’s trade agenda and turned into a global campaign against Huawei. This has been a humiliating failure.

Now Huawei has called the American intelligence community’s bluff. Huawei founder Ren Zhengfei offered to license his company’s technology to the West and allow Western companies to take it apart, re-write the source code, and otherwise purge it of any possible trace of Chinese hacking, in an interview with The Economist:

It is this 5G technology – central to Huawei’s future revenue growth – that Mr Ren said he was ready to share, in a two-hour interview with The Economist on September 10th. For a one-time fee, a transaction would give the buyer perpetual access to Huawei’s existing 5G patents, licences, code, technical blueprints and production know-how. The acquirer could modify the source code, meaning that neither Huawei nor the Chinese government would have even hypothetical control of any telecoms infrastructure built using equipment produced by the new company. Huawei would likewise be free to develop its technology in whatever direction it pleases.

China never planned to steal everyone else’s data. On the contrary, China offered technology that would stop the United States from stealing everyone else’s data, a critical setback to a US intelligence community that spends most of its $80 billion annual budget on signals intelligence (SIGINT).

That opens the door to a straightforward trade deal between the US and China, under which China will buy a lot more US agricultural produce and energy (as President Trump tweeted today), and China will agree to some mechanism to allay American concerns about theft of intellectual property. President Trump signaled the likelihood of such a deal by postponing some new tariffs to Oct. 15 from an early-scheduled Oct. 15, in deference to the anniversary of China’s Communist Revolution of 1949.

A trade deal was imminent in December 2018 when Xi Jinping and Trump dined during the Buenos Aires Group of 24 summit. It collapsed when the arrest of Huawei’s CFO (and Ren’s daughter) at the Vancouver airport shifted the agenda to national security issues.

The way back to a trade deal lay over the job of National Security Adviser John Bolton, who represented the intelligence community’s position inside the Trump cabinet. As I reported here Sept. 10, firing Bolton was a signal that Trump had grown weary of the spooks’ encroachment on his trade agenda. I do not think it a coincidence that Ren’s offer was given to the Economist the same day that Bolton was fired.

The Wall Street Journal reported this morning, “China is looking to narrow the scope of its negotiations with the U.S. to only trade matters, putting thornier national-security issues on a separate track in a bid to break deadlocked talks with the U.S. Chinese officials are hoping that such an approach would help both sides resolve some immediate issues and offer a path out of the current impasse, according to people familiar with the plan.”

In fact, the Trump Administration took the initiative to sideline the national security issues by removing Ambassador Bolton. President Trump’s first concern is his re-election, which is endangered by the manufacturing recession that began in the first quarter of 2019, triggered by the contraction of world trade due to the tariff war.

Chinese scientists demonstrated quantum communications in a video call with Vienna in 2017. The technology uses the entanglement of atoms at a distance to create a communications signal. Any attempt to hack the system will destroy the quantum state that powers the communication, and destroy the signal. It is the first form of cryptography that is theoretically impossible to foil. As I reported, several major telecom and tech companies including Japan’s Toshiba and South Korea’s SK Telecom are in a race to embed quantum communications in the new 5G networks.

America’s spies failed to anticipate this sea-change in technology, although China openly tested a quantum communications satellite in June 2017. The failed attempt to derail Huawei was a last-ditch effort to slow down the Chinese while the spies figured out what to do next. One solution might be to cut $60 billion or so out of the US intelligence budget and divert it to a crash R&D program to bring America up to speed in quantum communications and fifth-generation broadband, technologies in which China presently has the lead.