US introduces legislation for Chinese tech sales

Citing national security and intellectual property theft, the proposed Fair Trade with China Enforcement Act would also prevent Huawei and ZTE equipment and services from being sold to government in the US.
Written by Corinne Reichert, Contributor

Legislation barring the sale of national security-sensitive technology to China has been introduced to the United States Senate by Republican Marco Rubio, in another effort to crack down on the supposed theft of US intellectual property.

The proposed Fair Trade with China Enforcement Act would also block government or contractors from buying telecommunications equipment and services from Chinese tech giants ZTE and Huawei.

In addition, the draft legislation imposes higher taxes on any income from China being made by US multinational companies, as well as levelling duties and caps on shares held by Chinese investors in US companies that produce goods under the "Made in China 2025" initiative, which aims to catch China up with the US and Germany across robotics, aerospace, and clean-energy cars.

"How America responds to the growing threats posed by China is the single most important geopolitical issue of our time, and will define the 21st century," Rubio said when introducing the Bill.

The introduction of the Bill follows the heads of the CIA, FBI, NSA, and the director of national intelligence to the Senate Intelligence Committee recommending in February that Americans not use products from Huawei and ZTE.

Read more: Paranoia will destroy us: Why Chinese tech isn't spying on Americans

ZTE was then issued with an export ban last month by the US Department of Commerce, which alleged that the Chinese tech company had lied to the Bureau of Industry and Security about disciplinary actions following illegal shipments of equipment to Iran and North Korea.

ZTE had been fined $1.2 billion by the US for directly, or through third-party distributors, shipping $32 million in American-made telecommunications equipment to Iran between 2010 and 2016 without the proper licensing.

Following the latest export ban, ZTE has said "the major operating activities of the company have ceased" while it attempts to have the sanctions removed or modified.

The United Kingdom's Cyber Security Centre also reportedly sent a letter to British telcos warning of the national security risks of using ZTE equipment last month, with Australian carrier Telstra ending the sale of ZTE white-labelled devices this week.

US President Donald Trump had started a trade war with China in March, imposing higher tariffs after saying an investigation by Trade Representative Robert Lighthizer had found that China is using foreign ownership restrictions to require tech transfers from US to Chinese companies, as well as conducting espionage to acquire intellectual property.

The Presidential Memorandum also claimed that China "directs and facilitates" the investment in and acquisition of US companies for technology transfer purposes according to the Chinese government's plans.

"We have a trade deficit, depending on the way you calculate, of $504 billion, now some people would say it is really $375 billion," Trump said at the time, adding that the tariffs could hit $60 billion worth of Chinese imports to America.

"Frankly, it's going to make us a much stronger, much richer nation."

The Trump Administration is also considering setting standards for a nationwide 5G mobile network to prevent Chinese dominance in the industry, according to alleged government documents leaked in January.

According to the documents, Huawei and ZTE have become leaders in 5G technology due to support from the Chinese government -- with China itself "the dominant malicious actor in the information domain".

"Huawei has used market-distorting pricing and preferential financing to dominate the global market for telecommunications infrastructure. China sets aside up to 70 percent of its mobile infrastructure market for Huawei and ZTE, only allowing Western vendors to compete for the remainder," the alleged government memo says.

"The magnitude of the Chinese market reserved to Huawei and ZTE allows the companies to effectively fund their R&D with domestic sales while insulating the companies against global infrastructure spending downturns. The government has also extended an estimated $100 billion line of credit to Huawei to finance deals abroad. Combined with aggressive pricing, diplomatic support, and suspected payments to local officials, Huawei has quickly taken market share in the radio infrastructure market as well as optical and routing, leaving them poised to take market leadership of 5G."

Huawei has thus surpassed Western companies Ericsson and Nokia in radio infrastructure, and US networking giant Cisco in routing, the alleged memo contends.

With AAP

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