TRADE PROTECTIONISM AND CYBER ESPIONAGE ON GROUNDS OF NATIONAL SECURITY: HUAWEI AS POTENTIAL SECURITY THREAT TOWARDS UNITED STATES’ TELECOMMUNICATIONS INFRASTRUCTURE (2007-2014)
By
MUHAMMAD AKBAR CHARISMA 016201300102
A thesis presented to the Faculty of Humanities President University in partial fulfillment of the requirements for Bachelor Degree in International Relations Major in Diplomacy Studies
2017 THESIS ADVISER RECOMMENDATION LETTER
This thesis entitled “TRADE PROTECTIONISM AND CYBER ESPIONAGE ON GROUNDS OF NATIONAL SECURITY: HUAWEI AS POTENTIAL SECURITY THREAT TOWARDS UNITED STATES’ TELECOMMUNICATIONS INFRASTRUCTURE (2007-2014)” prepared and submitted by Muhammad Akbar Charisma in partial fulfillment of the requirements for the degree of Bachelor of Arts in International Relations in the Faculty of Humanities has been reviewed and found to have satisfied the requirements for a thesis fit to be examined. I therefore recommend this thesis for Oral Defense.
Cikarang, Indonesia, February 23rd 2017
Recommended and Acknowledged by,
Hendra Manurung, SIP., M.A.
Thesis Adviser
i
DECLARATION OF ORIGINALITY
I declare that this thesis, entitled “TRADE PROTECTIONISM AND CYBER ESPIONAGE ON GROUNDS OF NATIONAL SECURITY: HUAWEI AS POTENTIAL SECURITY THREAT TOWARDS UNITED STATES’ TELECOMMUNICATIONS INFRASTRUCTURE (2007-2014)” is, to the best of my knowledge and belief, an original piece of work that has not been submitted, either in whole or in part, to another university to obtain a degree.
Cikarang, Indonesia, February 23rd 2017
Muhammad Akbar Charisma
ii
PANEL OF EXAMINER APPROVAL SHEET
The Panel of Examiners declare that the thesis entitled “Trade Protectionism and Cyber Espionage on Grounds of National Security: Huawei as Potential Security Threat towards United States’ Telecommunications Infrastructure (2007-2014)” that was submitted by Muhammad Akbar Charisma majoring International Relations from the Faculty of Humanities was assessed and approved to have passed the Oral Examinations on February 13th 2017.
Hendra Manurung, SIP., MA.
Chair – Panel of Examiners
Dr. Phil. Reza Alexander Antonius Wattimena
Examiner
Haris Rahmat Pratama, BA. IR., M.A.
Examiner
iii
ABSTRACT
Title: “TRADE PROTECTIONISM AND CYBER ESPIONAGE ON GROUNDS OF NATIONAL SECURITY: HUAWEI AS POTENTIAL SECURITY THREAT TOWARDS UNITED STATES’ TELECOMMUNICATIONS INFRASTRUCTURE (2007-2014)” Trade relation between United States and People’s Republic of China has caused a number of mergers and acquisitions towards US companies by Chinese private firms, including Huawei. According to RAND study in 2005, Huawei was alleged as one of Chinese “national champions” that U.S. – China Economic and Security Commission (USCC) argued they are subject to Chinese government order. Besides, with the growing concerns of cyber espionage incidents emanating from China (such as Titan Rain in 2005, APT1 (also known as the “comment crew”, and intellectual property theft), USCC suggested there had to be realistic assessment to secure US critical telecommunications infrastructure from Huawei that could possibly provide access for China to control US sensitive telecommunication equipment and infrastructure. Therefore, in this thesis, the writer aims to address US government’s measures that applied trade protectionism through CFIUS and cyber espionage through NSA in order to deal with Huawei as potential security threat to US telecommunications infrastructure. Keywords: CFIUS, Cyber Espionage, Huawei, NSA, Security Threat, Telecommunications infrastructure, Trade Protectionism, USCC.
iv
ABSTRAK JUDUL: "PROTEKSIONISME PERDAGANGAN DAN SPIONASE SIBER ATAS DASAR KEAMANAN NASIONAL: HUAWEI SEBAGAI ANCAMAN POTENSIAL TERHADAP INFRASTRUKTUR TELEKOMUNIKASI AMERIKA SERIKAT (2007-2014)" Hubungan perdagangan antara Amerika Serikat dan Republik Rakyat Cina telah menimbulkan sejumlah penggabungan dan akuisisi terhadap perusahaan - perusahaan AS oleh perusahaan swasta Cina, termasuk Huawei. Menurut studi RAND pada tahun 2005, Huawei diduga sebagai salah satu "juara nasional" China, dimana Komisi Ekonomi dan Keamanan AS - China (USCC) mengatakan bahwa mereka tunduk pada perintah pemerintah Cina. Selain itu, dengan berkembangnya keprihatinan terhadap insiden spionase siber yang berasal dari Cina (seperti Titan Rain pada tahun 2005, APT1 (juga dikenal sebagai "comment crew", dan pencurian kekayaan intelektual), USCC menyarankan harus ada penilaian yang realistis untuk mengamankan infrastruktur telekomunikasi AS dari Huawei yang mungkin bisa memberikan akses bagi Cina untuk mengontrol peralatan telekomunikasi dan infrastruktur AS yang sensitif. Oleh karena itu, dalam tugas akhir ini, penulis bertujuan menyampaikan tindakan pemerintah AS yang diterapkan melalui proteksionisme perdagangan melalui CFIUS dan spionase siber melalui NSA untuk menangani Huawei sebagai potensi ancaman keamanan terhadap infrastruktur telekomunikasi AS. Kata kunci: Infrastruktur Telekomunikasi, Huawei, CFIUS, HPSCI, NSA, Proteksionisme Perdagangan, Spionase Siber.
v
“Fainna ma’al ‘usri yusro. Inna ma’al usri yusro.”
-(Q.S. Al-Insyirah: 5-6)
vi
ACKNOWLEDGEMENT Alhamdulillahirabbil ‘aalamiin, an absolute praise to the Almighty God, Allah SWT, because of His mercy and blessings the writer could finished this thesis. Shalawat and salam are given to prophet Muhammad SAW, because of his guidance that brings enlightenment to our life. I would like to deliver my highest gratitude to:
1. My beloved father and mother, Mandriadi and Laily Hidayati S., who relentlessly raised and supported me until I can finish my study in this university. For my dearest younger brother, Muhammad Firman Azima, who always makes me laugh whenever I feel homesick. 2. My advisors, Hendra Manurung, SIP., M.A. and Haris Rahmat Pratama. BA.IR., MA., for all the knowledge they have been giving to me during the process of writing this thesis. 3. My dearest F2 roommates, Muhammad Adnan Fatron, M. Lutfan Hasby, M. Nur Fadhilah, Rudi Azwan, as well as Ilham Saumi, for this wonderful university journey we make together. 4. My dearest friends, Luky Yuniansyah, Rian Akbary, Lanny Surya Alfiani, Iranti Mantasari, Lathifatus Syifa, Izzati Robbi Hamiyya, as well as the big family of IR 2013.
Cikarang, February 23rd 2016
Muhammad Akbar Charisma
vii
Table of Contents
THESIS ADVISER RECOMMENDATION LETTER ______i DECLARATION OF ORIGINALITY ______ii PANEL OF EXAMINER APPROVAL SHEET ______iii ABSTRACT ______iv ACKNOWLEDGEMENT ______vii LIST OF FIGURES ______xi LIST OF ACRONYMS ______xii CHAPTER I: INTRODUCTION ______1 I.1. Background of the Study ______1 I.2. Problem Identification ______3 I.3. Statement of the Problem ______5 I.4. Research Objectives ______6 I.5. Significance of Study ______6 I.6. Theoretical Framework ______7 I.6.1. Constructivism ______7 I.6.2. Trade Protectionism ______8 I.6.3. National Security ______9 I.6.3.1. Cyber Security ______10 I.7. Scope and Limitations of Study______12 I.8. Research Methodology ______13 I.8.1. Qualitative Research ______13 I.8.2. Analytical-Descriptive ______13 I.8.3. Conceptual Framework______15 I.8.4. Research Framework ______16 I.9. Thesis Outline ______17 I.10. Definition of Terms ______18 CHAPTER II: THE RISE OF US’ NATIONAL SECURITY CONCERNS DUE TO HUAWEI’S ATTEMPTS OF MAKING BUSINESS EXPANSION IN US TELECOMUNICATION MARKET______20 II.1. The Critical Role of Telecommunications Infrastructure to United States _____ 20 II.2. Chinese Cyber Espionage Conducts towards US’ and its Influence towards US’ Assessment on Chinese Companies’ Investment in the US ______22
viii
II.3. The Rise of Security Concerns of United States over Huawei ______26 II.3.1. Timeline of the Cases of Huawei’s Blocked Foothold in US Market ______28 II.3.2. Alleged Links between Huawei and Chinese Government of Potential Digital Triangle ______29 II.4. Chapter Conclusion ______32 CHAPTER III: US ALLEGATION TOWARDS HUAWEI AS POTENTIAL SECURITY THREATS TO US’ TELECOMMUNICATION INFRASTRUCTURE __ 33 III.1. US Policies in Securing Telecommunications Sector as part of Its Critical Infrastructure ______33 III.1.1. Homeland Security Presidential Directive-7 in 2003______34 III.1.2. Exon-Florio Amendment (1988) and Foreign Investment in Committee on Foreign Investment in the United States (CFIUS) ______35 III.1.3. The Foreign Intelligence Surveillance Act (FISA) of 1978 ______36 III.1.3.1. The Role of National Security Agency (NSA) in Conducting Surveillance ______37 III.I.3.2. The Development of NSA’s Cyber Espionage on Grounds of National Security ______39 III.1.4. House Permanent Select Committee on Intelligence (HPSCI) ______42 III.2. Huawei’s Failed Business Deals with 3Com and 3Leaf ______43 III.2.1. Huawei-Bain Capital Deal with 3Com ______43 III.2.2. Huawei Deal with 3Leaf ______43 III.3. The Investigation Findings about Security Concerns from Huawei Posed to US National Security ______45 III.4. Chapter Conclusion ______55 CHAPTER IV: THE IMPLEMENTATION OF PROTECTIONISM AND CYBER ESPIONAGE TOWARDS HUAWEI AS POTENTIAL SECURITY THREAT TO US TELECOMMUNICATIONS INFRASTRUCTURE ______56 IV.1. Assessing US’ Concerns of Huawei as Chinese Telecommunication Company in US Telecommunications Market. ______56 IV.2. US Applied Trade Protectionism towards Huawei Due to Concern in National Security ______61 IV.3. HPSCI Recommended American Companies Not to Use Huawei Equipment in Their Network Infrastructure, despite No Evidence Was Found during The Investigation. ______65 IV.4. Operation “Shotgiant”, and “Halluxwater” as well as “Headwater” as Persistent Backdoor in Huawei Case ______69 IV.5. Chapter Conclusion ______74
ix
CHAPTER V: CONCLUSION ______75 BIBLIOGRAPHY ______77 APPENDICES ______82
x
LIST OF FIGURES
Figure 1. Conceptual Framework……………………………………………...15
Figure 2. Research Framework……………………………………….………. 16
Figure 2. Global Distribution of Confirmed APT1 servers …………………...24
Figure 3. The Three Vertices of the Digital Triangle………………………….29
xi
LIST OF ACRONYMS
APT 1 : Advanced Persistent Threat 1
CBC : Chinese Construction Bank
CFIUS : The Committee on Foreign Investment in the United States
HPSCI : House Permanent Select Committee on Intelligence
IBCB : Industrial and Commercial Bank of China
NSA : National Security Agency
PDB : Persistent Backdoor
PLA : People’s Liberation Army
PRC : People’s Republic of China
RAND : Research and Development
RMB : Renminbi (Chinese national currency)
SIGINT : Signal Intelligence
US : United States
USCC : US-China Economic and Security Review Commission
xii
CHAPTER I: INTRODUCTION
I.1. Background of the Study
Nowadays, the modern information infrastructure has become a driving factor behind globalization and the emergence of a borderless economy, as industrialized countries have embraced the new technologies and the world of cyberspace.1 That being said, telecommunication networks are becoming a critical part of a nation’s information infrastructure, since they provide the central means for transmitting through voice, data, and video, a huge amount of private commerce, government business, as well as personal communications. However, there were growing concerns about the ownership and control of US communications networks, as through international mergers and acquisitions, it could provide access for a foreign government when targeting US national security.2
According to U.S.-China Economic and Security Review Commission (USCC) Staff Report on January 2011, US national security vulnerabilities was attributable to using critical infrastructure components manufactured, implemented, operated, or maintained by foreign actors are increasing at an escalated rate.3 Meanwhile, Chinese companies are looking to the American
1 Lacey, Kathleen A. and Barbara Crutchfield George. (2002). International Telecommunications Mergers: U. S. National Security Threats Inherent in Foreign Government Ownership of Controlling Interests., p. 6. 2 Acquisition is something such as a building or another company that is bought by a company under a certain contract as defined by Cornell University Law School. Merger is an occasion when two or more companies join together to make one larger company, according to Cambridge Dictionary. 3 U.S.-China Economic and Security Review Commission Staff Report. (2011). The National Security Implications of Investments and Products from the People’s Republic of China in the Telecommunication Sector, p. 6. The U.S. – China Economic and Security Review Commission was established by the US Congress in October 2000 with mandate to monitor, investigate, and submit to Congress and annual report on the national security implications of the bilateral trade and economic relationship between the US and the PRC, and to provide recommendations to Congress for legislative and administrative actions.
1 telecommunications market to open up new opportunities, the expansion strategy of Chinese telecommunication companies is increasing through a number of mergers and acquisitions. As a result, Chinese telecommunication companies may have gained knowledge with technology development, in which this situation leads into China become the principal market driver in telecommunication sector in American market. Thus, as this role continues to grow for China, it resulted in emerging concerns regarding potential national security implications of manufacturing and investment by Chinese telecommunication companies.
There is growing public concern over the impacts of cyber espionage incidents emanating from China, particularly the large China-based, -owned, or - influenced companies “national champions” that are subject to Chinese government direction.4 Furthermore, USCC also suggested that the emergence of Chinese state affiliated companies in global telecommunication markets, as well their acquisitions in part or in whole of western telecommunication firms, generate concerns that these companies may facilitate increased intelligence exploitation of US communications and computer networks by Chinese state-affiliated entities, especially the Chinese telecommunication companies. Thus, the US government has to be aware that this concern should be balanced by a realistic assessment of communications security vulnerabilities of relations between the Chinese and western telecommunication industries, given that Chinese telecommunication’ investment could eventually provide China access to control US’ vital networks and information.
The US House of Permanent Select Committee on Intelligence (2012) cited that the US’ critical telecommunications systems depends on information transmission through telecommunications systems.5 The committee also argued that US’ system interdependencies among these critical infrastructures has increased the risk that failure in one system shall cause failures or disruptions in
4 Pursuant to RAND Corporation (2005) in A New Direction for China’s Defense Industry, “national champions” are those Chinese companies that are subject to Chinese government direction and serving support for PRC’ state policies and political goals. 5 U.S. House of Representatives 112th Congress. (2012). Investigative Report on the U.S. National Security Issues Posed by Chinese Telecommunications Companies Huawei and ZTE., p. 1.
2 multiple critical infrastructure systems. Furthermore, the Committee added that US must pay attention to products produced by companies with ties to regimes that present the highest and most advanced espionage threats to US, such as China. Recalling that China has notoriety related with cyber espionage with intention of stealing US’ secret information and intellectual property, the Committee worried that Huawei’ attempts to seek to control American market for sensitive equipment and infrastructure could be used for spying and other malicious purposes by Chinese government or People’s Liberation Army (PLA).
I.2. Problem Identification
According to The Economist, Huawei Technologies Co. Ltd is a multinational networking and telecommunications equipment and services company headquartered in Shenzhen, Guangdong, China, who overtook Sweden’s Ericsson since it became the world’s largest telecommunication equipment maker.6 In US, Huawei has faced a number of trade protectionism measures by US government through Committee on Foreign Investment in the United States (CFIUS) who had important role in Huawei’s divested deal with American computer network firms, which were 3Com in 2008 and 3Leaf in 2011.
Meanwhile, Huawei has been investigated by experts from the House Permanent Select Committee on Intelligence Community of the United States (herein referred to as “the Committee”) during November 2011 to October 2012.7 The 11-month formal investigation was initiated by Huawei’s open letter to the US government in February 2011, in which the purpose was gaining trust in its equipment. The main purpose of the investigation was to find the ties between Huawei with Chinese government or military, given that Huawei is one of Chinese
6 Huawei’s products for example are routers - a piece of hardware that route data (defined from NCTE Advice Sheet – ICT Glossary), servers - a computer on a network that manages network resources and delivers information and software to other computers that are linked by a network (defined from NCTE Advice Sheet – ICT Glossary), cloud computing – the delivery of computing resources from applications to server (defined from IBM), switch – a piece of hardware that is used to connect multiple computers linked by a network (defined from Tech Term), and others. 7 House Permanent Select Committee on Intelligence. Investigate Report on The US National Security Issues Posed by Chinese Telecommunication Companies Huawei and ZTE. (October 8, 2012), p. v.
3
“national champions”, and thus, Huawei could provide the government with intelligence service to telecommunication networks, increasing the opportunity for further economic and foreign espionage by Chinese who was known to be a major perpetrator in cyber espionage.
The 52-pages report of the Committee, with title Investigative Report on the US National Security Issues Posed by Chinese Telecommunications Companies Huawei and ZTE has been issued on October 8, 2012 declared that China has the means, opportunity, and motive to use telecommunications companies for malicious purposes through routers and switches that underlie the internet and wireless communication systems. Thus, since 2012 Huawei was officially banned from selling their network equipment such as base station and antenna in the US, as the equipment could be used by China to spy on US.8
Committee also recommended the Committee on Foreign Investment in the United States (CFIUS) to block acquisitions, takeovers, or mergers involving Huawei given the threat to US national security interest.9 In addition, the Committee also recommended the US government systems, particularly sensitive systems, should not include Huawei equipment, including in component parts, and government contractors – particularly those working on contracts for sensitive US programs – should exclude Huawei equipment in their systems.
Besides, a cyber espionage operation code-named “Shotgiant” was conducted by NSA in 2007, aiming to find any links between Huawei and the Chinese People’s Liberation Army (PLA), as Huawei was attempting to enter American telecommunications market. NSA document claimed the operation has successfully infiltrated Huawei’s network and copied a list of 1,400 customers,
8 Base station can be defined as a fixed transmitter that forms part of an otherwise mobile radio network (retrieved from http://www.dictionary.com/browse/base-station, and accessed on November 13, 2016). Antenna is arrangement of wires used in sending and receiving electromagnetic waves data or information (retrieved from http://www.dictionary.com/browse/antenna?s=t, and accessed on December 3, 2016). 9 Takeover is special act of acquiring despite the disapproval of, or open resistance from, its board of directors (retrieved from http://marketbusinessnews.com/financial-glossary/hostile-takeover- definition-meaning/, and accessed on December 7, 2016).
4 including internal documents of Huawei’s CEO Ren Zhengfei and Chairwoman Sun Yafang. In a statement, Huawei spokesman Bill Plummer criticized the spying conduct by NSA10:
“If it is true, the irony is that exactly what they are doing to us is what they have always charged that the Chinese are doing through us. If such espionage has been truly conducted, then it is known that the company is independent and has no unusual ties to any government and that knowledge should be relayed publicly to put an end to an era of mis- and disinformation”
The response from Bill Plummer indicated that the US government has undertaken spying through NSA that might erode the good intention of Huawei to open new job field in the US telecommunication market. According to Der Spiegel in 2014, NSA Spokeswoman Caitlin Hayden responded to the allegations by giving comment without specifically mention particular activities of the intelligence operations of specific foreign countries: “…but I can tell you that our intelligence activities are focused on the national security needs of our country. We do not give intelligence we collect to US companies to enhance their international competitiveness or increase their bottom line”.11
The case of Huawei as potential security threat to US telecommunications infrastructure -however- has captivated the writer’s attention to conduct further research by analyzing the case under the title: Trade Protectionism and Cyber Espionage on Grounds of National Security: Huawei as Potential Security Threat towards United States’ Telecommunications Infrastructure (2007- 2014).
I.3. Statement of the Problem
How did US on grounds of national security implement trade protectionism and cyber espionage in dealing with Huawei as potential security threat to US’ telecommunications infrastructure (2007-2014)?
10 Der Spiegel, (2014). NSA Spied on Chinese Government and Networking Firm. Retrieved from http://www.spiegel.de/international/world/nsa-spied-on-chinese-government-and-networking- firm-huawei-a-960199.html, accessed on January 10, 2017. 11 Ibid.
5
I.4. Research Objectives
The purpose of this research is to find the answer to the questions using explanatory-descriptive method. It is a method to gain familiarity with a phenomenon or to achieve new insights into it and portray accurately the characteristics of a particular individual, situation, or groups.12 This thesis seeks to:
Analyze detailed indications of potential security threats possessed by Huawei towards the US’ telecommunications infrastructure. Explain the US trade protectionism and cyber espionage as measures to anticipate potential security threats towards its national security in the case of Huawei’s entrance to US market of telecommunications. Analyze through Constructivism, the identity of China as major perpetrator in cyber espionage has impacted on US’ assessment on Huawei as one of Chinese “national champions” company.
I.5. Significance of Study
This thesis aims to gain comprehension on how trade protectionism and cyber espionage are used upon foreign company as means to secure a US’ critical telecommunications infrastructure. In addition, there are also several points that the writer highlights in this thesis:
Understanding the role of a secure telecommunication network as a critical infrastructure for US. Understanding the case of Huawei becoming potential security threat towards US telecommunications infrastructure through Constructivism as the main approach, where the growing public concerns over the impacts of Chinese cyber espionage incidents on US has influenced US’ assessment towards Huawei, where Huawei as a private company was seen as a tool for
12 Kothari, C.R. Research Methodology, Methods and Techniques. New Delhi: New Age International Ltd., p. 2.
6
China to breach into US telecommunications as one of its critical infrastructures. Understanding the trade protectionism and cyber espionage that could be used to secure US’ telecommunications infrastructure.
I.6. Theoretical Framework
I.6.1. Constructivism At the inception, Constructivism is a social theory and gradually becomes one of the leading schools in International Relations. Constructivism in International Relations highlights “how ideas define and transform the organization of world politics, shape the identities and interests of states, and determine what counts as legitimate action.”13 Constructivism offers specific claims and hypothesis about patterns in world politics where reality is socially constructed (Baylis et all, 2008). Moreover, the so-called as social construction of theory shows that state and non-state actors socially construct their identities and interests to take action based on what they perceive as a legitimate action. Identity itself is the understanding of the self in relationship to other, where identities are social and thus are always formed in relationship to others.
Baylis et all (2008) also added that Constructivists generally hold that identities shape interests; we cannot know what we want unless we know who we are, but because identities are social and are produced through interactions, identities can change. Meanwhile, Rousseau and Retamero (2007) cited that in Constructivism, the existence of shared identity decreases threat perception and increase cooperation in economic policy areas.
In the study of international relations, Constructivism stands on insight that “anarchy is what states make of it (Wendt, 1992)”, meaning, Constructivism rejects the logic of anarchy in international relations, and otherwise argued that it is created
13 Baylis, John., et all. (2008). The Globalization of World Politics. New York: Oxford University Press.
7 through the interaction of international actors.14 Wendt’s (1992) argument is in line with Barnett (2008) who argued that Constructivism addresses how the world is made and remade through action and how the structures of world politics do not merely constrain but also constitute the identities, interests, and practices of the actors of world politics.
I.6.2. Trade Protectionism
According to Durusoy et all (2015), protectionism is a foreign trade policy based on the opinions which suggest that domestic manufacturers should be protected against foreign competitions.15 Protectionism is the sum of government trade policies intended to assist domestic producers against foreign producers in a particular industry, by means of raising the price of foreign products, lowering cost for domestic producers, and limiting foreign producers’ access to domestic market.16
Efere (2002) and Robert (2001) cited that a government also applies protectionist policies by national security-defence thesis, infant-child industry thesis, strategic trade policy, inequality of conditions, child labor argument, protection of environment in order not to go through a new deeper crisis. According to Sohn and Yeo (2005), the linkage between international trade and national security has a long history that may date back at least to the inception of the General Agreement on Tariffs and Trade (GATT) in 1947. The concept of national security therefore, gradually moved into the agenda of international trade regulation to protect a nation against external military threat (Sohn and Yeo, 2005).
Furthermore, trade measures have been often used as means to protect national security in various forms, such as complete or partial embargo on exports
14 Hoft, Ted. (1998). The Promise of Constructivism in International Relations Theory. President and Fellows of Harvard College and the Massachusetts Institute of Technology. Baylis et all (2008) define anarchy as the absence of political authority or central government. 15 Durusoy et all. (2015). Economic Crisis and Protectionism Policies: The Case of the EU Countries. International Journal of Humanities and Social Science, p. 58. 16 Abboushi, Duquesne. (2010). Trade Protectionism: Reasons and Outcomes. Research Gate, p. 387.
8 and imports, restrictions on air and sea transportation, as well as prohibition on financial transaction (Sohn and Yeo, 2005). There are various laws and regulations that provide legal basis for the trade measures for national security purpose, particularly the WTO Agreements that permit trade restrictions for the protection of national security. The GATT Article XXI: Trade Exceptions points (a) and (b) provide that:
“Nothing in this Agreement shall be construed (a) to require any contracting party to furnish any information the disclosure of which it considers contrary to its essential security interests; or (b) to prevent any contracting party from taking any action which it considers necessary for the protection of its essential security interests (i) relating to fissionable material or the material from which they are derived; (ii) relating to the traffic in arms, ammunition and implements of war and to such traffic in other goods and materials as is carried on directly or indirectly for the purpose of supplying a military establishment; (iii) taken in time of war or other emergency in international relations;”
Related to this thesis, Ma Yu, a senior researcher at the Chinese Academy of International Trade and Economic Cooperation stated that there has been an obvious rise in global trade protectionism, and China has been targeted as a main rival that poses a serious threat to US jobs in the telecommunication sector.17 Besides, the report of investigation conducted by House Permanent Select Committee on Intelligence towards Huawei represented a message of trade protectionism, since the Committee suggested that CFIUS must block acquisitions, takeover, or mergers involving Huawei, given that the threat to US national security interests.
I.6.3. National Security
According to Paleri (2008), national security is comprised of the terms “nation” and “security”, where state and government are accountable for providing people the security. That being said, national security is a concept that relates to safety, security and psychological aspirations of the people of a nation concerning their well-being in accordance with their needs and, therefore, has to be universally
17 China Topix. (June 6, 2016). Huawei Probe Motivated by US Trade ‘Protectionism’: Chinese Analysts. Retrieved from http://www.chinatopix.com/articles/90329/20160606/huawei-probe- may-be-motivated-by-trade-protectionism-chinese-analysts.htm, and accessed on December 22, 2017.
9 common to all (Paleri, 2008). Besides, Buzan (1991) stated that security is taken to be about the pursuit of freedom from threat and the ability of states and societies to maintain their independent identity and their functional integrity against forces of change, which they see as hostile.18
Meanwhile, in the viewpoint of Constructivism, security can be achieved once the perception and fears of security threat, challenges, vulnerabilities and risks are allayed and overcome.19 Related with trade protectionism, Willett and Jalalighajar (1983) argued that trade restrictions imposed in the name of national security that have promoted protectionists is a distinguished protection, since in reality there is not, and has not been, much conflict between the claims of national security and the pursuit of free trade.20
I.6.3.1. Cyber Security
In recent years, the growth of cyberspace has been related with national security. It happened in a way that cyberspace capabilities are also a source of vulnerability, posing a potential threat to national security and a disturbance of international order.21 The escalating nontransparent interconnections within cyberspace have challenged the traditional understanding of leverage and influence, international relations and power politics, national security, borders, and boundaries – as well as a host of other concepts and their corresponding realities.
The challenge over national security however, is related with the conventional way of thinking about national security in military terms that has shifted with the presence of cyberspace. Cybersecurity refers to a state’s
18 Buzan, Barry. (1991). New Patterns of Global Security in the Twenty-first Century International Affairs, pp. 432-433. 19 Brauch, Hans Gunter. (2011). Concepts of Security Threats, Challenges, Vulnerabilities and Risks. Springer. 20 Willet, Thomas D. and Mehrdad Jalalibhajar. (1983). U.S. Trade Policy and National Security. Cato Institute, pp. 717-718. 21 Choucri, Nazli. (2012). Cyberpolitics in International Relations. Massachusetts: The MIT Press, p. 5.
10
ability to defend itself and its institutions against threats such as espionage, sabotage, crime and fraud, as well as identity theft.22
Regarding this thesis, in everyday life practices, cyber threats could directly or indirectly affect multiple aspects of social, political, and economic life through the disruption or destruction of critical infrastructure.23 In this thesis, the writer connects the concept of national security with US’ attempts to secure its telecommunications infrastructure as part of its critical infrastructure. Pursuant to USA PATRIOT ACT (2001), the definition of critical infrastructure is systems and assets, physical or virtual, so vital to the United States that the incapability or destruction of such systems and assets would have a debilitating impact on security, national economic security, national public health and safety, or any combination of those matters.
According to the Executive Order 13231 was signed on October 16, 2001, stating that it is US policy to protect against the disruption of the operation of information systems for critical infrastructure, and to ensure that any disruptions that occur are infrequent, of minimal duration, and manageable, and cause the least damage possible, in which according to HPSCI investigation report in 2012, it stated that The United States’ critical infrastructure, and in particular its telecommunications networks, depend on trust and reliability. Specifically, telecommunications infrastructure can be understood as organizations, personnel, procedures, facilities, and network employed to transmit and receive information or electronic means.
22 According to Cambridge Dictionary, espionage is an act of discovering secrets, especially political or military information of another country or the industrial information of a business; sabotage can be defined as an act aims to damage or destroy equipment, weapons, or buildings in order to prevent the success of an enemy or competitor; crime and fraud in this case are defined as the crime of getting money by deceiving people; and identity theft is defined as the illegal use of another person's personal details. 23 Tziarras, Zenonas. (2014). The Security Culture of a Global and Multileveled Cyber Security. Research Gate., p. 324.
11
I.7. Scope and Limitations of Study
This thesis is analyzing US trade protectionism and cyber espionage used in dealing with Huawei on grounds of protecting national security, given that Huawei was considered as potential security threats for US telecommunications infrastructures. First, this analyze how China’s identity known as major perpetrator in cyber espionage influenced US’ assessment towards Huawei as potential security threat towards US’ telecommunications infrastructure, as seen through the viewpoint of Constructivism. Second, this thesis also elaborates the indications of Huawei’s potential ties with and supports from Chinese government and military, People’s Liberation Army (PLA) that US used as grounds to secure its telecommunications infrastructure. Third, this thesis covers the reason why US government’s actions to exclude Huawei from making acquisitions with American companies on grounds of US national security concerns was understandable.
The focus of this thesis will be on state as the level of analysis as the writer only focuses on explaining the measures US has taken in form of trade protectionism and cyber espionage to secure its telecommunications as one of its critical infrastructures. Furthermore, the writer in this thesis focuses on two main actors, which are US as state actor and Huawei as non-state actor, rather than focusing on China as the country where Huawei is emanating from, but not necessarily exclude China’s relation with US as a background of the issue.
The writer uses Constructivism in this study mainly because the writer wants to focus on its features that emphasize on interpretive perspective of states and non-state actors, particularly on how “ideas define identities and interests of states, and US in particular that it perceived China as major perpetrator in cyber espionage and changed US’ perception of Huawei as a potential security threats towards US telecommunications infrastructure. This argument is supported by investigation report of HPSCI in 2012 stating that China that is already known to be a major perpetrator of cyber espionage, and thus, the HPSCI focused on Huawei with the strongest potential Chinese ties that also sought opportunity to expand its business in US telecommunications market.
12
In this thesis, the writer uses economic as the main dimension of analysis to address trade protectionism. Through economic dimension the writer explains Huawei’s investment in form of acquisitions towards US companies like 3Com and 3Leaf went into failure due to US growing concerns of national security that Huawei could provide access for China to control US’ telecommunications network as part of US’ critical infrastructure as Huawei attempted to expand its business in US market though acquisition. Moreover, pursuant to US Department of Defense, Chinese actor are the world’s most active and persistent perpetrators of economic espionage, which represented a growing and persistent threat to US economic security (USCC, 2012).
I.8. Research Methodology
I.8.1. Qualitative Research
This thesis employs Qualitative research method in order to find the answer the stated problem. According to John W. Cresswell, qualitative research is a means for exploring and understanding the meaning individuals or groups ascribe to a social or human problem. The process of research involves emerging questions and procedures; collecting data in the participants’ setting; analyzing the data inductively, building from particulars to general themes; and making interpretations of the meaning of the data. The final written report has a flexible writing structure.24
I.8.2. Analytical-Descriptive
This thesis applies the analytical-descriptive method to analyze variables that are used in this thesis in order to comprehend the overarching explanation in the following chapters. The writer accentuates the use of primary sources from the U.S.-China Economic and Security Review Commission Staff Report as well as the report of Huawei as the result of investigation carried out by the House of Representatives, while combining some books and journal from international
24 Cresswell John W. (2013). Research Design: Qualitative, Quantitative, and Mixed Methods Approaches. California: SAGE Publications, Inc.
13 relations experts to bolster the fundamental theoretical framework. C.R. Kothari (2004) in Research Methodology: Method and Techniques (2nd Revision Edition) explained that:25
“Descriptive research includes surveys and fact-finding enquiries of different kinds. The major purpose of descriptive research is description of the state of affairs as it exists at present. In social science and business research we quite often use the term Ex post facto research for descriptive research studies. The main characteristic of this method is that the researcher has no control over the variables; he can only report what has happened or what is happening. Most ex post facto research projects are used for descriptive studies in which the researcher seeks to measure such items as, for example, frequency of shopping, preferences of people, or similar data. Ex post facto studies also include attempts by researchers to discover causes even when they cannot control the variables. The methods of research utilized in descriptive research are survey methods of all kinds, including comparative and correlational methods. In analytical research, on the other hand, the researcher has to use facts or information already available, and analyze these to make a critical evaluation of the material. Besides, the writer also applies Library Research method in order to apprehend understandings regarding analysis of historical records and documents about cyber espionage materials through the view of experts (books and journals) as well as governmental argument, particularly the US government. That said, sources collected from government official data is considered as primary data, defined by C.R. Kothari (2004) as ‘those which are collected afresh and for the first time, thus happen to be original in character’. However, the writer also analyzes and adapts experts’ viewpoints regarding the topic of the thesis which are qualified as the secondary data, defined by C.R. Kothari (2004) as ‘those which have already been collected by someone else and which have already been passed through the statistical process’.
25 Kothari, C.R. (2004). Research Methodology: Methods & Techniques (New Delhi: New Age International., pp. 2-3.
14
I.8.3. Conceptual Framework
CONSTRUCTIVISM PARADIGM
US CHINA Perceived China as cyber threat and impacted on Huawei’s identity.
Entering US market Potential ties between through acquisitions of China and Huawei 3Com and 3Leaf
HUAWEI
Assessments to secure national security (RQ)
TP CE
CFIUS TP = Trade Protectionism CE = Cyber Espionage RQ = Research Question NSA
Figure 1. Conceptual Framework (Constructed by the writer)
In this thesis, the writer applies the conceptual framework above to show how the aforementioned theoretical framework is applied in the case of Huawei as potential security threat towards US telecommunication infrastructure. In this particular conceptual framework, the writer also highlights how the research question will be explained throughout the thesis. Meaning, this thesis will be explaining the assessment of US government through CFIUS that applied trade protectionism and NSA that applied cyber espionage towards Huawei during 2007 – 2014.
15
I.8.4. Research Framework
In order to gain clear understanding upon the analysis of the research, the writer applies the following research framework:
Figure 2. Research Framework constructed by the writer by constructed Framework Research 2. Figure
16
Chinese telecommunication multinational firms – Huawei, had interest to spread its business to the US telecommunications market when it attempted to acquire 3Com and 3Leaf (Barfield, 2011). Nevertheless, the intention of Huawei to join the bidding was considered conspicuous, leading to Huawei was forced to voluntarily divest its investment from 3Com and 3Leaf by CFIUS, particularly recalling several factors such as the potential of Huawei’s relation with Chinese PLA as the founder, Ren Zhengfei once had career in PLA and Chinese Communist Party.
Also, the writer analyzes the measures US took to secure its national security, recalling USCC review in 2011 about Chinese telecommunication companies and HPSCI recommendation in 2012 that Huawei could provide access for Chinese People’s Liberation Army (PLA) to harm US’ national telecommunication network through Huawei’s gears. Besides, in this thesis writer also addresses NSA cyber espionage conduct towards Huawei in order to find relations between Huawei and PLA, given that Huawei’s attempt to expand its business in US telecommunication market could possibly provide access for China to control US sensitive data from its telecommunication infrastructure.26
I.9. Thesis Outline
Chapter I (Introduction): Using descriptive method, mainly focus on the overview of the background of the study, problem identification, statement of the problem, research objectives, significance of study, theoretical framework, scope and limitation of study, as well as research methodology.
Chapter II (The Rise of US’ National Security Concerns Due to Huawei’s Attempts of Making Business Expansion in US’ Telecommunication Market): In this chapter, the writer points out and elaborate the independent variables of the thesis, such as the critical role of telecommunications infrastructure to a state in
26 New York Times. (2014). N.S.A. Breached Chinese Servers Seen as Security Threat. Retrieved from: https://www.nytimes.com/2014/03/23/world/asia/nsa-breached-chinese-servers-seen-as-spy- peril.html?_r=0, accessed on December 23, 2016.
17 which the emergence of Chinese telecommunication firms like Huawei has caused fear towards US while presenting the notoriety of China that often conduct cyber espionage like Titan Rain and APT1.
Chapter III (US Allegation towards Huawei as Potential Security Threat to US’ Telecommunications Infrastructure): The third chapter is addressing US foreign policies in securing its national security through Homeland Security Presidential Directive 7, Exon-Florio Amendment in Committee on Foreign Investment in the US (CFIUS), Foreign Intelligence Surveillance Act (FISA) in National Security Agency (NSA), as well as House Permanent Select Committee on Intelligence (HPSCI). Besides, this chapter is also addressing the investigation of Huawei by HPSCI to probe Huawei’s potential security threats, resulted in a number of suspicious indications were found during the investigation. Also, the writer addresses the case where US through CFIUS had role to make Huawei voluntarily divested itself from US technology companies like 3Com and 3Leaf.
Chapter IV (Implementing Protectionism and Cyber Espionage Towards Huawei as Potential Security Threat to US Telecommunications Infrastructure): In the fourth chapter, the writer explains about the analysis on the investigation report issued by the House of Permanent Select Committee on Intelligence, as well as the implementation of trade protectionism and cyber espionage towards Huawei through the view of Constructivism.
Chapter V (Conclusion): In this chapter the writer gives conclusion of the analysis of the thesis, particularly the answer for the statement of problem in the first chapter.
I.10. Definition of Terms
Critical Systems and assets, whether physical or virtual, so vital to a Infrastructure: state that the incapacity or destruction of such systems and assets would have a debilitating impact on security, national
18
economic security, national public health or safety, or any combination of those matters.27
Cyber attacks Attempt aims to damage, disrupt, or gain unauthorized access to a computer, computer system, or electronic communications network (as defined from www.dictionary.com).
Cyber Defined narrowly as any act undertaken clandestinely that Espionage: uses cyber capabilities to gather information from the target.28
Cyber Threats Cyber threat means the possibility of action or an incident in the cyber domain which, when materialized, jeopardizes some operation dependent on the cyber world.29
Shotgiant A cyber espionage of NSA launched in 2007, aiming to find ties between Huawei and Chinese government and military (PLA).
Security Threat A threat targeting the security of a country or threat to the security of data of sensitive infrastructure (Collins Dictionary, 2017).
Trade According to Durusoy et all (2015), protectionism is a Protectionism foreign trade policy based on the opinions which suggest that domestic manufacturers should be protected against foreign competitions.
27 Democratic Policy & Communication Center. Glossary of Cyber Related Terms. Page 1. 28 Tallinn Manual on the International Law Applicable to Cyber Warfare. Rule 66. Retrieved from https://ccdcoe.org/cyber-definitions.html, and accessed on November 13, 2016. 29 Finland’s Cyber Security Strategy (as of January 24, 2013,). Retrieved from https://ccdcoe.org/cyber-definitions.html, and accessed on November 13, 2016.
19
CHAPTER II: THE RISE OF US’ NATIONAL SECURITY CONCERNS DUE TO HUAWEI’S ATTEMPTS OF MAKING BUSINESS EXPANSION IN US TELECOMUNICATION MARKET
In this chapter, the writer aims to give brief understanding on how important telecommunications infrastructure is, by providing a number of instances related to US history about it. Besides, the writer portrays the overview of the growing concerns of China as perpetrator in cyber espionage conduct (such as Titan Rain in 2005, Advanced Persistent Threat (APT) in 2006, and intellectual property theft allegation of US’ F-35 Joint Strike Fighter) that influenced how Huawei was perceived by US.
II.1. The Critical Role of Telecommunications Infrastructure to United States In era of modernization, the role of secure telecommunication equipment is critical to a state’s economic development and competitiveness, because of the interconnectedness that had been built upon a system relies on secure network to run properly. Besides, the trend of mobile phone that boomed worldwide has created jobs and generated income for the government, operators, manufacturers, service providers, and application and content developers. Furthermore, the growing concerns as addressed by HPSCI in 2012 was the US telecommunications infrastructure largely built and owned by the private sector, yet the US government did not have the full picture of what was contained within the infrastructure, and thus US had to be able to protect its telecommunications infrastructure from vulnerabilities Huawei equipment could possibly possess.
Pursuant to an investigation report of Huawei by the House Permanent Select Committee on Intelligence, telecommunications networks are vulnerable to malicious and evolving intrusions or disruptive activities, and therefore, the
20 equipment provider has to be able to gain trust from its customer, particularly US in this case.30 In fact, US relies much on its telecommunication networks to manage critical infrastructures that include electric power grids; banking and finance systems; natural gas, oil, and water systems; as well as rail and shipping channels, and others that depend on computerized control systems (US House of Representatives, 2012). If this system interdependencies is disrupted, it is likely to occur devastating effects on various aspects of US national infrastructures which leads to shortages and stoppages that could spread throughout American society. Moreover, the committee also emphasized on the risk posed by the telecom companies who have ties with Chinese government, given that China presents the highest and most advanced espionage threats to US.
In fact, Huawei was not the only foreign company whose business deals were called off when attempting to acquire American companies due to the growing concerns of national security, as opposed by Committee of Foreign Investment in the United States (CFIUS). In 1987, Fujitsu, a Japanese computer company, once attempted to acquire American semi-conductor manufacturer called Fairchild Industries but it got strong opposition in US Congress, because it generated intense concern in Congress that this acquisition would decline the US’ economic power in international arena.31 At that time, the Congress argued that the acquisition would have given Japan control over a major supplier of computer chips for the military and would have made US defense industries more dependent on foreign suppliers for sophisticated high-technology products.
Moreover, at that time many US authorities also feared that Japanese shared too much sensitive technology with Warsaw Pact nations that the acquisition could have given advantage of American technology know-how to the Eastern Bloc.32 Despite the former Commerce Secretary Malcolm Baldridge and former Defense Secretary Caspar Weinberger failed in convincing President Reagan to block the
30 US House of Representatives. (2012). Investigative Report on the US National Security Issues Posed by Chinese Telecommunications Companies Huawei and ZTE., p. 1. 31 Jackson, James K. The Committee on Foreign Investment in the United States (CFIUS) (United States: Congressional Research Service, August 12, 2016). Page 3. 32 Greidinger, Marc., op cit., p. 113.
21
Fujitsu acquisition over Fairland Industries, the two companies eventually called off the proposed deal.
II.2. Chinese Cyber Espionage Conducts towards US’ and its Influence towards US’ Assessment on Chinese Companies’ Investment in the US In this section, the writer addresses national security concerns in form of cyber espionage conducts emanating from China in order to give readers brief overview that become grounds of US growing concerns over Chinese telecommunication companies (including Huawei) that sought opportunity in American market. This concerns grew as these Chinese “national champions” could facilitate increased intelligence exploitation from China towards US telecommunications infrastructure (USCC, 2011). There is a growing suspicion over the strategy of China’s PLA where they are employing IT engineers from universities, institutes, and corporations in order to cripple the US military’s ability to communicate, as supported by RAND study about the “digital triangle” in 2005.
Pursuant to US Department of Defense, Chinese actor are the world’s most active and persistent perpetrators of economic espionage, which represented a growing and persistent threat to US economic security (USCC, 2012). Furthermore, USCC (2012) argued that the theft of industrial secrets through cyber espionage is apparently Chinese state policy, given that the Chinese government controlled up to 50 percent of the Chinese economy, and industrial espionage appeared to be a key mission of the Chinese intelligence services.
According to retired General James Catwright, China is actively engaging in cyber reconnaissance by probing the computer networks of US government agencies as well as private companies.33 He also added that this foreign intelligence gathering activity from China can be used for numerous purposes, like identifying weak points in the networks, understanding how leaders in the US think,
33 Northrop Grumman Corporation. (2009). Capability of the People’s Republic of China to Conduct Cyber Warfare and Computer Network Exploitation prepared for The US-China Economic and Security Review Commission. United States., p. 52.
22 discovering the communication patterns of US government agencies and private companies, and attaining valuable information stored throughout the networks.
According to Lindsay (2015), the first publicly reported major Chinese hacking was “Titan Rain”, which was the US code name for intrusions into a number of US department, especially Department of Defense laboratories, NASA networks, and US aerospace companies between September 2003 and August 2005. The hackers of Titan Rain successfully hit US’ hundreds of computers as a number of vulnerabilities were found at the US Army Information Systems Engineering Command. Major General William Lord, director of information, services and integration in the Air Force’s Office of Warfighting Integration and Chief Information Officer said that “China has downloaded 10 to 20 terabytes of data from the Non-Secure Internet Protocol Router Network (NIPRNet)”, “they are looking for your identity so they can get into the networks as you”, “there is a nation-state threat by the Chinese.”34
According to a former government network analyst who help track Titan Rain, the cyberespionage conduct in Titan Rain searched abundant military networks for single computers with vulnerabilities that the attackers could exploit later. Besides, in early 2007, the Chinese cyber perpetrators have infiltrated into the networks of the F-35 Joint Strike Fighter’s contractor – Lockheed Martin, Northrop Grumman, and BAE Systems – and successfully stolen the F-35 designs plans (USCC, 2012). Moreover, some experts noted the resemblance between China’s stealth fighter, the J-31 and F-35, suggesting that J-31 was developed using the F-35 design plans (Wortzel, 2013). Moreover, McAfee, a US computer company, in February 2011 labeled an intrusion codenamed “Night Dragon” allegedly began in November 2009, which was referred to IP address located in China, and indicated that the perpetrators had obtained data of bids and operations
34 NIPRNet is US Department of Defense network for exchanging sensitive but unclassified information. Defined from http://www.usmilcom.com/military.htm, and accessed on January 2, 2017.
23 from the computer systems of US global oil, energy, and petrochemical companies.35
Meanwhile, according to Mandiant, a US private cyber security firms, the People’s Liberation Army (PLA) Unit 61398 also known as the ‘comment crew’ has stolen hundreds of terabytes of data from at least 141 organizations (which 115 were US’ industries) from across 20 industries since early 2006.36 Advanced Persistent Threat (APT)1 is a single organization of operators that has conducted a cyber espionage campaign against a broad range of victims since at least 2006.37 In the report, Mandiant (2013) also added that APT1 is believed to be the 2nd Bureau of Chinese PLA General Staff Department’s (GSD) 3rd Department, and is also most commonly known as Unit 61398. Lindsay (2015) added that the target of APT1 were including Western government and military agencies, a wide range of companies in industries, and even US presidential candidates. Below is the actual number of global distribution of confirmed APT1, showing that the most servers of APT1 were located in China:
Figure 3. Global Distribution of Confirmed APT1 servers. Source: Mandiant. APT1 - Exposing One of China's Cyber Espionage Units. Page 43.
35 Counterintelligence. (October 2011). Foreign Spies Stealing US Economic Secrets in Cyberspace, p. 9. 36 CNN. (May 20, 2014). What We Know about Chinese Army’s Alleged Cyber Spying Unit. Retrieved from http://edition.cnn.com/2014/05/20/world/asia/china-unit-61398/, and accessed on December 19, 2016. 37 Mandiant. (February 2013). APT1 – Exposing One of China’s Cyber Espionage Units. Page 2.
24
In US Department of Defense’s 2013 report to Congress indicating that China participates in cyber espionage activities, saying that “China is using its computer network exploitation capability to support intelligence collection against the US diplomatic, economic and defense industrial base sectors that support US national defense programs.”38 Responding to the report, Chinese Foreign Ministry Spokeswoman Hua Chunying said that “This kind of baseless accusations and endless finger-pointing would only hurt the efforts and environment for such a dialog”.39 However, General Keith Alexander, the former Director of the National Security Agency and commander of US Cyber Command, argued that Chinese cyber espionage for economic advantage, including stealing intellectual property and proprietary information was managed and directed by the Chinese government through information and data extracted from the conducts of cyber espionage (Wortzel, 2013).
Meanwhile, according to USCC (2011), there is growing public concerns over the impacts of cyber espionage incidents that appear to originate in China, in which there are large Chinese companies, particularly “national champions” prominent in China’s “going out” strategy of overseas expansion that are subject to direction by the Chinese Communist Party (CCP).40 Therefore, from this viewpoint, the clear economic benefits of foreign investment in the US must be weighed against the potential security concerns related to components coming under the control of foreign entities, since this situation is applicable in the Chinese telecommunications industry that continue to acquire significant US telecommunication and information firms.
According to U.S.-China Economic and Security Review Commission (USCC) Staff Report in January 2011, the merger and acquisition environment in
38 Los Angeles Times. (May 7, 2013). From the Archive: China Dismisses U.S. Accusations of cyber-spying. Retrieved from http://articles.latimes.com/2013/may/07/world/la-fg-wn-china-us- cyber-spying-20130507, and accessed on January 5, 2017. 39 Ibid. 40 U.S. – China Economic and Security Review Commission Staff Report., op cit., p. 9. China’s “Going Out” strategy is a Chinese government campaign introduced at the 2002 Communist Party Congress to raise China’s global economic profile by investing overseas and acquiring foreign assets.
25 the telecommunication industry is active, and there are fast growing markets worldwide, particularly in the developing world, Europe, and the United States.41 Meanwhile, Chinese telecommunications sector is growing as a core “strategic industry” of interest where a huge percentage of telecommunication equipment is manufactured in China, and thus, the global presence of Chinese companies as an acquirer towards American firms is reasonable.42
II.3. The Rise of Security Concerns of United States over Huawei Shortly after the Mao Zedong death in 1976, the Chinese government in 1978 started to break its Soviet-style economic policy as it gradually reforming in accordance to free market principles and began to open trade and investment with the West, as one might familiar with Deng Xiaoping said: “Black cat, white cat, what does it matter what color the cat is as long as its catches mice?”.43 One of the Chinese policies’ is called the Five Year Plans (FYP) that has been issued by the government since 1953, and in the 12th FYP (2011-2015) introduced in October 2010, telecommunication was one of seven strategic emerging industries that are intended to be the backbone of China’s economy in the future while aiming to be able to compete on a global scale.
As a result of bilateral investment between the US and China, American marketplace is filled by Chinese telecommunication companies that seek opportunity by selling their products and services.44 The momentum that Chinese telecommunication companies gained through US’ market expansion has emerged concerns for US government that the companies may become more integral and can be the market driver in many sectors (USCC, 2011). The increasing emergence
41 U.S.-China Economic and Security Review Commission Staff Report. (2011). The National Security Implications of Investments and Products from the People’s Republic of China in the Telecommunications Sector. USCC Research Staff., p. 11. 42 There are seven “strategic industries” in which the Chinese government seeks to maintain “absolute control” through over 50 percent ownership. These seven “strategic industries” are Armament, Power Generation and Distribution, Oil and Petrochemicals, Telecommunications, Coal, Civil Aviation, and Shipping (USCC, 2011). 43 Morrison, Wayne M. (2015). China’s Economic Rise: History, Trends, Challenges, and Implications for the United States. United States: Congressional Research Service, p. i. 44 US-China Economic and Security Review Commission Staff Report. (2011). The National Security Implications of Investments and Products from the People’s Republic of China in the Telecommunications Sector, p. 6.
26 of Signals Intelligence (SIGINT) that portrays the unusual behavior of Chinese companies that become ‘national champions’ has increased and affected US’ concerns over the impacts of cyber espionage incidents that appear emanating from China (USCC, 2011).
The term ‘national champions’ can be understood as those Chinese companies that are subject to Chinese government direction and serving support for PRC’ state policies and political goals (USCC, 2011). The suspicion over Chinese government has been a concern for US government, and to deal with this the US government hired an American research organization, Research and Development (RAND) Corporation in 2005. RAND has evaluated the potential of digital triangle that represent military, other state actors, and numbered research institutes collaborated covertly, as instanced by Huawei. Huawei is one the Chinese national champions that had privilege to be funded lines of credit from state banks, research and development (R&D), to actively seek to build global market share.
Huawei Technologies (hereafter is called Huawei) is a Chinese global information and communications technology (ICT) solutions provider.45 Huawei’s solutions, products, and services are used in more than 170 countries and regions, in which has successfully served over one-third of the world’s population with over 1,500 networks (Huawei). Founded in 1987 by Ren Zhengfei, Huawei has grown a small company worth only USD 5,680 and transformed it into a global company with over USD 39 billion sales volume, and employing more than 170,000 workers (Huawei).
The Huawei’s founder, Ren Zhengfei was born on October 25, 1944 and studied at and graduated in 1963 from Chongqing Institute of Civil Engineering and Architecture.46 Ren Zhengfei was employed in civil engineering until 1974 as he decided to join the Chinese military Engineering Corps as a soldier and given command to build the then French-imported Liao Yang Chemical Fiber Factory
45 Corporate Information. Retrieved from http://www.huawei.com/en/about-huawei on November 27, 2016. 46 Ken Hu – Deputy Chairman of Huawei Technologies, Chairman of Huawei USA. (2011). Huawei Open Letter. Page 3.
27
(Ken Hu, 2011). Ren Zhengfei was invited to the National Congress of the Communist Party of China in year 1982, and retired from the army in 1983 and decided to establish Huawei with RMB 21,000 (about US$2,500) capital in year 1987 (Ken Hu, 2011).
By 2007, Huawei served 35 of the top 50 telecommunication operators and became the world’s second-largest telecommunication provider in 2009 right behind the Sweden’s Ericsson and eventually took it over to be the largest telecommunication equipment maker in 2012.47 The company also focused on the research and development (R&D) sector as it has established more than 100 international branch offices and 17 R&D facilities around the world in Stockholm, Sweden; Dallas and Silicon Valley, United States; Bangalore, India; Ferbane in Offaly, Ireland; Moscow, Russia; Jakarta, Indonesia; and the Netherlands (U.S. – China Economic and Security, 2011).
II.3.1. Timeline of the Cases of Huawei’s Blocked Foothold in US Market
The US government has taken steps to block Huawei from obtaining foothold in America, taking into account that the company could act on behalf of China in order to gain access to US government’s telecommunication network (USCC, 2011). Here is the timeline of US relations with Huawei:
2007: The National Security Administration began the operation “Shotgiant” as an attempt to penetrate into Huawei’s networks and exploit its systems. Besides, Huawei was also attempting to acquire 3Com in this year. 2008: Bain Capital and Huawei’s application to acquire 3Com under $2.2 billion deal was withdrawn as it fell afoul of the US’ CFIUS which investigated the deal on national security grounds.
47 The Economist. (August 4, 2012). Who’s Afraid of Huawei. Retrieved from http://www.economist.com/node/21559922, and accessed on January 7, 2017.
28
2010: Huawei acquisition towards 3Leaf under $2 million deal. 2011: Huawei’s official issued an open letter to the US that Huawei denied that it acted for Chinese government, and it willingly asked for investigation. Besides, Huawei acquisition towards 3Leaf was divested, due to identity of Huawei that had history with Chinese PLA. 2012: The House of Intelligence Committee produced a 52-pages long report urging the US to block acquisitions, takeovers or mergers with Huawei, and eliminate its equipment from US systems. 2014: Operation Shotgiant was revealed, leading to Chinese government asking for US’ clarification.
II.3.2. Alleged Links between Huawei and Chinese Government of Potential Digital Triangle48
Commercial IT
State R&D Military Infrastructure
Figure 4. The Three Vertices of the Digital Triangle.
The main indications that support digital triangle was in mid-1990s when Chinese government’s role was significant in the company’s early survival.49 That was one of the reasons why the US government chose not to compromise when it deals with Chinese telecommunication company
48 According to RAND study in 2005, there was the potential of “digital triangle”, which was a model that represents military, other state actors, and numbered research institutes collaborated covertly, as instanced by Huawei, being one the Chinese national champions that had privilege to be funded lines of credit from state banks, research and development (R&D), to actively seek to build global market share. 49 Ahrens, Nathaniel. (2013). China’s Competitiveness: Myth, Reality, and Lessons for the United States and Japan (United States: Center for Strategic & International Studies (CSIS), p. 5.
29
like Huawei. In 1994, Huawei’s founder Ren Zhengfei met Jiang Zemin, who at that time was acting as the Chinese president and secretary general of the Chinese Communist Party (CCP), and he stated “that switching equipment technology was related to international security, and that a nation that did not have its own switching equipment was like one that lacked its own military (Ahrens, 2013).”
According to Ahrens (2013), from Huawei’s history with Chinese military, it was known that Huawei in its early days received contracts to build military telecommunications networks. Huawei deputy manager of sales in Russia, Alexei Shalaginov stated that “it is small in terms of our overall business, but large in terms of relationship.” Moreover, 70 senior People’s Armed Police visited Huawei in 1999, led by a person in charge of telecoms infrastructure purchases, where a year after that Huawei continued providing gears to the telecommunication bureau of the PLA, and was likely to keep supporting the PLA with its gears to the military. When question emerged about the ties between Huawei and the gear they supply government’s military, the company kept on labeling itself as a purely civilian company and stated that the products do not differ from other commercially available products that Huawei sells (Ahrens, 2013).
Besides, the support form officials that is significant as seen as explicit approval for Huawei in domestic and in foreign market, the company also received preferential construction loans and priority processing, and support in hiring, as well as customer financing from local banks. Behind the Chinese government’s financial and political support, there has been the desire to promote Huawei as a national champion to ward off foreign domination of the telecom equipment industry, where the status as a private company has not stood in the way of it receiving preference over other up-and-coming equipment makers from state-owned sector.50
50 Tang, Jie, and Anthony Ward. The Changing Face of Chinese Management (London: Routledge, 2003). Page 123.
30
From the viewpoint of financial support as part of Chinese government’s R&D, Huawei has been aided by the banks that provided credit terms that have been offered to the customers of Huawei.51 Besides, the company in its early days supplied products and provided services to a number of government-affiliated organizations (and reportedly individuals) as well as rural telecom companies (Tang and Ward, 2003).
In 1998, China Construction Bank (CCB) supplied Huawei with RMB 3.9 billion in buyers’ credit, in which this support represented 45 percent of the bank’s credit extended in that year. In 1999, Huawei continued to receive another RMB 3.5 billion from the Industrial and Commercial bank of China (ICBC), and the Bank of China, with ICBC lending an additional 200 million for R&D.52 In the early 2004, Huawei continued receiving a $10 billion five-year-credit facility for international expansion from the China Development Bank and $600 million from Ex- Im Bank of China (which later increased up to $30 billion, and possibly more (Ahrens, 2013).
Back in years, Chinese government has also provided R&D grants for Huawei as in 1996, Vice Premier Wu Bangguo visited the company and pledged RMB 50 million in loans to develop mobile phone technology (Ahrens, 2013). At that time, Wu Bangguo said that “at present, this is monopoly of foreign companies. I suggest that Huawei make new breakthrough in the mobile area (Ahrens, 2013).” Moreover, in Huawei’s 2010 financial statement, it listed RMB 433 million (approximately $66 million) of unconditional government R&D grants, as well as an additional RMB 545 million (approximately $84 million) in conditional R&D grants (Ahrens, 2013).
51 According to USCC 2012 report, the credit line to Huawei functioned as an export buyer’s credit – financing available to Huawei’s overseas customers to finance their purchase of equipment from the company (Huawei). 52 Ahrens, Nathaniel., op cit., page 26.
31
In Huawei’s open letter by Ken Hu, Huawei explained the situation by saying that:53
“The credit lines made available through Huawei by China's commercial banks are actually designated for Huawei's customers, not Huawei. As an intermediary, Huawei recommends loans to our customers and, once taken, our customers are responsible for paying the principle and interest directly to those banks. It is important to note that these types of loans only represented about 9% of Huawei's annual income in 2010, a level that is similar to our industry peers. In 2004, the China Development Bank agreed to offer a US$10 billion buyer's credit line to our customers and the amount was subsequently increased to US$30 billion in 2009. As of today, US$10 billion has been loaned to our customers from the China Development Bank (Ken Hu, 2011).” II.4. Chapter Conclusion
With the growing concerns of China’s intelligence activities like Titan Rain, APT1, and F-35 design plan theft towards US, the US government has put extra attention towards China’s behavior, including Chinese companies’ investment in the US market. Huawei as a Chinese multinational company however, was alleged to be subject to Chinese government order as one of the national champions in the digital triangle. Moreover, the US government suspicion over Huawei has escalated as indications were found that Huawei was backed by Chinese government’s funding through Chinese state owned bank like China Development Bank, where Huawei also provided PLA’s telecommunication bureau with telecoms infrastructure.
53 Hu, Ken. Huawei Open Letter. Retrieved from http://www.huawei.com/ilink/en/about- huawei/newsroom/press-release/HW_092875 on December 20, 2016.
32
CHAPTER III: US ALLEGATION TOWARDS HUAWEI AS POTENTIAL SECURITY THREATS TO US’ TELECOMMUNICATION INFRASTRUCTURE
To gain in-depth knowledge about the US measures have been conducted to secure its telecommunications infrastructure from potential security threat posed by Huawei, the US government has applied a number of policies relevant with telecommunication sector as one of US critical infrastructures category. In this chapter, the writer addresses brief explanations about Homeland Security Presidential Directive 7 (HSPD 7), Exon-Florio Amendment (1988), Foreign Intelligence Surveillance Act (FISA), as well as the House Permanent Select Committee on Intelligence (HPSCI). Furthermore, the writer also provides cases related with Huawei as potential security threat to US telecommunications infrastructure, for instance divested acquisition with 3Com in 2008 and 3Leaf in 2011. Besides, the writer also provides the findings of investigation by HPSCI towards Huawei from November 2011 to October 2012. The result of the findings and cases in this chapter will be used to analyze the measures US government has undertaken in form of trade protectionism and cyber espionage in the next chapter.
III.1. US Policies in Securing Telecommunications Sector as part of Its Critical Infrastructure54
In this section, the writer addressed a number of US policy to secure its telecommunications as part of its critical infrastructure. This is meant to give readers brief information about how US manage to anticipate potential security threats like Huawei who sought opportunity in US telecommunication industry market through acquisitions and partnership.
54 According to US Homeland Security, there are 16 critical infrastructures sectors whose assets, systems, and networks, whether physical or virtual, are considered so vital to US that their incapacitation or destruction would have a debilitating effect on security, national economic security, national public health or safety, or any combination thereof.
33
III.1.1. Homeland Security Presidential Directive-7 in 2003
On December 17, 2003, President Bush Administration released Homeland Security Presidential Directive (HSPD) 7 as a national policy for US federal departments and agencies to identify, prioritize, and coordinate protective measures for US’ critical infrastructure (Department of Homeland Security, 2003). Department of Homeland Security (2003) argued that US’ open and technologically complex society includes a wide array of critical infrastructure and key resources that are potential to be exploited by terrorists, since the majority of US’ critical infrastructure, particularly telecommunications are owned by private sector and State or local governments.
The HSPD 7 has reiterated the relationship between the Department of Homeland Security and other agencies in certain areas, such as the US Department of Commerce. Under Section 232 of the Trade Expansion Act of 1962, the Department of Commerce is given authority to conduct investigations to determine the effect of imports on national security.55 Below is the Section 232 (after the provision of) Trade Expansion Act of 1962 as in Part IV – National Security §1862 in Safeguarding national security:56
“(a). Prohibition on decrease or elimination of duties or other import restrictions if such reduction or elimination would threaten to national security; (b). Investigations by Secretary of Commerce to determine effects on national security of imports of articles; consultation with Secretary of Defense and other officials; hearings; assessment of defense requirements; report to President; publication in Federal Register; promulgation of regulations”
Should an investigation find that the import may threaten on national security, the US President may use his authority to adjust the
55 Goldstein, Mark L. (2013). Telecommunications Networks – Addressing Potential Security Risks of Foreign-Manufactured Equipment. United States Government Accountability Office (GAO), p. 46. 56 Part IV – National Security §1862. Safeguarding national security. Retrieved from http://www.washingtontradereport.com/Section232.htm on January 15, 2017.
34
import by taking measures recommended by the Secretary of Commerce, including barring imports of a product.
III.1.2. Exon-Florio Amendment (1988) and Foreign Investment in Committee on Foreign Investment in the United States (CFIUS) The surge of the rate of foreign takeovers of American firms that produce high technology goods and services has increased US dependency on foreign firms. This situation rose US government’s concerns about its national security that it established particular domestic policies that treated foreign investors no less favorably than US firms.57 That being said, the increasing foreign direct investment coming along with takeovers made Congress thought that US should protect sensitive technologies from military and economic competitors, as it would increase the tendency of US dependency on foreign sources for defense-related production.58
Committee on Foreign Investment in the United States (CFIUS) whose membership includes nine members, including the Secretaries of State, the Treasury, Defense, Homeland Security, Commerce, and Energy; the Attorney General; the United States Trade Representative; and the Director of the Office of Science and Technology Policy (Jackson, 2016). CFIUS was established under Executive Order 11858 of President Gerald Ford in 1975 mandated to review transactions that could result in control of a business by a foreign person in order to determine the effect of such transactions on the national security of US (Greidinger, 1991). Moreover, in 1988, the US Congress approved the Exon-Florio provision in Omnibus Trade and Competitiveness Act of 1988 that grants authority to the president of US to investigate and block mergers, takeovers, and acquisitions that could result in foreign control of domestic companies, in order to decelerate the erosion of the competitiveness of the US in world
57 Jackson, James K. (2011). Foreign Investment, CFIUS, and Homeland Security: An Overview. United States: Congressional Research Service, p. 1. 58 Greidinger, Marc. (1991). The Exon-Florio Amendment: A Solution in Search of a Problem. United States: American University International Law, p. 112
35
markets, reduce the dependency of US on foreign sources, and protect the national security (Greidinger, 1991). According to Derek Scissors, Ph.D., a Senior Research Fellow in Asia Economic Policy in the Asian Studies Center at The Heritage Foundation, “transactions with security risk are effectively blocked by protectionism” on grounds of national security.59
The Exon-Florio provision empowers CFIUS to investigate “mergers, acquisitions and takeovers (that could result in) foreign control of persons engaged in interstate commerce in the US”, if the president discovers credible evidence that the foreign interest might take action that threatens to impair the national security of the US, the president is authorized to take such action to suspend or prohibit the transaction.60 The Act updated the Exon-Florio Amendment that empowered the role of CFIUS to investigate all foreign investment deals in which the entity is owned or controlled by a foreign power.
III.1.3. The Foreign Intelligence Surveillance Act (FISA) of 1978 On October 25, 1978, FISA was signed into law by President Jimmy Carter to regulate the government’s practice of foreign intelligence (Electronic Privacy Information Center, 2016). Upon the signing, he stated that the FISA aimed to assure that “those who serve this country in intelligence positions will have affirmation of Congress that their activities are lawful (Administration of Jimmy Carter, 1978).”
59 The Heritage Foundation. (October 23, 2012). China Cyber Threat: Huawei and American Policy Toward Chinese Companies. Retrieved from http://www.heritage.org/defense/report/china- cyber-threat-huawei-and-american-policy-toward-chinese-companies, and accessed on January 8, 2017. 60 (United States Code) USC 50 Appendix Sect. 2170 – Authority to review certain mergers, acquisitions, and takeovers. (a). Investigations: The President or the President's designee may make an investigation to determine the effects on national security of mergers, acquisitions, and takeovers proposed or pending on or after the date of enactment of this section [Aug. 23, 1988] by or with foreign persons which could result in foreign control of persons engaged in interstate commerce in the United States. (d). the President may take such action for such time as the President considers appropriate to suspend or prohibit any acquisition, merger, or takeover, of a person engaged in interstate commerce in the United States proposed or pending on or after the date of enactment of this section [Aug. 23, 1988] by or with foreign persons so that such control will not threaten to impair the national security.
36
In 2007, President Bush acknowledged the amendment of FISA, called The Protect America Act. It was the act that modernized FISA in a way that it permits surveillance professionals to more effectively collect foreign intelligence information on targets in foreign lands without first receiving court approval.61 Under section 702, foreign intelligence information, US government may acquire includes a number of grounds related to national security, such as information relating to an actual or potential attack or other grave hostile acts of a foreign power or an agent of a foreign power.62 The communication may be pertained under Section 702 was comprised of data repositories such as texts of emails and recordings of conversations, as well as metadata (in form of basic information about the communication like the time and duration of a telephone call, or sending and receiving email addresses).63
III.1.3.1. The Role of National Security Agency (NSA) in Conducting Surveillance The National Security Agency (NSA) is a national agency of US that was established on November 4, 1952, by President Harry Truman’s order (National Security Agency, 2016). The establishment of NSA was pursuant to the President Truman’s authority as the Commander in Chief of the US’ armed forces (which was related to President’s authority under the Section 2 of Article II of the US Constitution).64 In 1959 Congress has
61 Standler, Ronald B. Protect America Act of 2007 and FISA Amendments Act of 2008: More Hastily Passed Statutes, p. 16 62 Foreign power pursuant to FISA was comprised of: (1). A foreign government, (2). a diplomat, other representative or employee of a foreign government, (3). a faction of a foreign nation that is not substantially composed of US persons, (4). an entity openly acknowledged by a foreign government to be directed and controlled by it, or (5). a group engaged in international terrorism or activities in preparation therefore. An agent of a foreign power is also anyone, including a US person, who: (1). Knowingly engages in clandestine intelligence gathering activities for a foreign power which activities constitute a violation of US criminal statutes; (2). Knowingly engages in sabotage or international terrorism, or activities that are in preparation therefore, or on behalf of a foreign power. 63 NSA Director of Civil Liberties and Privacy Office Report. NSA’s Implementation of Foreign Intelligence and Surveillance Act Section 702, p. 1. 64 ‘The President shall be commander in chief of the Army and Navy of the United States…’. US Constitution Article II. Retrieved from https://www.law.cornell.edu/constitution/articleii on November 16, 2016.
37
enacted the National Security Agency Act as the legislative basis for NSA’s activities, written in the US Code Title 50 § 3038(b)(1):65
“through the National Security Agency (except as otherwise directed by the President or the National Security Council), the continued operation of an effective unified organization for the conduct of signals intelligence activities and shall ensure that the product is disseminated in a timely manner to authorized recipients;” NSA has two interconnected missions, Signals Intelligence (SIGINT) and Information Assurance (IA). According to NSA, SIGINT is a conduct of collecting foreign intelligence from communications and information systems and providing it US Government in which the collected information shall be used to help protect US troops, support allies, fight terrorism, combat international crime and narcotics, support diplomatic negotiations, and other national objectives (National Security Agency, 2016). Through SIGINT, the NSA serves the US to obtain information related to the plans, intentions, capabilities, and locations of foreign power, organizations, terrorist groups, or persons, or their agents, who threaten America’s national security.
Meanwhile, Information Assurance (IA) is a conduct that involves preventing unauthorized access to sensitive or classified national security information and systems in order to keep others from stealing or tampering with the US’ national security systems and information (National Security Agency, 2016). Under IA, the purpose is protecting the nation’s vital national security systems and information from theft or damage by others’ (National Security Agency, 2016).
Under Foreign Intelligence Surveillance Act Section 702 (refers to the part of FISA Amendments of 2008), The NSA analyst may access the communication for the purpose of identifying and reporting foreign intelligence. The communication pertained under Section 702 was comprised of texts of emails and recordings of conversations, basic
65 50 U.S. Code § 3038 - Responsibilities of Secretary of Defense pertaining to National Intelligence Program. Retrieved from https://www.law.cornell.edu/uscode/text/50/3038 on November 16, 2016.
38
information about the communication like the time and duration of a telephone call, or sending and receiving email addresses.
III.I.3.2. The Development of NSA’s Cyber Espionage on Grounds of National Security
According to Deeks (2015) in an article entitled An International Legal Framework for Surveillance, domestic laws can and do serve as the basis for international legal developments, especially in the face of highly different conceptions of the proper legal framework – all of which are present in the surveillance debate.66 Related with the role of NSA in conducting cyber espionage as part of its task in SIGINT, one should see that it is relevant with Deeks’ argument. Moreover, the US government’s strategy to safeguard its cyberspace as part of its national security was seen from President Obama’s remark regarding the massive Sony hacking scandal that alleged the North Korea as the perpetrator. President Obama stated that:67
“This is more like basketball than football, in the sense that there’s no clear line between offense and defense. Things are going back and forth all the time. I won’t lie to you, this is a debate that we have internally. Because when you develop sufficient defenses, the same sophistication you need for defenses means that, potentially, you can engage in offense. Now, there are some things that we’re very clear about. For example, we just don’t do espionage the way many other countries do, where their state-sponsored operations are going in and stealing information commercially. Most of the work that we do revolves around threats against us from non-state actors, and obviously terrorism is a huge field.”
However, in the emergence, surveillance by NSA, the United Kingdom’s Government Communications Headquarters (GCHQ), and other states’ intelligence apparatuses is related with states’ efforts to collect intelligence about decision-making in foreign governments. That being said, the governments will continue its duty to protect their people from harm, particularly in the age of terrorism by non-state actors, leading to
66 Deeks, Ashley. (2015). An International Legal Framework for Surveillance. Virginia Journal of International Law Vol. 55:2. 67 Recode. (2015). How Cyber Security Is Like Basketball, According to Barack Obama. Retrieved from https://www.recode.net/2015/2/14/11559050/how-cyber-security-is-like-basketball- according-to-barack-obama on February 19, 2017.
39
decision not to cease their foreign surveillance conducts. As for the US, electronic surveillance has a decades-long history, and from its inception it was used to both facilitate war-fighting and to assists diplomats in assessing each other’s plans (Deeks, 2015).
The US conducted electronic surveillance not just against foreign government but also foreign nationals. In fact, the US had a historical knowledge about telecommunications equipment that could be exploited through its vulnerabilities since the early 1950. In the early 1960s, the US’ National Security Agency (NSA) was successfully able to intercept the Cuban telephone signals with the help from American telecommunication giant, called Radio Corporation of America (RCA) International who help in building Cuba’s telephone system in 1959.68 The operation was codenamed Mongoose, began on November 30, 1961, whose purpose was to overthrow the Fidel Castro regime in Cuba through a combination of guerrilla attacks by CIA-trained Cuban exiles and the use of political, economic, and psychological warfare.69 The efforts of NSA against Cuba was possible because of RCA International willingly provided the CIA and NSA with the schematics of the Cuban communications system as well as details about the operating parameters of the equipment.
The development of cyber espionage on grounds of national security continued through NSA unit, called the Office of Tailored Access Operations (TAO) whose area of operations ranges from counterterrorism to cyber attacks to traditional espionage. TAO in operating is using special tools to penetrate into target’s networking equipment (including Huawei’s network in that is addressed in this thesis). NSA through TAO has conducted a number of intelligence-gathering information that can be seen
68 East Asia Forum. (March 16, 2014). China-US Telco Wars. Retrieved from http://www.eastasiaforum.org/2014/03/16/china-us-telco-wars/, and accessed on December 13, 2016. 69 Aid, Matthew. (2009). The Secret Sentry: The Untold History of the National Security Agency. Bloomsbury Publishing, p. 60.
40
from the record of the TAO’s gained access of 279 operations in 2010 alone.70
Furthermore, the US government underlined the distinction between intelligence operation for national security purposes and government sponsored cyber espionage for commercial gain. Besides, the government has also acknowledged that it undertakes intelligence operation or cyber espionage as a legitimate activity.71 When the US government was facing the Snowden’s revelations in 2013, President Obama attempted to defend the NSA’s conduct, yet he consistently defended the conduct on the basis that it was necessary to maintain national security. However, Besides, Michael Hayden, the former director of NSA and CIA stated that:72
“those records are a legitimate foreign intelligence target. If I, as director of the CIA or NSA, would have had the opportunity to grab the equivalent in the Chinese system, I would not have thought twice, I would not have asked permission”.
Relating this notion with Section 702 of FISA, one should find that they are relatable and consistent. In Section 702 of FISA of foreign intelligence information, US government may acquire includes a number of grounds related to national security, such as information relating to an actual or potential attack or other grave hostile acts of a foreign power or an agent of a foreign power. Besides, in the view of Tallinn Manual of 2013, it did not further address the intent of the attack or the nature of the information stolen with purpose of making it more helpful for nations that are victims of foreign cyber attacks. The cyber espionage addressed in
70 Russia Today. (January 1, 2014). ‘Getting the Ungettable’: Leaks Reveal NSA’s Top Hacking Unit. Retrieved from https://www.rt.com/usa/nsa-top-unit-tao-954/, and accessed on December 20, 2016. 71 Economy Watch. (2015). What Does Cyber-Espionage for National Security Cover? Retrieved from http://www.economywatch.com/features/What-Does-Cyber-Espionage-for-National- Security-Cover1013.html on February 21, 2017. 72 The Wall Street Journal. (June 21, 2015). Michael Hayden Says U.S. Is Easy Prey for Hackers. Retrieved from https://www.wsj.com/articles/michael-hayden-says-u-s-is-easy-prey-for-hackers- 1434924058, and accessed on January 8, 2017.
41
Tallinn Manual is essential as it allows victims to take appropriate countermeasures for even the slightest intrusion.73
III.1.4. House Permanent Select Committee on Intelligence (HPSCI) The United States House Permanent Select Committee on Intelligence (HPSCI) is a committee of the US House of Representatives that was created in 1977.74 The Committee is charged with oversight of the United States Intelligence Community which includes the intelligence and intelligence related activities of the other seventeen elements of the US government, as well as the Military Intelligence Program.75
As in House Resolution (H. Res.) 658 Report No.95-498, in June 1977, that “…the purpose of this resolution to establish a new permanent select committee of the House, to be known as the Permanent Select Committee on Intelligence, to oversee and make continuing studies of the intelligence and intelligence-related activities and programs of the United States Government, and to submit to the House concerning such intelligence and intelligence-related activities and programs.”76 Besides, the HPSCI in carrying out this purpose, the HPSCI “shall make every effort to assure that the appropriate departments and agencies of the United States provide informed and timely intelligence necessary for the executive and legislative branches to make sound decisions affecting the security and the vital interests of the Nation.”77
73 Rubenstein, Dana. (2014). Nation State Cyber Espionage and Its Impact. 74 House Permanent Select Committee on Intelligence. History and Jurisdiction. Retrieved from http://intelligence.house.gov/about/history-and-jurisdiction.htm on December 26, 2016. 75 The other seventeen elements of the US government are Office of the Director of National Intelligence, Central Security Agency (CIA), Department of the Air Force, Department of the Army, United States Coast Guard, Defense Intelligence Agency, Department of Energy, Department of Homeland Security, Department of State, Department of Justice Drug Enforcement Administration (DEA), Department of the Treasury, Department of Justice Federal Bureau of Investigation (FBI), United Nations Marine Corps, National Geospacial Intelligence Agency, National Reconnaissance Office, National Security Agency, and Department of the Navy. 76 House Resolution (H. Res.) 685 Report No. 95-498. (1977). 77 Ibid.
42
III.2. Huawei’s Failed Business Deals with 3Com and 3Leaf III.2.1. Huawei-Bain Capital Deal with 3Com Huawei entered American telecommunication market on February 14, 2001.78 During its operation in US, it attempted to win a number of major contracts from US’ top-tier carriers. In 2008, Huawei attempted to purchase 3Com, which was a major American telecommunication company that invented, manufactured, integrated, and implemented network infrastructure products (USCC, 2011). The inception of this case was when 3Com had a joint venture with Huawei in 2003 under H3C, where during the joint venture both companies had a combined research on routers, switches, wireless networking, security, and others.79
In 2007 Bain Capital – a private equity company based in Boston joined with Huawei to acquire 3Com under US$2.2 billion bid (New York Times, 2008). However, the US government had growing concerns over Huawei who had been alleged to have ties with Chinese military that would take advantage of 3Com’s Tipping Point, a 3Com’s subordinate unit that provided network security products and services to US’ DoD as well as some other federal agencies (USCC, 2011). Eventually, the proposed deal by Bain Capital and Huawei was called off on March 20, 2008, as it fell afoul of CFIUS that the takeover would impact on the national security, saying that it would recommend the bid to be rejected. Chinese official argued that the transaction should have been assessed purely on commercial grounds and did not raise security issues, while Huawei declined to give comment.
III.2.2. Huawei Deal with 3Leaf In May 2010, Huawei purchased 3Leaf -a bankrupt American company headquartered in Santa Clara, California- for $2 million.80 3Leaf
78 Steinbock, Dan. The Case for Huawei in America (2012). Page 12. 79 Joint venture is “business undertaking by two or more persons engaged in a single defined project.” Defined from Garner, B. A., Editor in Chief (2004) Black’s Law Dictionary (Eighth Edition). Thomson, Minnesota. 80 Barfield, Claude., op cit., page 12.
43
specialized its operation in cloud computing technology that allowed groups of computers to collaborate together into a more powerful system (Barfield, 2011). In this case, CFIUS’s recommendation and its rationale are confidential, yet its decision appeared to be based on the identity of Huawei that had history with Chinese PLA. Furthermore, the deal has come under scrutiny from US government that it was cleared without the approval from CFIUS, and US government then asked Huawei to place the deal under the review of CFIUS. Bill Plummer, the vice president for government affairs for Huawei US said that “We have great respect for the process, (and) to withdraw and divest would have tarnished our brand and reputation”, while adding that Huawei was willing to negotiate a broad national-security agreement that could alleviate concerns from US officials.81 Huawei deal with 3Leaf was to hire 15 of 3Leaf employees, buy several former 3Leaf patents, and purchase 3Leaf’s servers.
Huawei had reason not to notify CFIUS before doing the acquisition of technology and employees of 3Leaf, that Huawei and its advisors reasoned that the purchase of discrete technology (including patents) and the assumption of less than a third of 3Leaf’s employees did not constitute the acquisition of an ongoing US business, and therefore the acquisition fell outside CFIUS jurisdiction. However, the US’s Department of Defense as one of the CFIUS members had different view about the deal, determining that it had jurisdiction of finding a covered transaction if the deal carries concern signs, while informing Huawei that it must divest the 3Leaf assets and employees.
As the result, in February 2011 Huawei announced that it would divest its acquisition towards US server technology possessed by 3Leaf due to pressure from the US government. This was attributable to the decision of CFIUS that would urge President Barack Obama to veto the purchase on
81 The Wall Street Journal. (November 5, 2010). Security Fears Kill Chinese Bid in U.S. Retrieved from https://www.wsj.com/articles/SB10001424052748703703804576144892603923096, and accessed on January 10, 2017.
44
concern with US national security. Teng Bingsheng, a Professor of Strategy at Cheung Kong Graduate School of Business (CKGSB), China, said that “the American government’s concerns are unnecessary but understandable. They have been very open about why they see Huawei as a potential threat to American security. From the outside, Huawei may look like a black box and is run like a close-knit fraternity.”82 Besides, Xiang Songzuo, Deputy Director of the Institute of International Currency at Renmin University stated that “The United States is now very clear. If your industry is associated with military technology, and if your business is state-owned enterprise, then the acquisition is basically rejected on grounds of national security”.83
Notwithstanding, Chinese Ministry of Commerce expressed its disappointment on the 3Leaf deal with Huawei, stating that it regarded Huawei’s proposals to have been a normal commercial move based on its own development needs and market economy rules.84 A Ministry of Commerce spokesman stated that: “China is following international practice. Many nations have already adopted such an approval process. It will help China to further open up and improve policy transparency.”85
III.3. The Investigation Findings about Security Concerns from Huawei Posed to US National Security The investigation was initiated by an open letter by Huawei in February 2011 in which the essence of the letter was denying the security concerns with the company or its equipment, and along with the letter Huawei requested for a full investigation to gain US trust in Huawei’s equipment (US House of Representatives, 2012). The Committee began the investigation in November 2011
82 CKGSB. (March 4, 2011). Huawei and 3Leaf: What Went Wrong? Chinese Telecoms Set Sights on Strategic Foreign Assets. Retrieved from http://knowledge.ckgsb.edu.cn/2011/03/04/technology/huawei-and-3leaf-what-went-wrong- chinese-telecoms-set-sights-on-strategic-foreign-assets/, and accessed on January 5, 2017. 83 Week in China. (February 25, 2011). A Connection Problem. Retrieved from https://www.weekinchina.com/2011/02/a-connection-problem/, and accessed on January 10, 2017. 84 Ibid. 85 Ibid.
45 to inquire into the counterintelligence and security threat posed by Chinese telecommunications companies doing business in the United States, including Huawei.
The investigation spent hours of interviews, extensive and repeated document request, open-source information review, as well as open hearing with witnesses from both companies, yet the Committee stated that it remained unsatisfied with the level of cooperation and candor performed by each company. The Committee deemed that Huawei was not willing to provide sufficient evidence to mitigate the concerns of the Committee about its formal relationship or regulatory interaction with Chinese authorities and specific details about the role of Huawei's Chinese Party Committee.
The Committee commented that Huawei failed to provide in-depth information about its corporate structure, history, ownership, operations, financial arrangements, or management. At the end of the investigation, the Committee concluded that the risks associated with Huawei’s provision of equipment to US critical infrastructure could undermine the core of US national-security interests.
The track record of China’s Huawei that attempted to make investment in American telecommunications market has been a concern of US government since telecommunication holds crucial role in maintaining its national security. After a bid proposed by Bain Capital-Huawei to acquire 3Com, the company was then probed by US’ CFIUS resulted in the bid application withdrawal in the case of 3Leaf. Huawei was investigated during 2011 – 2012 by US’ House Permanent Select Committee on Intelligence (hereafter will be “the Committee”) for a potential of being arms of Chinese government. The investigation by the Committee was led by Representative Mike Rogers, Republican of Michigan, the chairman of the Committee, and Representative Charles Albert Ruppersberger of Maryland, the top Democrat of the Committee. Mike Rogers underscored the threat to national security as doing business with Huawei would open opportunities for the company to handle sensitive data over computer networks.
46
The inception of the investigation began when Huawei issued an open letter to US government in February 2011 in order to clarify Huawei thought as misperceptions about the company’s history and business operation. Ken Hu, the Deputy Chairman of Huawei Technologies and Chairman of Huawei USA stated that:86
“Unfortunately, over the past 10 years, as we have been investing in the United States, we have encountered a number of misperceptions that some hold about Huawei. These include unfounded and unproven claims of “close connections with the Chinese military,” “disputes over intellectual property rights,” “allegations of financial support from the Chinese government,” and “threats to the national security of the United States.
These falsehoods have had a significant and negative impact on our business activity and, as such, they must be addressed as part of our effort to correct the record. We sincerely hope that the United States government will carry out a formal investigation on any concerns it may have about Huawei. We have faith in the fairness and justness of the United States and we believe the results of any thorough government investigation will prove that Huawei is a normal commercial institution and nothing more.” After conducting the investigation, the Committee offered a number of policy recommendations (US House of Representatives, 2012):
First, the Committee recommended the Committee on Foreign Investment in the United States (CFIUS) to block acquisitions, takeovers, or mergers involving Huawei given the threat to US national security interest. Secondly, the Committee also recommended the US government systems, particularly sensitive systems, should not include Huawei equipment, including in component parts, and government contractors – particularly those working on contracts for sensitive US programs – should exclude Huawei equipment in their systems. Thirdly, private sector entities in the US are strongly encouraged to consider the long-term security risks associated with doing business with Huawei for equipment or services. Furthermore, US network providers and systems developers are strongly encouraged to seek other vendors for their projects. The Committee also highlighted that Huawei cannot be trusted to be free of
86 Hu, Ken. Huawei Open Letter. Page 3.
47
foreign state influence and thus pose a security threat to the US and its systems. Fourth, Huawei in particular, must become more transparent and responsive to US legal obligations.
As the result of the investigation report that had been published in 2012, Huawei’s telecom networking equipment, which included base stations and antennas, has effectively been banned in the US.87 Responding to the Committee’s report, Scott Sykes, Huawei spokesman expressed his disagreement by stating that (Huawei, 2012):
“The report released by the committee today employs many rumors and speculations to prove non-existent accusations. This report does not address the challenges faced by the [information and communications technology] industry. Almost every ICT firm is conducting R&D, software coding and production activities globally; they share the same supply chain, and the challenges on network security is beyond a company or a country. The committee’s report completely ignored this fact. We have to suspect that the only purpose of such a report is to impede competition and obstruct Chinese ICT companies from entering the US market.” Chinese Ministry of Commerce announced that it strongly opposed the report that alleged Huawei posed national security threats in US. Shen Danyang, a ministry spokesman commented the report that based on “subjective guesswork” and “untrue evidence”, while using national security as an excuse for blocking companies from fair competition in the US telecommunications market.88
Meanwhile, Ma Yu, a senior researcher at the Chinese Academy of International Trade and Economic Cooperation stated that “there has been an obvious rise in global trade protectionism, and China has been targeted as a main rival that poses a serious threat to US jobs in the telecommunication sector”.89 The
87 China US Focus. (June 30, 2016). Sanctioning ZTE and Huawei: Chinese Telecom Giants’ Conflicts with the U.S. Retrieved from http://www.chinausfocus.com/finance- economy/sanctioning-zte-and-huawei-chinese-telecom-giants-conflicts-with-the-u-s, and accessed on January 12, 2017. 88 China Daily. (October 10, 2012). China ‘Strongly Opposes’ US Report on Telecom Firms. Retrieved from http://usa.chinadaily.com.cn/business/2012-10/10/content_15805874.htm, and accessed on January 8, 2017. 89 China Topix. (September 14, 2016). US Government Still Sees Huawei as a Front for Chinese Spying. Retrieved from http://www.chinatopix.com/articles/100862/20160914/government-still- sees-huawei-front-chinese-spying.htm, and accessed on January 8, 2017.
48
Committee stated that Chinese government and the Chinese Communist Party (CCP) can exert influence over the corporate boards and management of private sector companies, despite according to Chinese analysts saying that state control or influence or purportedly private sector entities in China is neither clear nor disclosed.
The investigation by the Committee attempted to seek answers on several key questions about the companies, including: the companies’ histories and management structures, as well as any ties to the Chinese government, military, or CCP; how the Chinese government or CCP exercise control or influence over the decisions, operations, and strategy of both companies; whether Huawei is treated with privileges as national champion in form of special advantages or financial incentives by the Chinese government.
The Committee found that Huawei did not fully cooperate with the investigation was unwilling to explain its relationship with the Chinese government or Chinese Communist Party (CCP). The Committee said that throughout the investigation, Huawei officials was attempting to portray the company was transparent, yet it consistently refused to provide detailed answers in written form or provide internal documents to validate their answers.
Moreover, the Committee found out that Huawei would not fully describe the history, structure, and management of Huawei as well as its subsidiaries to the Committee. In regards to the question about the role of Chinese Communist Party (CCP) within Huawei or how Huawei interacts in formal channels with the Chinese government, the Committee said that they received almost no answers. Besides, when Huawei was asked about the influence of parent company with Huawei in US, several current and former employees of Huawei US answered that the Huawei US almost completely managed by the Huawei parent company in China.
First, Huawei did not provide clear and complete information on its corporate structure and decision-making processes, and the company likely remains dependent on the Chinese government for support. Throughout the investigation, Huawei consistently denied that it has links to the Chinese government and
49 maintains that it is a private, employee based company. Despite that, many industry analysts have different argument, suggesting that the fact of Huawei’s founder, Ren Zhengfei was working as a director to the PLA Information Engineering Academy, an organization they believe is associated with 3PLA, which is the China’s signals intelligence division, and argued that Ren’s connections to the military continue. This allegation is strengthened by the Chinese government and military who proclaimed that Huawei is a “national champion” that provide the company with financial support.
In order to gain knowledge about the Chinese government’s influence or control over Huawei, the Committee focused on Huawei’s structure and decision- making processes. However, when the Committee requested Huawei to list the ten largest shareholders of the company, it refused to answer. Huawei’s statement that raised the Committee’s suspicion was at public hearing on September 13, 2012, when Huawei claimed that its shareholder agreement has put veto power to Ren Zhengfei, the founder and the president of the company. Therefore, this statement led to conclusion that 60,000 of supposed shareholders of Huawei did not have control over the company’s decisions, leaving the biggest power in the hand of Huawei’s founder who was noticeably working as an official in PLA.
Besides, The US-China Commission lists Huawei as a Chinese enterprise that exists in a relatively new market and receives plenty of generous Chinese government policies to support its development. Huawei claimed that it only maintains normal commercial communication with relevant supervisory agencies, including the Ministry of Industry and Information Technology, as well as the Ministry of Commerce, while it denied interaction with the Ministry or National Defense, the Ministry of State Security, or the Central Military Commission (US House of Representatives, 2012). Notwithstanding, according to the Committee, Huawei also failed in providing documents with which the Committee could evaluate these claims, as the company could not afford the Committee’s inquiry about the precise mechanism of interaction with and regulation the Chinese government bodies Huawei had mentioned beforehand.
50
Second, Huawei admits that the Chinese Communist Party (CCP) maintains a Party Committee within a company, yet the company’s officials failed to explain what that Committee does on behalf of the Party or which individuals compose the committee. One of the key concerns for the Committee is the relations between Huawei and the Chinese Communist Party (CCP) as it represents the opportunity for the State to exert its influence over the decisions and operations of a company seeking to expand into the critical infrastructure in US.
Huawei –however, admitted that internal party does exist within Huawei, since the involvement of that party committees are is a requirement under Chinese law which is also adopted by all Chinese companies as well as economic institutions in China. The Committee responded to this statement by saying that Huawei’s defense is not a compelling defense for companies like Huawei when attempting to expand its business by building critical telecommunications infrastructure in US. The Committee argued this reason was increasing more suspicion when Huawei refused to discuss or describe the involvement of CCP in Huawei committee membership, even more when it refused to explain what decisions of Huawei reviewed by the party committee, and how Huawei chose the individuals to be the member of the party committee.
Third, Huawei’s corporate history suggests ties to the Chinese military, yet Huawei failed to provide detailed answers to questions about those connections. In accordance to Huawei officials, the company’s founder, Ren Zhengfei once served Chinese military engineering corps as a soldier, given task to establish a Chinese state-owned manufacturing company, called the Liao Yang Chemical Fiber Factory where he was later promoted as a Deputy Director. Ren Zhengfei decided to retire from his position in 1983 after the engineering corps was disbanded, and worked for a Chinese state-owned enterprise called Shenzhen South Sea Oil Corporation, until he felt dissatisfied with the low salary, quit the job, and established Huawei in 1987. What made the Committee became suspicious besides Ren’s history with Chinese military was the refusal of Huawei officials to explain more information about Ren’s full military background, to whom Ren reported when he was working
51 in military, as well as detailed information about what duties Ren performed for the Chinese Communist Party when he was invited to join the 12th National Congress.
Fourth, Huawei failed to answer key questions or provide supporting documentation for its claims to be financially independent of the Chinese government. In this case, Chief of Huawei Representative in the US Charles Ding claimed suggested that he did not understand and had no knowledge about the term “national champion”, as a term that is used to describe the favored Chinese companies supported with financial and R&D by Chinese government.
On the other hand, according to RAND (2005), 863 Program is considered as the most critical national defense science and technology funding effort, whose ultimate goal is to close the technology gap with the West and pursue strategic technologies with implications for China’s long-range industrial competitiveness and national power. RAND (2005) also explained the so-called term “digital triangle”, which is a model that represents the combination of state R&D infrastructure, commercial IT, and military. Commercial IT is this model are telecoms equipment and electronics companies, where the telecommunication companies like Huawei, Datang, Zhongxing, and Great Dragon (Julong) are called the “four tigers” of Chinese telecoms equipment makers.
However, during the investigation the Committee found that Huawei used the term “national champion” several times in its slide presentation in Capitol Hill, Washington DC in November 2011, and Huawei did not deny the fact that it used the term. When asked by the Committee about the use of the term in the document, Huawei through Charles Ding stated that the particular slide in the larger document was created by a third party and therefore, was not the responsibility of Huawei. Responding to Huawei’s answer, the Committee argued that Huawei knew about the document that was used in discussion with US elected representatives is sufficient evidence to prove that Huawei does in fact have an understanding about the term of “national champions”.
In terms of the allegation of financial support provided by the Chinese government and banks, Huawei claimed that it only took advantage of general
52
Chinese banking opportunities, not to seek influence or even coordinate with banks such as the Chinese Development Bank and the Export-Import Bank, which are both state-owned. During Huawei’s presentation to the Committee, it provided a list of the Memoranda of Understanding (MOUs) between Huawei and Chinese banks for lines of credit for its customers. Huawei admitted that its customers have a US $100 billion in credit available, but Huawei claimed that only $5.867 billion has been drawn in the period between 2005 and 2011, in which Huawei stated that the line of credit is a financing opportunity available to customers, not to Huawei.90
The backing by Chinese Development Bank allowed Huawei to significantly reduce its cost of capital and to offer financing to their buyers at rates and terms that are better than their competitors, thereby increasing the purchasing power of their buyers.91 The lines of credit provided by Chinese Development Bank are often tapped to provide vendor financing, where Chines telecoms company like Huawei arranges funding for their customer (including the telephone and data service providers) to help them buy Huawei’s equipment. Besides, the Committee found that the large amount of lines of credit was purposed for China to appear impressive, and Huawei admitted that it had to participate, otherwise it would no longer receive loans. Furthermore, when Huawei was questioned about detailed information about the issue of this line of credit, it failed to provide the Committee with written explanation of the benefits Huawei gains from these financing arrangements, as it did not provide internal documents or any auditable information about process of this financing.
Fifth, Huawei refused to provide detailed information about its R&D programs, and other documents to provide its claim that Huawei provides no R&D for the Chinese military or intelligence services. During this session, the Committee investigated Huawei by asking information on the technologies, equipment, or
90 According to www.debt.org, a line of credit is any credit source extended to a business, government or individuals by a bank or lending institution, where the customers can draw upon the credit any time to pay a bill or make a purchase as long as the credit limit is not exceeded. Retrieved from https://www.debt.org/credit/lines/ on December 27, 2016. 91 Sanderson, Henry and Michael Forsythe. (2012). China’s Superbank: Debt, Oil and Influence – How China Development Bank is Rewriting the Rules of Finance. Singapore: John Wiley & Sons, p. 158.
53 capabilities supported by funding or grants by the Chinese government. Notwithstanding, Huawei was not able to provide responsive answers to the Committee’s questions about the specifics information about the Chinese government-backed R&D activities. In its defense, Huawei claimed that it has never managed any of the PLA’s networks.
However, according to Far Eastern Economic Review, in 2000, Huawei once did provide gears of three room-sized switching systems were shipped to Telecommunication Bureau of People’s Liberation Army (PLA).92 The Committee found internal Huawei documentation from former employees that showed Huawei provided special network services to an entity the employee believed to be an elite cyber warfare unit of Chinese PLA. When probed, the documents appeared authentic and official Huawei material, and thereby undermining Huawei’s claim about its sales to the Chinese military that it never did, while in fact the company also could not provide sufficient explanation about the details of its R&D activities for the Chinese government or military.
Sixth, Huawei failed to provide detailed information about its operation in Iran, that it denied doing business with Iranian government, and did not provide evidence to support its claims that it really complied with all international sanctions as well as the US export laws. According to US Department of State, the concerns of Huawei having business with Iran has alarmed US government, given that US had applied economic sanctions against Iran under various legal authorities since 1979. One policy under the trade restrictions is that US citizens may not export goods or services to Iran or, in general, to a third country knowing it is intended for Iran. When Huawei bought certain assets of 3Leaf Systems (an American IT company) for US $2 million, a number of US senators expressed their concern in an official letter (issued to US Commerce Secretary Gary Locke and Treasury
92 Gilley, Bruce. (2000). Huawei’s Fixed Line to Beijing. Far Eastern Economic Review.
54
Secretary Tim Geithner) arguing that Huawei’s acquisition on 3Leaf would violated US law by supplying sensitive American technology to Iran.93
Huawei also alleged to have business relationship with Zaeim Electronics Industries Co., an Iranian electronic company whose clients included the intelligence and defense ministries, as well as Iranian elite special forces unit, the Islamic Revolutionary Guards Corps. However, Huawei refused to answer about detailed question about its operations in Iran, stating that Huawei respected the contract signed with its customers. Huawei also claimed to have done measures in form of internal program on trade compliance to obtain the best practices to deal with this issues, yet the problem according to the Committee was Huawei refused to provide any internal documents regarding the its operation in Iran.
III.4. Chapter Conclusion
Recalling that telecommunication infrastructure is one of the US’s critical infrastructures, the US government has been very careful when dealing with potential threat that could undermine these infrastructures, including with Huawei’s attempt to acquire a number of US telecommunication companies like 3Com and 3Leaf. As Huawei was attempting to acquire 3Com and 3Leaf in respectively 2007 and 2010, the CFIUS has assessed the acquisitions and put pressure on these deal, which finally led to Huawei’s decision to call off the acquisitions in 2008 and 2011. In order to clean-slate misconception about Huawei’s identity seen as a way for China to conduct intelligence activity by US, Huawei’s official has requested full investigation from US government. However, with the indications found during the investigation report of HPSCI in 2012, this situation eroded US’ trust when Huawei was attempting to expand its business foothold in US market.
93 According to The Comprehensive Iran Sanctions Accountability and Divestment Act (passed by the US Congress in 2010), US has imposed trade sanctions on Iranian government, while on the same time prohibited US government contract with companies that export sensitive telecommunications technology equipment to Iran, General Provision Sec. 401: Authorize the President to waive, if in the US national interest: (3) the prohibition on procurement contracts with persons that export sensitive technology to Iran.
55
CHAPTER IV: THE IMPLEMENTATION OF PROTECTIONISM AND CYBER ESPIONAGE TOWARDS HUAWEI AS POTENTIAL SECURITY THREAT TO US TELECOMMUNICATIONS INFRASTRUCTURE
In the third chapter, the writer elaborates Huawei’s attempts to expand its business to American telecommunications market. A number of deals has been attempted by Huawei, which included 3Com called-off acquisition in March 2008, divested business deal with 3Leaf in February 2011 finally led to investigation by the US House Permanent Select Committee on Intelligence during November 2011 to October 2012 after Ken Hu, a Huawei executive requested for an investigation through his open letter issued in February 2011. Given that Huawei as telecommunication company would have provided equipment to handle sensitive data of US telecommunication networks, in this chapter the writer analyzes the measures the US government has undertaken through trade protectionism by US’ CFIUS as well as operation that created backdoor in Huawei’s network.
IV.1. Assessing US’ Concerns of Huawei as Chinese Telecommunication Company in US Telecommunications Market. In the first chapter, the writer elaborates Constructivism as the main paradigm to analyze the case of Huawei as the potential security threat to US telecommunications infrastructure.94 From the viewpoint of Constructivism, it is explained that “how ideas define and can transform the organization of world politics, shape the identities and interests of states, and determine what counts as
94 Pursuant to USA PATRIOT ACT (2001), the definition of critical infrastructure is “systems and assets, physical or virtual, so vital to the United States that the incapability or destruction of such systems and assets would have a debilitating impact on security, national economic security, national public health and safety, or any combination of those matters”.
56 legitimate action.”95 The writer applies Constructivism in this thesis to underline the friction that occurred because of how the ideas defined by US government from the case of Huawei as potential threat to US telecommunications infrastructure, given RAND (2005) argued Huawei enjoyed favorable supports from Chinese government as one of national champions.
First, Constructivism offers specific claims and hypothesis about patterns in world politics, particularly on how US perceive China’s “ideas” who has notoriety in cyberspace, recalling US was a victim of China’s cyber espionage activities that stole US sensitive information and American companies’ confidential information, not to mention Titan Rain, stolen F-35 design plans, as well as Chinese Unit 61398 as the writer addresses in the second chapter.
Besides, through the viewpoint of Constructivism, it “shape the identities and interests” of US by determining what counts as legitimate action to protect its telecommunications infrastructure through trade protectionism and cyber espionage. This notion is consistent with Lieberthal and Singer (2012), arguing that cybersecurity on the broader US-China relationship has caused distrust of each other’s actions in the cyber realm which is growing and starting to create negative assessments of each country’s long strategic intentions. Also, Fortune suggested that “Huawei contends that it’s a punching bag, a victim of worries and ascendant China and growing concerns about cybersecurity and intellectual property theft.”96 This situation is also reflected from the investigation report by HPSCI about Huawei in 2012, as the Committee stated that: “to the extent these companies are influenced by the state, or provide Chinese intelligence services access to telecommunication networks, the opportunity exists for further economic and foreign espionage by a foreign nation-state already known to be a major perpetrator of cyber espionage (US House of Representatives, 2012).”
95 Baylis, John., et all. (2008). The Globalization of World Politics. New York: Oxford University Press, 96 Fortune. (July 28, 2011). What Makes China Telecom Huawei So Scary? Retrieved from http://fortune.com/2011/07/28/what-makes-china-telecom-huawei-so-scary/, and accessed on December 26, 2016.
57
From Lieberthal and Singer (2012) assessment as well as HPSCI investigation report on Huawei in 2012, one can comprehend the situation that US and China relations in cyberspace is eroding due to a number of mistrust primarily cause by the emergence from a number of cyber intrusions emanating from China. As US perceived China as a major perpetrator of cyber espionage, this situation has spilled over other issues on strategic sectors, particularly Chinese foreign investment came was about to the US, as seen from the Huawei case in this thesis. This analysis is consistent with the growing suspicion over the strategy of China’s PLA where they are employing IT engineers from universities, institutes, and corporations in order to cripple the US military’s ability to communicate (US House of Representatives, 2012).
Second, equipping “anarchy is what states make of it (Wendt, 1992)”, meaning that Constructivism rejects constant logic of anarchy in international relations, and otherwise argued that it is created through the interaction of international actors, exemplified by how anarchy perceived by the US towards China has altered Huawei’s identity, where the company’s identity as independent company with no evidence of facilitating Chinese intelligence activities has been seen as potential threats to US telecommunications infrastructure. This analysis is also consistent with The American Interest (2012), stating that HPSCI report stands as a broad indictment of the Chinese way of doing business (that is, opaquely) and of the ideology of China’s economic choices (that is, heavy on state involvement).97
Also, through the viewpoint of Constructivism, security can be achieved once the perception and fears of security threat, challenges, vulnerabilities and risks are allayed and overcome (Brauch, 2011). The issue of decreasing shared identity in Constructivism that could increase threat perception suggested by Rousseau and Retamero (2007) can be seen from the report of HPSCI’s recommendations in Huawei investigation report, stating that Huawei cannot be trusted to be free of foreign state influence and thus pose a security threat to the US and its systems,
97 The American Interest. (October 31, 2012). Trusting Huawei. Retrieved from http://www.the- american-interest.com/2012/10/31/trusting-huawei/, and accessed on December 19, 2016.
58 and recommended Huawei to become more transparent and responsive to US legal obligations.
In the investigation report, there are a number of findings that -despite no actual evidence – indicated Huawei’s relations with Chinese government or PLA, USCC (2011) suggested that Huawei could provide access for China to harm US telecommunications infrastructure. Therefore, linking the defined ideas US perceived from Huawei with HPSCI investigation findings, one should see the red line between the lack of shared identity between US and Huawei, as shown in HPSCI statement saying that Huawei failed to provide in-depth information about its corporate structure, history, ownership, operations, financial arrangements, or management.
Because of the lack of shared identity between Huawei and the US, it is understandable that the Committee has concluded that risks associated with Huawei’s equipment to US critical infrastructure could undermine the core of US national security interests. Furthermore, the Committee also argued that Huawei was not willing to provide sufficient evidence to mitigate the concerns of the Committee about its formal relationship or regulatory interaction with Chinese authorities and specific details about the role of Huawei's Chinese Party Committee. Meaning, Huawei’s failure to show its transparency by providing enough comforting evidence (spoken and written) to US in order to prove that it was not under the control of Chinese government to harm US telecommunications infrastructure has been seen as the factor that contributed to the US’ growing concerns, in line with findings of HPSCI in its report in 2012:
Huawei’s unclear and complete information about its corporate structure, particularly about Ren Zhengfei as the founder and Chinese government and military who proclaimed that Huawei is one of Chinese national champions. Huawei’s defense upon Chinese Communist Party (CCP) within Huawei, where according to experts in Chinese political economy, through this committee CCP can exert its influence, pressure, and monitoring of
59
Huawei’s corporate activities to provide direction and economic resources in China. However, when asked about the involvement of CCP in Huawei committee membership, it refused to explain what decisions of Huawei was reviewed by the CCP committee and how Huawei chose the individuals to be the member of the party committee. Huawei refusal to explain more information about Ren Zhengfei full military background and to whom he reported when he was working in PLA. Chief of Huawei Representative in US Charles Ding’s claim that he did not understand and had no knowledge about the term “national champion”, despite Huawei did not deny the term was used in Huawei’s presentation slide in November 2011, but Mr. Ding argued that the slide was not the responsibility of Huawei as it was made by a third party. The Committee argued this peculiarity was sufficient evidence that Huawei must have known about the term. Huawei’s default to further explain about detailed information of line of credit supported by Chinese state-owned banks, failure to provide the Committee written explanation of benefits Huawei gain from the financing arrangements, as well as failure to provide internal documents or any auditable information about the process of this financing. Huawei’s inconsistent answer stating that it has never managed any of PLA’s networks, yet the Committee found authentic internal documents from Huawei’s former employees that showed Huawei once provided special network service to an entity the employee believed to be an elite warfare unit of Chinese PLA. Huawei’s business relationship with Zaeim Electronics Industries Co., an Iranian electronic company whose clients included the intelligence and defense ministries, as well as Iranian elite special forces unit, the Islamic Revolutionary Guards Corps.
60
Huawei’s refusal to provide any internal documents regarding the its operation in Iran and insisted that it would ensure compliance with US laws despite it did not provide evidence to support its argument.
IV.2. US Applied Trade Protectionism towards Huawei Due to Concern in National Security The US government could have encouraged the bids Huawei made in a number or projects with 3Com and 3Leaf that could make the US government benefited from the foreign direct investment of Huawei, yet it chose not to enjoy this opportunity, remembering the potential security threats coming along with the opportunity. With the bilateral investment between China and US, China telecommunication companies have managed to enter American market to seek new opportunity.98 Huawei was also attempting to open up its new opportunity as it entered American market on 14 February in 2001. For US, Huawei’s expansion brought opportunity for the US government as it opened new jobs, capital, and tax revenues. According to China US Focus (2014), “its (Huawei) expansion could generate billions of dollars in capital investment and tax revenues; thousands of well-paying, high-skilled jobs; contribute to US R&D and innovation in a strategic industry; upgrade US competitiveness; and enhance efforts to secure infrastructure security in America.”99
Back in 2008, when Huawei and Bain Capital attempted to acquire 3Com, which was a major American telecommunication company, CFIUS stated that it would recommend the bid to be rejected, due to allegation that if Huawei could have taken advantage of 3Com’s Tipping Point, which was 3Com’s subordinate unit that provided network security and services to US Department of Defense as well as some other federal agencies.100 However, eventually the bid was called off
98 US – China Commission Research Staff. The National Security Implications of Investments and Products from The People’s Republic of China in the Telecommunications Sector (United Nations: US – China Economic and Security Review Commission, January 2011. Page 6. 99 China US Focus. (April 01, 2014). Huawei in America: An NSA Retrospective. Retrieved from http://www.chinausfocus.com/finance-economy/huawei-in-america-an-nsa-retrospective, and accessed on December 27, 2016. 100 US-China Economic and Security Review Commission Staff Report., op cit., page 29.
61 by Huawei and Bain Capital, after knowing that CFIUS would recommend the bid to be rejected by the US president. As a response, the Chinese official argued that the bid should have been assessed purely on commercial grounds and did not raise security issues.101
In May 2010, Huawei acquire 3Leaf, an American company specialized in cloud computing technology, for US $2 million. However, in February 2011 Huawei has accepted to follow CFIUS recommendation to voluntarily divest from 3Leaf due to national security concerns. The main reason of Huawei’s failure in acquiring 3Leaf was primarily caused by the concerns raised by CFIUS that Huawei was linked to the Chinese military, yet Huawei in its defense denied any ties to the Chinese military, and stressed that Huawei is completely employee- owned.
The CFIUS informed Huawei that it would recommend President Barack Obama to order Huawei to divest its acquisition from 3Leaf, but Huawei would not await the presidential determination and chose to abandon its acquisition. Responding to this case, the Chinese Ministry of Commerce said that “to some extent, this obstruction and interference is affecting China-US trade and economic cooperation.”102 Meanwhile, Huawei stated that “this was a difficult decision. However, we have decided to accept the recommendation of CFIUS to withdraw our application to acquire specific assets of 3Leaf.”103
Meanwhile, Huawei through its spokesman, Ross Gan, stated that “Huawei is disappointed to learn that old mischaracterization about the company still linger.”104 As US government through HPSCI argued that CFIUS needed to block Huawei’s attempt to expand its business in American market (based on findings
101 Financial Times, (2008). Huawei-3Com Deal Finally Collapses. Retrieved from: https://www.ft.com/content/c2091814-f6b5-11dc-bda1-000077b07658, and accessed on December 27, 2016. 102 Troutman Sanders. (March 7, 2011). $2 Million Deal = Big CFIUS Mistake. Retrieved from https://www.troutmansanders.com/2-million-deal--big-cfius-mistake-03-07-2011/, and accessed on December 28, 2016. 103 Ibid. 104 The New York Times. (August 22, 2010). Scrutiny for Chinese Telecom Bid. Retrieved from http://www.nytimes.com/2010/08/23/business/global/23telecom.html, and accessed on January 13, 2017.
62 found during the investigation), one should comprehend that this action was reasonable, given that USSC (2011) suggested large Chinese “national champions” companies are considered subject to direction by the Chinese Communist Party (CCP). Teng Bingsheng, a Cheung Kong Graduate School of Business (CKGSB) Professor of Strategy stated that:105
“I think that the American government’s concerns are unnecessary but understandable. They’ve been very open about why they see Huawei as potential threat to American security. From the outside, Huawei may look like a black box and is run like a close-knit fraternity. Its corporate government is opaque: according to statistics that is issues, company president Ren Zhengfei only holds about 1.5 percent of the shares, but he seems to rule with an iron fist. Especially since Ren is a People’s Liberation Army veteran, the American had a knee-jerk reaction to be suspicious.” Considering that Chinese telecommunication company like Huawei could become conduits for Chinese government-sponsored cyber espionage or cyberattacks on so called critical infrastructure in the US have been swirling around Washington for a few years. That being said, relating Constructivism with HPSCI findings of investigation report on Huawei in 2012, one could comprehend that US government was fully committed to anticipate the potential threats possessed by Huawei. This argument is consistent with HPSCI statement in the report, stating that despite hours of interviews, extensive and repeated document requests, a review of open-source information, and an open hearing with witnesses from Huawei, the Committee remained unsatisfied with Huawei’s level of corporation to that was expected to be able to mitigate the Committee’s concerns. As the result, the Committee concluded that the risks associated with Huawei’s provision equipment to US critical infrastructure could undermine the core of US national security interests (HPSCI, 2012).
In the theory of Constructivism, Baylis et all (2008) points out what so- called as social construction of theory where state and non-state actors socially construct their identities and interests to take action. In this case, the US has
105 CKGSB. (March 4, 2011). Huawei and 3Leaf: What Went Wrong? Chinese Telecoms Set Sights on Strategic Foreign Assets. Retrieved from http://knowledge.ckgsb.edu.cn/2011/03/04/technology/huawei-and-3leaf-what-went-wrong- chinese-telecoms-set-sights-on-strategic-foreign-assets/, and accessed on January 5, 2017.
63 constructed the identity of Huawei as potential security threat to US telecommunications infrastructure, which can be seen from called off business deals with US firms including 3Com and 3Leaf. Specifically, according to Sohn and Yeo (2005), national security, however, has often been referred in attempts or efforts to request for or to justify protection of certain import-competing industries. In relation with protectionism, trade measures have been often used as means to protect national security, for instance complete or partial embargo and imports, restrictions on air and sea transportation, prohibition on financial transaction, and freeze the target country’s assets the invoking or the participating countries territories. Thus, the US measure of trade protectionism to deal with Huawei was in line with Sohn and Yeo’s (2005) notion, which is prohibition on financial transaction.
According to Bai Ming from Chinese Academy of International Trade and Economic Cooperation, “The US has the cold war mentality towards China and applies trade protection against Chinese companies as America prohibits China’s entry to many fields mostly due to political reasons that it abuses national security as an excuse.”106 Meanwhile, Caixin (2014) argued that CFIUS is a mysterious committee that keeps confidential its investigation process, objection reason and legal explanation, has been considered a road block in overseas investment in the US by many Chinese companies, and even denounced as tool for trade protection.107 Furthermore, Forbes (2012) stated that the report of investigation conducted by House Permanent Select Committee on Intelligence towards Huawei represented a message of trade protectionism, since the Committee suggested that CFIUS “must block acquisitions, takeover, or mergers involving Huawei … given that the threat to US national security interests.”108 These arguments about trade protectionism US imposed towards Huawei as Chinese telecommunication
106 Peterson Institute for International Economics. (2015). Chinese Investment and CFIUS: Time for an Updated (and Revised) Perspective. 107 Ibid. 108 Forbes. (October 9, 2012). Huawei, ZTE and the Slippery Slope of Excusing Protectionism on National Security Grounds. Retrieved from http://www.forbes.com/sites/danikenson/2012/10/09/huawei-zte-and-the-slippery-slope-of- excusing-protectionism-on-national-security-grounds/#58c04ed36967, and accessed on December 14, 2016.
64 company, however, is consistent with the potential security threat posed by Huawei could impair the US national security, given that Huawei has history with Chinese government and PLA.
Furthermore, the US’ trade protectionism reason to block Huawei in several business expansions it attempted to make is deemed necessary to protect US national security. In this case, measures US government took through CFIUS, NSA, and HPSCI on the Huawei case was in line with Willett and Jalalighajar (1983) argued that trade restrictions actually imposed in the name of national security have promoted protectionist distinguished protection. This situation showed that the US government would not compromise its national security over its economic interest as numerous indications of Huawei’s ties with Chinese government found during the HPSCI investigation report of 2012, mainly the fact that Huawei’s founder, Ren Zhengfei has history working in Chinese PLA. However, responding to the issued HPSCI’s investigation report, Huawei vice president for external affairs, Bill Plummer, said that US’ move to get private companies to ban using Huawei products was “little more than an exercise in China-bashing, protectionism, and an egregious example of libel.”109 Moreover, Huawei complained that it was the victim of US’ trade protectionism “swathed in trumped-up national security concerns.”110
IV.3. HPSCI Recommended American Companies Not to Use Huawei Equipment in Their Network Infrastructure, despite No Evidence Was Found during The Investigation. Through the point of view of Constructivism, security can be achieved once the perception and fears of security threat, challenges, vulnerabilities and risks are allayed and overcome (Brauch, 2011). Therefore, in order to protect its national security, US through HPSCI’s investigation of Huawei as potential security threat
109 CNET. (October 8, 2012). Lawmakers to U.S. Companies: Don’t Buy Huawei, ZTE. Retrieved from https://www.cnet.com/news/lawmakers-to-u-s-companies-dont-buy-huawei-zte/, and accessed on December 13, 2016. 110 New York Times. (March 22, 2014). N.S.A. Breached Chinese Servers Seen as Security Threat. Retrieved from https://www.nytimes.com/2014/03/23/world/asia/nsa-breached-chinese-servers- seen-as-spy-peril.html?_r=0, and accessed on December 13, 2016.
65 can be seen as an attempt to attain the national security for US telecommunications infrastructure, in particular.
“Nevertheless, the Committee’s investigation report offered no evidence of espionage or information theft, despite its drafters having waded through a year’s worth of interviews, testimony and data analysis. Rather, it stands as a broad indictment of the Chinese way of doing business (that is, opaquely) and of the ideology of China’s economic choices (that is, heavy on state involvement).”111 During the investigation by HPSCI during November 2011 to October 2012, the Committee suggested a number of recommendations for US government and US companies regarding security concerns posed by Huawei, in which the recommendations indicate trade protectionism by US government:
First, the Committee recommended the Committee on Foreign Investment in the United States (CFIUS) to block acquisitions, takeovers, or mergers involving Huawei given the threat to US national security interest. Secondly, the Committee also recommended the US government systems, particularly sensitive systems, should not include Huawei equipment, including in component parts, and government contractors – particularly those working on contracts for sensitive US programs – should exclude Huawei equipment in their systems. Thirdly, private sector entities in the US are strongly encouraged to consider the long-term security risks associated with doing business with Huawei for equipment or services. Furthermore, US network providers and systems developers are strongly encouraged to seek other vendors for their projects. The Committee also highlighted that Huawei cannot be trusted to be free of foreign state influence and thus pose a security threat to the US and its systems.112
111 The American Interest. (October 31, 2012). Trusting Huawei. Retrieved from http://www.the- american-interest.com/2012/10/31/trusting-huawei/, and accessed on December 19, 2016. 112 Following HPSCI’s recommendations, in March 2013, Sprint (US based telecommunication service provider) pledged not to use equipment from Huawei after it merged with SoftBank (a Tokyo-based telecommunication company). Bloomberg. (May 30, 2013). Huawei Loser in SoftBank-Sprint Deal Over Alleged Spying. Retrieved from
66
Fourth, Huawei in particular, must become more transparent and responsive to US legal obligations.
With these recommendations, Huawei responded by stating that the report conducted by the HPSCI (the Committee) failed to provide clear information or evidence to properly address the Committee’s concerns (US House of Representatives, 2012). Huawei insisted that during investigation it has cooperated with the Committee in an open and transparent manner by providing important information about its funding resources and financial resources, list of its shareholders, annual reports, and other documents, in order to ensure the results are fact-based and unbiased (Huawei, 2012).
Moreover, Huawei (2012) expressed its disappointment in a statement that “the report released by the Committee employs rumors and speculations to prove non-existent accusations, and suspected that the only purpose of the report was to impede competition and obstruct Chinese ICT companies from entering US market.”113 Likewise, Huawei Chief Spokesman in Washington, William Plummer said that “the outcome was predetermined, the political agenda was one of poking China in the eye and holding hostage an innocent, employee-owned company.”114 Geng Shuang, a Chinese embassy spokesman in Washington commented this case as he said that “we hope the US side could facilitate the investment and economic activities of Chinese enterprise in the US on an equally and fair basis.”115 As the result of the investigation, since 2012 Huawei has been effectively shut out of selling its base station and antenna in the US, as the HPSCI reported that Huawei’s gear could be used for espionage, yet mobile phones are excluded from the sales ban. That being said, Huawei has also been banned from bidding for US
https://www.bloomberg.com/news/articles/2013-05-29/huawei-loser-in-softbank-sprint-deal-over- alleged-spying, and accessed on December 27, 2016. 113 Huawei. Statement Regarding HPSCI’s Report. (Retrieved from http://www1.huawei.com/enapp/184/hw-194454.htm, and accessed on December 20, 2016. 114 Sino US. (October 9, 2012). Firms Hit Back at US Allegations. Retrieved from http://www.sino-us.com/10/Firms-hit-back-at-US-allegations.html, and accessed on December 12, 2016. 115 Ibid.
67 government contracts for growing suspicions that Huawei could undertake cyber espionage for China.
After the 11-month long investigation conducted by the HPSCI during November 2011 – October 2012, there were several indications that have arisen regarding the result of the investigation. However, the Committee’s report offers no clear evidence that Huawei had spied for China.116 No clear evidence meant that for instance was the Committee did not present concrete evidence that Huawei has stolen the data of US. In July 2013, the former head of the Central Intelligence Agency (CIA) and National Security Agency (NSA) Michael Hayden claimed that he has seen had evidence that Huawei has engaged in espionage on behalf of the Chinese government, stating that the company has shared “intimate and extensive knowledge of the foreign telecommunications systems” with the Chinese government.117
In an interview with the Australian Financial Review, Michael Hayden insisted that Huawei could be a tool for the Chinese government to tamper with US telecommunication network as he said:118
“My conclusion was that, “No, it is simply not acceptable for Huawei to be creating the backbone of the domestic telecommunications network in the United States, period.” And frankly this is where I think the state has a role to play – to ensure we don’t make decisions that compromise the foundations of our national security.” Despite that, Bloomberg stated that Michael Hayden could not provide “specific instances of espionage or any operational matters.”119 Responding to Hayden’s claim, Huawei through its spokesman Scoot Sykes said: “These tired,
116 Reuters. (October 17, 2012). Exclusive: White House Review Finds No Evidence of Spying by Huawei – Sources. Retrieved from http://www.reuters.com/article/us-huawei-spying- idUSBRE89G1Q920121017?feedType=RSS&feedName=technologyNews&utm_source=dlvr.it& utm_medium=twitter&dlvrit=56505, and accessed on December 27, 2016. 117 Reuters. (July 19, 2013). Former CIA Boss Says Aware of Evidence Huawei Spying for China. Retrieved from http://www.reuters.com/article/us-huawei-security-idUSBRE96I06I20130719, and accessed on December 10, 2016. 118 Business Insider. (July 19, 2013). Huawei Spies for China, Says Former NSA and CIA Chief Michael Hayden. Retrieved from http://www.businessinsider.com/huawei-spies-for-china-says- michael-hayden-2013-7?IR=T&r=US&IR=T, and accessed on December 10, 2016. 119 Bloomberg. (July 19, 2013). Huawei Denies Spying Claims of Ex-CIA Director Hayden. Retrieved from https://www.bloomberg.com/news/articles/2013-07-19/huawei-denies-spying- claims-of-ex-cia-director-michael-hayden, and accessed on December 16, 2016.
68 unsubstantiated, defamatory remarks are sad distractions from real world concerns related to espionage, industrial, and otherwise.”120 Wiewen, He, Vice President and Senior Fellow, Center for China and Globalization argued the Huawei case reflected how strong the strategic distrust on China by the US Congress and Obama Administration, that HPSCI recommendation to exclude Huawei from entering US telecommunications market through merger and acquisition happened because China is the “potential strategic rival of America”.121
IV.4. Operation “Shotgiant”, and “Halluxwater” as well as “Headwater” as Persistent Backdoor in Huawei Case The operation of NSA was codenamed “Shotgiant” and launched in 2007 with main mission to find any ties between Huawei and the Chinese PLA, as written the NSA document dated 2010. Likewise, John Bumgarner, the chief technology officer at the US Cyber Consequences, a non-profit research institute said that the NSA’s primary objective “was most likely to identify information that could confirm their suspicions about Huawei relationship with the PLA.”122
NSA document claimed the operation has successfully infiltrated Huawei’s network and copied a list of 1,400 customers, including internal documents of Huawei’s CEO Ren Zhengfei and Chairwoman Sun Yafang. In the leaked document, NSA stated that Huawei could provide PRC with SIGINT, which is a NSA’s term for Signal Intelligence, defined as a conduct of collecting foreign intelligence from communications and information systems. Furthermore, the leaked document said that:123
“Huawei’s widespread infrastructure will provide the PRC with SIGINT capabilities and enable them to perform denial of service type attacks (DoS)… the increasing role of
120 Bloomberg. Huawei Denies Spying Claims of Ex-CIA Director Hayden. op cit. 121 China US Focus. (October 25, 2012). Huawei, A Mirror of Strategic Distrust. Retrieved from http://www.chinausfocus.com/finance-economy/huawei-a-mirror-of-strategic-distrust, and accessed on January 3, 2017. 122 IEEE Spectrum. (March 26, 2014). U.S. Suspicions of China’s Huawei Based Partly on NSA’ Own Spy Trick. Retrieved from http://spectrum.ieee.org/tech-talk/computing/hardware/us- suspicions-of-chinas-huawei-based-partly-on-nsas-own-spy-tricks, and accessed on December 14, 2016. 123 NSA Leaked document entitled “Why We Care”.
69
international companies and foreign individuals in US information technology supply chains and service will increase the potential for persistent, stealthy subversions.
When we look at these three different aspects of Huawei we found that two topics showed up across the board – marketing and plans/intentions. So that is our main focus. If we can see how Huawei is marketing itself, and working to expand this will help us to understand the company’s plans and intentions. If we can determine the company’s plans and intentions, we hope that this will lead us back to plans and intentions of the PRC. We will consider ourselves a success if we obtaining actionable intelligence of Huawei (and potentially PRC’s) leadership plans and intentions.” Despite NSA successfully breached into Huawei’s network, the leaked documents did not state whether NSA found information that indicated Huawei actually did provide China with intelligence. Responding to the leaked information of Huawei spied by NSA, William Plummer Huawei spokesman expressed his disappointment as he stated that:124
“If this is true, the irony is that exactly what they are doing to us is what they have always charged that the Chinese are doing through us… If such espionage has been truly conducted, then it is known that the company is independent and has no unusual ties to any government and that knowledge should be relayed publicly to put an end to an era of mis- and disinformation.” Moreover, the leaked NSA spy catalog on Cryptome, a website that publishes government and corporate documents, showed that NSA had succeeded in installing software to create a backdoor in certain Huawei’s gears, such as firewalls and routers in early 2008.125 More specifically, the NSA catalog also showed that one Persistent Backdoor (PDB) software implant called “Halluxwater”, targeting Huawei’s Eudemon 200, 500, and 1000 series of hardware firewall that acts to protect the user’s internal network from the rest of the Internet.126
124 Der Spiegel. (March 22, 2014). NSA Spied on Chinese Government and Networking Firm. Retrieved from http://www.spiegel.de/international/world/nsa-spied-on-chinese-government-and- networking-firm-huawei-a-960199.html, and accessed on January 10, 2017. 125 The project was using Turbopanda Insertion Tool (PIT) as command and control system for exploited Huawei firewalls. 126 Huawei Eudemon is a Huawei’s multifunction hardware firewall in form of routers. Firewall itself is a protective system that lies between computer network and the Internet to prevent unauthorized use and access to the computer network, while ignoring information coming from unsecured, unknown or suspicious locations. A backdoor is defined as a term used to describe a hidden method of bypassing security to gain access to a restricted part of a computer system (as defined from http://www.computerhope.com/jargon/b/backdoor.htm and accessed on February 19, 2017).
70
Besides “Halluxwater”, another backdoor software implant called “Headwater”.127 According to the leaked NSA catalog, “Headwater” is a PDB software implant for selected Huawei routers that enabled covert functions to be remotely executer within router via an Internet connection. When “Halluxwater” and “Headwater” get installed inside the Huawei’s routers’, they will install PBD in the equipment, it allowed NSA to control the PDB to examines all IP packets passing through the host router.128
When NSA was asked to provide response to the leaked document that revealed operation Shotgiant, it was known that NSA breached into Huawei’s networks only for reasons of national security as NSA spokeswoman, Caitlin Hayden stated that US intelligence activities are focused on the national security needs of US. In addition, she also emphasized that NSA did not give intelligence NSA collected to US companies to enhance their international competitiveness. Responding to the NSA’s operation “Shotgiant” targeting Huawei, the Chinese government demanded US clear explanation, as Hong Lei, China’s Foreign Ministry said that the Chinese government was extremely concerned about the spying allegations. In a statement, he said that “China has already lodged many complaints with the United States about this. We demand that the United States makes a clear explanation and stop such acts.”129
Furthermore, Chinese President Xi Jinping raised this spying allegation as he met with President Obama in The Hague during the Nuclear Security conference, as Edwards Snowden released document showing NSA spied on Huawei. Ben Rhodes, the US Deputy National Security Advisor, stated President Obama countered that: “the United States does not engage in espionage to gain a commercial advantage”, while adding that the president also said there is “a clear
127 Software is a set of command that enable user to interact with a computer, its hardware, or performs particular task (as defined from http://www.computerhope.com/jargon/s/software.htm and accessed on February 19, 2017). 128 IP (Internet Protocol) packet is a segment of data containing source, destination, size, type, data, and other information (as defined from http://www.computerhope.com/jargon/p/packet.htm and accessed on February 19, 2017). 129 Aljazeera America. (March 25, 2014). Beijing Condemns Washington Over Reported Spying on Telecom Giant. (Retrieved from http://america.aljazeera.com/articles/2014/3/23/report-nsa- spiesonchinatelecomgianthuawei.html, and accessed on December 13, 2016.
71 distinction between intelligence activities that have a national security purpose and intelligence activities that have a commercial purpose.”130 Despite NSA spokeswoman Caitlin Hayden stated that the operation Shotgiant was meant for security reason, Chinese media Xinhua criticized that the scandal showed US’ hypocrisy as US made a complete fool of itself through years of spying on Huawei.131 Moreover, despite the US government claims the information it collected will not be passed to US commercial companies, there are no reasons for believing the US government. Xinhua also criticized the US government for the operation Shotgiant, saying that the irony lies in that Huawei is the company US has denied access to its domestic market for years, while claiming that Huawei is a spy for China and threat to US national security, although the investigations and hearings have shown no evidence to validate the claims.
However, David Sanger, a New York Times national security correspondent commented that “The US says if it does into a foreign sit, it goes into them with the intention of gaining national security information for the United States but not with the intention of commercial advantage.”132 However, when he was asked about Huawei’s internal communications and communications of its leaders that should show the NSA that Huawei was an independent commercial enterprise, with no unusual connections to the Chinese government and was not a military asset, Sanger disagreed as he replied that:133
“Well, that was the claim made by Bill Plummer, who is a Huawei executive here in the United States, an American, who has been in the forefront of defending the company against these many investigations. But we don't know enough from what the results of Shotgiant were or other collection activities to know whether the United States has real evidence that the Chinese government, the People's Liberation Army, are actually using Huawei as a front, as the U.S. government
130 Los Angeles Times. (March 24, 2014). Obama Defends NSA Spying in Meeting with Chinese President. Retrieved from http://www.latimes.com/world/worldnow/la-fg-wn-obama-nsa-spying- chinese-president-20140324-story.html, and accessed on December 22, 2016. 131 Xinhua. (March 26, 2014). China Voice: Huawei Spying Betrays Blatant U.S. Hypocrisy. Retrieved from http://news.xinhuanet.com/english/china/2014-03/26/c_133215666.htm, and accessed on December 20, 2016. 132 NPR. (April 2, 2014). While Warning of Chinese Cyberthreat, U.S. Launches its Own Attack. Retrieved from http://www.npr.org/templates/transcript/transcript.php?storyId=298335286, and accessed on January 5, 2017. 133 Ibid.
72
has warned, or whether in fact it is a truly independent company, as Huawei executives like Mr. Plummer insist.” As for the analysis, from the theoretical framework, it is understood that Constructivism offers specific claims and hypothesis about patterns in world politics where reality is socially constructed (Baylis et all, 2008). Relating this notion with the act of US’ act to conduct cyber espionage as a mean for protecting its national security of telecommunication infrastructure, one should see that it is relatable with how US constructed its idea of cyberespionage. This analysis is supported by Baylis et all (2008) who also added that Constructivists generally hold that identities shape interests; we cannot know what we want unless we know who we are, but because identities are social and are produced through interactions, identities can change. Thereby, when NSA spokeswoman, Caitlin Hayden stated that “but I can tell you that our intelligence activities are focused on the national security needs of our country”134, as well as stating that NSA did not give intelligence NSA collected to US companies to enhance their international competitiveness, this reason was reasonable, given that it was China and Huawei who perceived cyber espionage as an illegal way of obtaining secret information, not US. This was consistent with Baylis (2008), stating that “how ideas define and transform the organization of world politics, shape the identities and interests of states, and determine what counts as legitimate action”. Therefore, US who perceived that cyber espionage was needed on grounds of national security was reasonable, since it was the idea of cyber espionage that was constructed by US who counted the action as legitimate action.
Besides, the cyber espionage in this case was also consistent with NSA’s mission of SIGINT, which is a conduct of collecting foreign intelligence from communications and information systems and providing it US Government in which the collected information shall be used to help protect US troops, support allies, fight terrorism, combat international crime and narcotics, support diplomatic negotiations, and other national objectives. National objectives in this case was
134 Der Spiegel. (March 22, 2014). NSA Spied on Chinese Government and Networking Firm. Retrieved from http://www.spiegel.de/international/world/nsa-spied-on-chinese-government-and- networking-firm-huawei-a-960199.html, and accessed on January 10, 2017.
73 relatable with defending US critical infrastructure as in (HSPD) 7, it was US national policy for US federal departments and agencies to identify, prioritize, and coordinate protective measures for US’ critical infrastructure, given that US telecommunication (as part of critical infrastructures) was at stake due to Huawei could provide access China to harm US telecommunications infrastructure.
IV.5. Chapter Conclusion Relating Constructivism as the main paradigm with the identity of Huawei as potential security threat towards US telecommunications infrastructure, this idea was influenced by China that was seen as major perpetrator in cyber espionage, as suggested by USCC in 2011. However, in the spite of unusual findings published by HPSCI in 2012, the report did not yet the document did not provide clear evidence whether Huawei did actually conduct espionage or information theft for China. As the result of the investigation, Huawei’s equipment such as base station and antenna have been shut out in US since 2012. Besides CFIUS that implemented trade protectionism towards Huawei’s acquisition towards 3Com and 3Leaf in 2007 and 2010, US through NSA actually had spied on Huawei since 2007 according to a NSA leaked documents. Nevertheless, the leaked document did not state whether Huawei had provided China with intelligence to harm US’ telecommunication infrastructure through its equipment.
74
CHAPTER V: CONCLUSION
Telecommunication networks are becoming a critical part of the nation’s information infrastructure, since they provide the central means for transmitting through voice, data, and video, a huge amount of private commerce, government business, as well as personal communications. In fact, US relies much on its telecommunication networks to manage critical infrastructures that include electric power grids; banking and finance systems; natural gas, oil, and water systems; as well as rail and shipping channels, and others that depend on computerized control systems. If these system interdependencies are disrupted, it is likely to occur devastating effects on various aspects of US national infrastructures which lead to shortages and stoppages that could spread throughout American society.
Meanwhile, China has been rapidly developed its economic industry through the Five-Year Plans (FYP) that has been issued by the government since 1953, which in the 12th FYP (2011-2015), telecommunication was one of seven strategic emerging industries that are intended to be the backbone of China’s economy to compete on a global scale. Furthermore, according to U.S.-China Economic and Security Review Commission (USCC) Staff Report in January 2011, the increased presence of Chinese telecommunications products and services was marked by the Chinese companies who attempted to open up new opportunities through a number of acquisition activities in American telecommunications market.
In the US, there was growing public concern over the impacts of cyber espionage incidents emanating from China, particularly the large Chinese “national champions” that are allegedly subject to Chinese government direction, including Huawei. Huawei is a Chinese telecommunication company that sought to expand its business in US telecommunications market by making acquisition deals with a number of US-based companies, particularly 3Com and 3Leaf in respectively 2008 and 2010. However, Huawei’s intention was not going as smooth as the company
75 thought it would be as Huawei was considered as potential security threat towards US telecommunications infrastructure.
Because of a number of indications found during HPSCI investigation and Huawei’s founder, Ren Zhengfei, who was working as an official in Chinese military People Liberation Army (PLA), the US government perceived the identity of Huawei as potential security threat that Huawei’s equipment could be used by China to harm US telecommunications infrastructure. Therefore, in order to deal with Huawei as potential security threat to US telecommunication infrastructure, US government implemented trade protectionism through blocked Huawei’s business deal with 3Com and 3Leaf with the assistance of CFIUS. Besides, the US also implemented NSA’s cyber espionage through operation Shotgiant in 2007 and planted Persistent Backdoor (PDB) in early 2008 to discover the intention of Huawei as well as to find ties between Huawei and Chinese PLA, given that Huawei has attempted to expand its business in US telecommunications market.
To sum, addressing this thesis from the view of Constructivism, the measures of trade protection and cyber espionage US undertook towards Huawei was understandable. As US perceived Huawei’s identity was influenced by the concerns over Chinese cyber espionage, the indications of Huawei as “national champions”, as well as HPSCI report in 2012, this process has transformed through Constructivism into the decreasing of shared identity between US and Huawei, and resulted in Huawei that was perceived as potential security threats to US telecommunications infrastructure. Despite that, it was worth taking into account that during the investigation by HPSCI in 2012, there was no fact found that Huawei did actually provide China access to control or harm US telecommunications infrastructure.
76
BIBLIOGRAPHY
Book
Aid, Matthew. (2009). The Secret Sentry: The Untold History of the National Security Agency. Bloomsbury Publishing.
Baylis, John., et all. (2008). The Globalization of World Politics. New York: Oxford University Press.
Brauch, Hans Gunter. (2011). Concepts of Security Threats, Challenges, Vulnerabilities and Risks. Springer.
Buzan, Barry. (1991). New Patterns of Global Security in the Twenty-first Century International Affairs.
Choucri, Nazli. (2012). Cyberpolitics in International Relations. Massachusetts: The MIT Press.
Cresswell John W. (2013). Research Design: Qualitative, Quantitative, and Mixed Methods Approaches. California: SAGE Publications, Inc.
Kothari, C.R. (2004). Research Methodology: Methods & Techniques (New Delhi: New Age International.
Hoft, Ted. (1998). The Promise of Constructivism in International Relations Theory. President and Fellows of Harvard College and the Massachusetts Institute of Technology.
Paleri. (2008). National Security: Imperatives and Challenges. Tata McGraw-Hill Education.
Willet, Thomas D. and Mehrdad Jalalibhajar. (1983). U.S. Trade Policy and National Security. Cato Institute.
Government Publications
77
US-China Economic and Security Review Commission Staff Report, (2011). The National Security Implications of Investments and Products from The People’s Republic of China in The Telecommunications Sector.
US House of Representatives, (2012). Investigative Report on the U.S. National Security Issues Posed by Chinese Telecommunications Companies Huawei and ZTE. United States.
Article
Abboushi, Duquesne. (2010). Trade Protectionism: Reasons and Outcomes. Research Gate.
Ahrens, Nathaniel. (2013). China’s Competitiveness: Myth, Reality, and Lessons for the United States and Japan (United States: Center for Strategic & International Studies (CSIS), p. 5.
Durusoy et all. (2015). Economic Crisis and Protectionism Policies: The Case of the EU Countries. International Journal of Humanities and Social Science.
Gilley, Bruce. (2000). Huawei’s Fixed Line to Beijing. Far Eastern Economic Review.
Greidinger, Marc., (1991). The Exon-Florio Amendment: A Solution in Search of a Problem (United States: American University International Law.
Jackson, James K. (2016). The Committee on Foreign Investment in the United States (CFIUS). United States: Congressional Research Service.
Ken Hu – Deputy Chairman of Huawei Technologies, Chairman of Huawei USA. (2011). Huawei Open Letter.
Lacey, Kathleen A. and Barbara Crutchfield George. (2002). International Telecommunications Mergers: U. S. National Security Threats Inherent in Foreign Government Ownership of Controlling Interests.
78
Northrop Grumman Corporation. (2009). Capability of the People’s Republic of China to Conduct Cyber Warfare and Computer Network Exploitation prepared for the US-China Economic and Security Review Commission. United States.
Mandiant. (February 2013). APT1 – Exposing One of China’s Cyber Espionage Units.
Medeiros et all., (2005). A New Direction for China’s Defense Industry. RAND Corporation.
Sanderson, Henry and Michael Forsythe. (2012). China’s Superbank: Debt, Oil and Influence – How China Development Bank is Rewriting the Rules of Finance. Singapore: John Wiley & Sons.
Sohn, Kiyoun and Taek Dong Yeo. (2005). Does the International Trade Help to Enhance National Security?
Websites
Aljazeera, (2014). Beijing condemns Washington over reported spying on telecom giant. Available: http://america.aljazeera.com/articles/2014/3/23/report- nsa-spiesonchinatelecomgianthuawei.html
Cheung Kong Graduate School of Business, (2011). Huawei and 3Leaf: What Went Wrong? Chinese Telecoms Set Sights on Strategic Foreign Assets. Available: http://knowledge.ckgsb.edu.cn/2011/03/04/technology/huawei-and- 3leaf-what-went-wrong-chinese-telecoms-set-sights-on-strategic-foreign-assets/
China US Focus, (2016). Huawei, A Mirror of Strategic Distrust. Available: http://www.chinausfocus.com/finance-economy/huawei-a-mirror-of-strategic- distrust
China US Focus, (2016). Sanctioning ZTE and Huawei: Chinese Telecom Giants’ Conflicts with the U.S. Available: http://www.chinausfocus.com/finance-
79 economy/sanctioning-zte-and-huawei-chinese-telecom-giants-conflicts-with-the- u-s
CNET, (2012). Lawmakers to U.S. companies: Don't buy Huawei, ZTE. Available: https://www.cnet.com/news/lawmakers-to-u-s-companies-dont-buy- huawei-zte/
Cryptome, (2014). NSA Codenames. Available: https://cryptome.org/2014/01/nsa-codenames.htm
Der Spiegel, (2014). NSA Spied on Chinese Government and Networking Firm. Available: http://www.spiegel.de/international/world/nsa-spied-on-chinese- government-and-networking-firm-huawei-a-960199.html
Department of Homeland Security, (2015). Homeland Security Presidential Directive 7: Critical Infrastructure Identification, Prioritization, and Protection. Available: https://www.dhs.gov/homeland-security-presidential-directive-7
Financial Times, (2008). Huawei-3Com Deal Finally Collapses. Available: https://www.ft.com/content/c2091814-f6b5-11dc-bda1-000077b07658
Forbes, (2012). Huawei, ZTE and the Slippery Slope of Excusing Protectionism on National Security Grounds. Retrieved from http://www.forbes.com/sites/danikenson/2012/10/09/huawei-zte-and-the-slippery- slope-of-excusing-protectionism-on-national-security-grounds/#11c832b36967
Los Angeles Times, (2014). Obama defends NSA spying in meeting with Chinese president. Available: http://www.latimes.com/world/worldnow/la-fg-wn- obama-nsa-spying-chinese-president-20140324-story.html
National Public Radio, (2014). While Warning of Chinese Cyberthreat, U.S. Launches Its Own Attack. Available: http://www.npr.org/templates/transcript/transcript.php?storyId=298335286
80
New York Times, (2014). N.S.A. Breached Chinese Servers Seen as Security Threat. Available: https://www.nytimes.com/2014/03/23/world/asia/nsa- breached-chinese-servers-seen-as-spy-peril.html?_r=0
Reuters, (2012). Exclusive: White House review finds no evidence of spying by Huawei – sources. Available: http://www.reuters.com/article/us-huawei- spying- idUSBRE89G1Q920121017?feedType=RSS&feedName=technologyNews&utm _source=dlvr.it&utm_medium=twitter&dlvrit=56505
The Wall Street Journal, (2010). Security Fears Kill Chinese Bid in US. Available: http://www.wsj.com/articles/SB1000142405274870435350457559661154781022 0
Troutman Sanders, (2011). $2 Million Deal = Big CFIUS Mistake. Available: https://www.troutmansanders.com/2-million-deal--big-cfius-mistake- 03-07-2011/
Xinhua, (2014). China Voice: Huawei Spying Betrays Blatant US Hypocrisy. Available:http://news.xinhuanet.com/english/china/2014- 03/26/c_133215666.htm
81
APPENDICES
82