Issue 243: 2020 07 23: Huawei

23 July 2020

Huawei

Losing the money tree.

By John Watson

America pleased: China upset.  The U.K.’s decision to exclude Huawei from work on 5G Internet is ostensibly about security risks.  No doubt security played an important part but that surely is only one part of the story.

The immediate backdrop is the new assertiveness shown by China in its dealings with the rest of the world.  It imposes new security laws on Hong Kong.  It threatens Taiwan.  There is sporadic fighting on its border with India.  It adopts a more aggressive attitude in the dispute over the Spratly Islands.  The Japanese are sufficiently nervous to rearm.  One way and another it is throwing its weight about and although it is currently focusing on areas with which it has traditional links, it is hard to tell where such a process will stop.  Does it see itself replacing America as the latter cuts back on its international obligations?  Does it aim at some form of “pax Sinae” as a new world order?

Nobody really knows and it is possible that the Chinese don’t know either.  Nonetheless the deepening division between China and the US means that third countries have to decide which side they are on and any attempt to ride both horses, at one time the apparent preference of the British government, becomes steadily harder.  In these circumstances Britain has no real choice.  Its links are all with the US and its allies and it would hardly make sense to weaken these in an attempt to please an Asian power which it does not really understand.  Britain’s place in any struggle over increasing Chinese hegemony is clearly with the West.

This has all been brought into stark relief by events in Hong Kong and the stand-off between America and China but there is something more fundamental at stake too.  Over the years we have got more and more used to China expanding its position as the workshop of the world, a position which now carries with it technical dominance in a number of areas.  Huawei is the leader in 5G systems.  China also has leadership in building nuclear plants and one of its companies is a joint venturer in the consortium which is to build Hinckley Point C.

Doubtless the involvement of Chinese companies in government projects makes sense both in terms of delivery and price.  The cooling of relations, however, raises the question of whether it is wise to become technically dependent on a foreign power, and particularly one which is so politically and economically ambitious.  That isn’t just a matter of security but also one of preventing our ability to pay our own way from sliding away from us.  It has already slid a long way.

It all started, of course, with the use of overseas labour much cheaper than our own.  “Don’t worry” we said in the early 70s in relation to the shift of electronic manufacturing to Japan.  “We are just exporting the production line work.  The brains and the designing function remain in the UK.  Without our diagrams they would not know which wire to attach to which terminal”.  Perhaps it was true at the time, more probably not, but slowly and surely the design work and engineering crept across too.  Japanese electronics and cars turned out to be rather good.  Now we need Chinese expertise to build Hinckley Point and, what is more, hope that we will learn from them so that one day we will again be able to build power stations on our own.

So with manufacturing, design and engineering moving to Asia, what is left for the UK to do?  We provide services, of course, predictable courts, insurance, finance, mainly centred on the City of London.  But why would these areas not ultimately follow the manufacturing, the engineering and the design?  Surely the services will eventually follow the economic activity.

Politicians often tell us that there is no magic money tree, but a national pool of expertise is probably about as close as you can get.  We need to build our own workforce, train our own engineers and then give them the projects in which to hone their expertise.  Of course that will involve joint ventures and there will be times when specialist foreign firms need to be involved but the decision as to when this is appropriate should not be made exclusively on the basis of cost and quality of service.  The need to build up the UK’s technical base should also be a factor.  Whether that was a factor behind the Huawei decision, that decision represents an opportunity for British firms which hopefully they will exploit.

 

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