CFIUS, Softbank and Sprint: Prelude to a Trade War

On March 19, I posted to expose a clever U.S. Government head-fake use of the Federal Communications Commission (FCC) to effectively cement an anti-competitive telecommunications infrastructure market in the U.S. via a wink-and-nod “notice and negotiate” provision designed to chill any potential purchases of network gear from select (e.g. China-based) vendors.  (Link to March 19 post)

On April 6, I blogged on powerful U.S. industry objections to an overreaching paragraph in the late March Federal funding bill that would have crippled their global operations - which all rely to some extent on facilities and supply chains in China - and perhaps shut them out of doing business in that market altogether.    Notably, the White House echoed the concerns expressed by eleven major U.S. industry associations.  (Link to April 6 post)

Today (May 23), the Wall Street Journal reported that the Committee on Foreign Investment in the United States (CFIUS) – which is currently reviewing the purchase of Sprint by Japan-based Softbank for any national security concerns – is seeking the right to approve the post-transaction company’s equipment purchases, as well demanding the removal of already-deployed Huawei gear in Sprint’s Clearwire affiliate's network, based on supposed “national security” grounds. (Link to WSJ article)

If what the WSJ reports is true, I emphatically call bullshit.

The U.S. Government has never – not once - substantiated any of its vague concerns about security issues associated with Huawei and is well aware that vendors headquartered outside China are also conducting R&D and coding and building in that market, and are just as vulnerable to penetration as Huawei.  Simply put, given the globalized nature of the industry, the U.S. Government knows full well that precluding Huawei from U.S. networks will do absolutely nothing to make those networks more secure.

Indeed, the White House seemed to quite clearly validate those latter two points in its April 5 statement reported in The Hill related to the offensive section in the funding bill referenced above which would have banned select Federal procurement of China-originated IT gear.  To wit:

"It could prove highly disruptive without significantly enhancing the affected agencies’ cybersecurity. While the Administration has raised concerns about the cyber threats emanating from China, resolving this issue requires open dialogue between the U.S. and China."

Granted, the context of the remarks is slightly different, but,“Open dialogue?”  Then what’s with the CFIUS initiative to rip out and ban Huawei gear as a contingency to approving the Softbank-Sprint deal?  “…Highly disruptive without significantly enhancing…cybersecurity?”  True that.  Indeed, highly disruptive doesn’t begin to describe the coming trade war that U.S. authorities seem to be ever-so-blithely inviting.

So what’s going on here?  The CFIUS-contemplated ban won’t make anything more secure, network- or otherwise, but it could very likely prompt a trade war at the very costly expense of American jobs, exports, innovation and economic growth.  Granted, I don’t know what quid pro quo with China they may be seeking to achieve, but can it possibly justify jeopardizing our economic national security?

Someone in Government should be held accountable – today better than after-the-fact - for the unprecedented and unnecessary mess they seem to be in the process of making.