Politicization and Securitization of the 5G Rollout: What Role for International Economic Law?
By Iryna Bogdanova, KFG ‘The International Rule of Law – Rise or Decline?’
5G: economic implications of its rollout and relevant national security risks
The 5G network, as the fifth generation of cellular networks, signifies a groundbreaking transition from its predecessors (2G, 3G, and 4G/LTE). Described as a “disruptive” and “transformational” technology, its distinguishing feature lies in being a software-driven network, allowing for future upgrades through software and low-cost components. This technology brings immediate advantages such as increased speed, reduced latency, and greater bandwidth, enhancing user experience and supporting three primary services: enhanced mobile broadband, ultra-reliable low-latency communication, and massive machine-type communication for the Internet of Things (IoT).[i] The economic value of 5G is not solely in cost savings but extends to new revenue sources, intelligent products, and improved customer experiences.
Analysts foresee a profound impact on industries as 5G deployment becomes key to shaping the future, influencing areas like autonomous vehicles, smart cities, unmanned drones, industrial IoT, and robotics.[ii] The transformative effects of 5G could lead to substantial economic growth.[iii] Additionally, 5G is seen as a platform technology, capable of significantly affecting the competitiveness and innovative potential of downstream industries such as manufacturing, transportation, healthcare, and agriculture. As a result, both 5G and its infrastructure are deemed “critical technology” and “critical infrastructure”, respectively, with the potential to shape a nation’s economic competitiveness and innovation landscape across various sectors.
The analysis underscores a range of risks linked to the 5G deployment, particularly concerning the involvement of Chinese companies. The limited number of major suppliers – Huawei, Nokia, Ericsson, and Samsung – raises concerns about supply chain security, specifically regarding component availability and regular software updates.[iv] This scarcity of alternatives gives rise to the risk of interdependence, potentially allowing strategic competitors to exploit this interdependence as a weapon, especially in the current geopolitical climate.
Examining the concept of weaponized interdependence, both the United States and China express interest in decoupling their telecommunications networks, particularly in case of 5G.[v] Policymakers from both sides leverage the idea of weaponized interdependence, citing threats such as espionage, the collection of sensitive information, and choke-point effects.[vi] These concerns justify actions aimed at disentanglement and promoting self-reliance in 5G infrastructure.[vii]
An additional concern revolves around the alleged subsidization of Huawei by the Chinese government, resulting in significantly reduced prices for 5G equipment.[viii] This move, viewed as part of a broader Chinese strategy to become a technological powerhouse, may deter other companies from participating in 5G infrastructure projects, potentially consolidating Huawei’s position as a global leader in 5G infrastructure.
The third critical aspect of the 5G rollout involves the security of the network, including cybersecurity concerns. Companies involved in building networking equipment could potentially install malicious hardware or software implants, allowing unauthorized access to valuable data and compromising the integrity of essential networks.[ix] Cybersecurity risks also include general vulnerabilities, making the network susceptible to cyberattacks.[x]
Adding complexity, the 2017 National Intelligence Law of China mandates citizens and companies to cooperate with Chinese intelligence agencies. This requirement poses a significant obstacle to building trust between Huawei – whose ownership structure and affiliation with the Chinese military remain unclear – and states concerned about the security of their critical infrastructure.
Government policies on Chinese companies’ participation in the 5G rollout
Against the background of diverse risks emanating from the 5G rollout, which consist of a bundle combining national security, economic and societal considerations, governments have been evaluating the long-term effects of the security of their 5G infrastructure. These evaluations result in different policy responses.
Explicit bans on the use of Chinese suppliers
Countries comprising the Five Eyes intelligence sharing network – Australia, Canada, New Zealand, the United Kingdom, and the United States – have an uncompromising stance on the issue of Huawei and its participation in their 5G network.[xi] Specifically, all of these countries banned Huawei-produced equipment and services from their 5G networks.[xii]
EU risk-based approach
The EU’s position on this matter is defined by indistinct delimitation of competences between the European Union and its Member States when it comes to the 5G technology.[xiii] At the Union level, the following steps were undertaken: in March 2019, the European Commission issued Recommendation 2019/534 and compelled Member States to carry out a risk assessment of the 5G network infrastructure. Based on the Member States’ input, a coordinated European risk assessment was conducted and the relevant report was released in October 2019, which was followed by the release of ‘Cybersecurity of 5G networks: EU toolbox of risk mitigating measures’.
The EU coordinated risk assessment of the cybersecurity of 5G networks emphasizes that the risk profiles of individual suppliers can be assessed on the basis of several factors, among which the most essential is “[t]he likelihood of the supplier being subject to interference from a non-EU country.” Furthermore, it has been highlighted that “[t]his is one of the key aspects in the assessment of non-technical vulnerabilities related to 5G networks.” In order to overcome the risks associated with high-risk vendors, the EU toolbox of risk mitigating measures proposes to apply restrictions for suppliers considered to be high-risk.
No restrictions against Chinese suppliers
Not all states restrict Chinese companies from their 5G networks. For example, a strong desire to avoid any confrontation with the main security (i.e., United States) and trade (i.e., China) partners defines South Korean policies on Huawei. South Korea did not impose any restrictions on the use of Huawei-produced equipment or services in its 5G networks, thus triggering a discussion on “digital entanglement” as a policy pursued by China in the region.[xiv]
What role for international economic law?
It can be argued that neither the content of the substantive norms nor the institutional infrastructure (i.e., availability of the dispute settlement systems) provided by international economic law is capable of constraining individual states or groups of states from implementing policies that undermine the existing international economic order if the interests at stake are securitized/politicized as it is the case with the 5G rollout.
World Trade Organization (WTO)
At least since 2018, China raised an issue of restrictions excluding Chinese companies from participation in the 5G networks at the WTO. It started with China’s proposal to discuss Australian actions restricting the use of 5G equipment produced by Huawei and ZTE at the Committee on Market Access in October 2018. During this meeting, China’s representative argued that Australia introduced origin-based prohibitions on Chinese telecom products in violation of its commitments under Article I:1 (MFN), Article X (Publication and Administration of Trade Regulations), and Article XI (General Elimination of Quantitative Restrictions) of the GATT 1994. The Australian representative contended that the government’s objective was to strengthen the security of Australia’s telecommunications networks. Towards this end, additional requirements were developed, which were origin-neutral and did not exclude Chinese suppliers. The issue was discussed at the subsequent meetings of the Council for Trade in Goods and the Council for Trade in Services.
In 2021, China brought the issue of Sweden’s restrictions on Huawei’s participation in their 5G networks to the attention of the Council for Trade in Goods. Recently, in April 2022, Belgium’s draft law introducing additional security measures for the provision of mobile 5G services was labeled by China as a special trade concern and included in the Council for Trade in Goods agenda.
These discussions at the various WTO Committees demonstrate that in theory ambiguously-formulated rules enshrined in the various WTO Agreements might be breached by the countries that restrict market access to Chinese tech companies, Huawei and ZTE. This being said, China has not yet filed any request for consultation to initiate a formal dispute before the WTO.
International Investment Agreements (IIAs) and Investor-State Dispute Settlement
In 2020, the Swedish Post and Telecom Agency auctioned licensing rights in the 3.5 GHz and 2.3 GHz bands for the upcoming Swedish 5G network.[xv] In order to participate in this auction, authorized mobile network operators were prohibited from using equipment sourced from Huawei.[xvi] After Huawei failed in domestic courts, in January 2022, Huawei initiated an ICSID arbitration based on the China-Sweden BIT.[xvii] This dispute appears to be the first investment dispute to question the legality of a country’s decision to restrict Huawei from its domestic 5G network and it has been already discussed in this blog.
In the context of possible investor-state disputes initiated by Huawei, it should be noted that China concluded 170 IIAs out of which 130 are in force now. China-based Huawei is a global multinational corporation that established multiple entities abroad. This is reinforced by the fact that Huawei significantly invested in foreign jurisdictions gives it a strong foothold to bring investment claims against foreign governments, arguing that its rights and legitimate expectations were violated post-establishment.[xviii]
Concluding remarks
In an ideal scenario, adherence to international economic law should limit a state’s freedom to engage in discriminatory, unfair, or unreasonable actions. Nevertheless, the observed state behavior reveals that current international economic law, encompassing normative regulations and methods for resolving disputes, does not effectively restrict states from pursuing their policies, especially when the subject matter becomes securitized or politicized, as evident in the context of the 5G rollout.
[i] Dahlman, E., Parkvall, S., and Sköld, J., What Is 5G? In: Dahlman, E., Parkvall, S., and Sköld, J. (eds.), 5G NR: the Next Generation Wireless Access Technology. Academic Press 2018.
[ii] Brake, D., Economic Competitiveness and National Security Dynamics in the Race for 5G between the United States and China (August 2018). TPRC 46: The 46th Research Conference on Communication, Information and Internet Policy 2018, Available at SSRN: https://ssrn.com/abstract=3142229.
[iii] Ibid.
[iv] Eurasia Group, White Paper: The Geopolitics of 5G (November 15, 2018), https://www.eurasiagroup.net/siteFiles/Media/files/1811-14%205G%20special%20report%20public(1).pdf
[v] Adam Segal, Huawei, 5G, and Weaponized Interdependence, in Daniel W. Drezner, Henry Farrell and Abraham L. Newman (eds.), In The Uses and Abuses of Weaponized Interdependence. Brookings Institution Press 2021, at pp. 143-157.
[vi] Ibid.
[vii] Ibid.
[viii] “Huawei’s prices are typically at least 30 percent lower than those of its competitors, benefitting from generous Chinese government direct and indirect subsidies.” Alex Rubin, Alan Omar Loera Martinez, Jake Dow and Anna Puglisi. The Huawei Moment. CSET Policy Brief. Center for Security and Emerging Technology, July 2021.
[ix] Radu, R. and Amon, C. 2021. “The governance of 5G infrastructure: between path dependency and risk-based approaches,” Journal of Cybersecurity 7(1):1–16.
[x] Ibid.
[xi] Bogdanova, I., Politicization of the 5G Rollout: Litigation Way for Huawei? (January 31, 2023). WTI working paper no. 01/2023, Available at SSRN: https://ssrn.com/abstract=4345025
[xii] Ibid.
[xiii] Robles-Carrillo, M., European Union policy on 5G: Context, scope and limits 45:8 (2021) Telecommunications Policy.
[xiv] Lee K., Rasser M., Fitt J. and Goldberg C. 2020. “Digital Entanglement: Lessons Learned from China’s Growing Digital Footprint in South Korea”, Center for a New American Security, https://www.cnas.org/publications/reports/digital-entanglement
[xv] Huawei Technologies Co., Ltd. v. The Kingdom of Sweden, Request for Arbitration, 2022. https://jusmundi.com/en/document/other/en-huawei-technologies-co-ltd-v-kingdom-of-sweden-request-for-arbitration-friday-7th-january-2022
[xvi] Ibid.
[xvii] Ibid
[xviii] This view is corroborated by other scholars, for example, Glinavos I., Which Way Huawei? ISDS Options for Chinese Investors. Chaisse, Julien, Choukroune, Leïla, Jusoh, Sufian (Eds.) Handbook of International Investment Law and Policy (2020) Springer.