Relations between the US and China have crashed of late, turning from a trade fight and then a war of words over the origins of the Covid-19 to a more important investigation of individual companies and the global economy. Relations between the two countries have been strained since 2018, and things could get uglier as other countries get hauled into the conflict.
According to Mustafa Metwali, an IT project manager at Summit Technology Solutions, there is now a race between the US and China to dominate the new 5G communications technology, “part of a race for web predominance among countries contending as suppliers.”
“It’s thought our future will depend on the protection of technological supremacy,” Metwali said. “This is at the centre of the dispute between the US and China over industrial espionage and trade.”
The battle is over who will manufacture and lead the coming age of web and media communications innovation called 5G. It has also been bogged down in conspiracy theories related to the outbreak of the Covid-19 pandemic.
According to journalist Alexander Morgan writing in Euronews, one Western conspiracy theorist, UK national Barrie Trower, has even speculated that “5G is to blame for the rapid spread of Covid-19.” Trower believes that 5G “degrades the immune system and that the dangers are being covered up by powerful forces in the global telecommunications industry,” he said.
The theory started to spread through Internet influencers and public figures with significant followings, who began sharing it with the public. It has been scientifically proven that Covid-19 is caused by a virus transmitted by respiratory droplets and cannot be transmitted via radio waves.
There is no evidence that 5G is harmful to humans, and it is simply the next generation of wireless network technology, following on from the other four generations that preceded it. Diaa Al-Maraghi, networks planning manager at Telecom Egypt (TE), explained, saying that “1G was the technology that empowered us to make remote calls; 2G brought messaging abilities; 3G brought web browsing to the masses; 4G made remote video a reality and through its association with GPS empowered services like Uber.
“We are presently living in a 4G world, yet progress to 5G is beginning, and it will accelerate over the next couple of years. 5G will be different from previous upgrades, however. For one thing, information will move around much quicker. It is also about machine-to-machine connections. Thinks about billions of machines, or the Internet of Things. This means that everything from washing machines to self-driving vehicles can be connected on 5G.”
Metwali connected today’s digital transformations with the importance of 5G, adding that “digital systems and the economy all depend in one way or another on the availability of a reliable network infrastructure for mobile devices. This is the link between the coming 5G networks and the growth of one of the most promising future technologies, namely the Internet of Things.”
According to Al-Maraghi, “5G technology is the future of worldwide broadcast communications, offering more data transmission than anybody can imagine at the moment. For example, telesurgery using a 4G connection is much slower, expanding the danger of mix-ups,” but it can be safely practiced with 5G.
But “the rollout of 5G requires millions of dollars to install the fibre-optic systems required for high-data networks and millions more to work them.” Moreover, “companies and countries that plan and put resources into this new technology will have a major stake in how 5G transmits data and how others are to access the system.
“If it’s China that controls the technology, the outcome could be terrible for the American and European companies that used to dominate broadcast communications, and it will mean a new future controlled by Chinese companies.”
CHINA AND 5G: Something along these lines was said in a speech at the Hudson Institute, a thinktank, in Washington in October 2018, when US Vice President Mike Pence said that “through its ‘Made in China 2025’ plan, the Chinese Communist Party has set its sights on controlling 90 per cent of the world’s most advanced industries, including robotics, biotechnology, and artificial intelligence.”
“To win the commanding heights of the 21st-century economy, Beijing has directed its bureaucrats and businesses to obtaining American intellectual property, the foundation of our economic leadership, by any means necessary.”
For Al-Maraghi, “China is already dominating the technology, as it has the largest number of patents in 5G technology. 5G depends on fibre-optic systems that are pricey to install and require infrastructure investments of billions of dollars. China is offering to construct and install those networks at low costs, with specialists keen to help” those buying them from China.
However, Mathias Johansson, head of Ericsson Egypt and Saudi Arabia, a Swedish communications technology company, told Al-Ahram Weekly that Ericsson was ready for the race “as a technology leader in 5G. Pioneering customers select us as their 5G partner, and we were first with commercial live networks in four continents. This includes multiple service providers in the United States, South Korea, and Europe, as well as in Australia and the Middle East, including Saudi Arabia. We have more than 90 commercial 5G agreements or contracts with unique service providers, of which 40 are live networks.
“In the biggest 5G market, South Korea, which had reached 4.5 million subscribers by the end of 2019, our mid-band 5G delivers better coverage, 100 per cent better uplink speeds, and five per cent better download speeds than the second-best competitor when measured in the same city,” he said.
Meanwhile, the Trump administration in the US has attacked the Chinese company Huawei for what it claims has been Huawei’s attempts to grab market share in 5G. The dispute broke into full public view in December 2018 when Meng Wanzhou, Huawei’s CFO and daughter of its founder, was arrested in Canada at the command of the US government on allegations of fraud. US federal prosecutors have also accused Huawei of stealing competitive innovations from US company T-Mobile.
The dispute between Huawei and Washington is happening against the background of the strengthening of worldwide rivalries amid a tariff war between the United States and China.
According to John Calabrese, a researcher at the US Middle East Institute, a thinktank in Washington DC, “members of Congress on both sides of the aisle for well over a decade and the Trump administration since coming to office have sought to keep Huawei out of the American market.” He added that US officials have stressed that the Chinese Communist Party could utilise Huawei as a weapon to control innovation and as an intermediary for Chinese state security.
“Huawei, ZTE, and challengers such as Nokia, Ericsson, Cisco, and Samsung together accounted for 80 per cent of worldwide service equipment provider market revenue in 2018,” Calabrese said. A report in his article said that China holds a narrow lead in the global race to 5G, and that out of the four companies dominating the global market for 5G networks, China is dominating with the companies Huawei and ZTE, the others being European or American.
But US concerns stem not just from the quick increase made by Chinese companies in their quest for market dominance of 5G, but also from some of the strategies they have used to accomplish it.
The Trump administration, citing US national security, has mounted a hostile campaign against Huawei. US officials have campaigned with other countries worldwide to reject Huawei 5G technology and slow the company’s move into other markets. Strains between US officials and Huawei heightened in May, when talks between Washington and Beijing were abandoned.
On 15 May US President Donald Trump banned US firms from buying or utilising Huawei telecoms gear. The US Commerce Department’s Bureau of Industry and Security included Huawei and 68 of the company’s non-US partners on a list that forces those wanting to dealt with them to register contracts and movements.
LESSONS FROM HISTORY: One former Japanese prime minister has urged China to build on his country’s experience to make the US-China trade war into an opportunity to transform China’s economy and society.
According to Yasuo Fukuda, speaking in 2019, “the ongoing trade war between China and the US is different from the one between the US and Japan in the 1980s, but the two trade wars do have a lot in common.
“First, both involve the world’s largest and second-largest economies; second, China is the country with the largest trade surplus with the US, and this spot was held by Japan during the 1980s; third, China is highly dependent on the US market, and so was Japan. The US approach and the intensity of the trade wars are also more or less the same.”
It might be useful for China to see how Japan responded to the US during its trade war in the 1980s, he said.
After US president Ronald Reagan took office in 1981, the United States began constraining Japan to open its market to American companies and reduce the trade imbalance between the two nations. While Japan consented to measures on the number of vehicles it sent to the United States, alarm over Japanese trade still developed, and legislators on both sides acted.
In endorsing a bill calling for US trade retaliation against Japan, Robert Packwood, at that point Republican Party leader of the US Senate’s finance committee, vowed to give Tokyo “an eye for an eye... that is all they understand.” During a 1985 finance committee hearing, Democratic senator Max Baucus said that “Reagan predicted ‘a future in which commerce will be king, the eagle will soar, and America will be the mightiest trading nation on Earth.’ Well, commerce may be king. And eagles may be soaring. But they’re not American eagles. America’s trade performance has never been worse.”
That year, five nations, including the United States, West Germany, France, the United Kingdom, and Japan, signed the Plaza Accord, devaluing the US dollar against the Japanese yen and the German Deutsche Mark. This prompted an expansion in US exports and a lowering of its trade deficit with numerous European nations.
However, the Plaza Accord was not the end of US activity against Japan. In 1987, Washington put heavy duties on $300 million worth of Japanese imports, successfully blocking them from the American market. As the yen’s value increased, Japanese products started to be increasingly costly. Endeavours by Japan’s central bank to keep the yen low started an asset bubble, the breakdown of which helped drive the nation into a downturn and subsequently a “lost decade”.
“Japan’s export and GDP growth essentially halted in the first half of 1986,” market analysts Joshua Felman and Daniel Leigh wrote in a report for the International Monetary Fund. They inferred that while the Plaza Accord did not cause Japan’s financial downturn, it did trigger problems.
The US could take a similarly forceful approach in forcing Beijing to bend to its demands. According to journalist Arthur Herman writing in the US magazine Forbes, the situation now is that a number of nations are turning to the Chinese version of 5G while the US fails to act. One telecom operator in some 48 nations has an agreement or is reportedly testing gear made by Huawei, which has allegedly had strong ties to China’s military and intelligence services.
Ten nations have declared arrangements to begin using Huawei gear in their 5G systems, including the UK, Portugal, Italy, Mexico, the Philippines, and Saudi Arabia. Only the US and Australia have an outright ban on using Huawei. Canada has not joined the boycott.
The Middle East and North Africa (MENA) region has not yet reached the same market penetration, but between now and 2025 the MENA region is probably going to see the quickest development of any region aside from Sub-Saharan Africa for mobile broadband use and smartphone adoption, reaching the level in Gulf markets.
In the latter, there is a clear perception that technologies like 5G can catalyse a digital transformation, support their respective national development visions/agendas, and significantly boost GDP. In the meantime, Gulf telecoms administrators have kept on building the framework required for the early adoption of 5G. The company Ooredoo has introduced more than 85 5G network towers in and around Doha in Qatar. Saudi Arabia has more than 1,000 towers equipped for supporting 5G, and the UAE has its sights set on arriving at that achievement by the end of 2020.
Ziad Abdel-Tawab, former head of information at the government’s decision support centre in Cairo, declared that “Egypt started to introduce 4G services in mid-2017, so it’s still early to move completely to 5G technology, at least in the very near future.
“Firstly, the cost of the infrastructure will take a lot of investment by the government and mobile network operators. Secondly, the area of the country makes it more convenient to start in phases and in certain projects such as in the smart cities. Thirdly, we need to take into account the key aspects of digital transformation and plan the 5G network cost-effectively with a focus on enhancing customer experience and maximising returns on investment. These things need to be revised both after the coronavirus period and after studying the early implementations in Europe and the US.”
For Al-Maraghi, “we have already taken steps towards the strategy of Digital Egypt. The first stage in the pilot digitisation project in Port Said was launched in mid-2019, for example.”
The trade war between China and the US has made the idea of expanding 5G in the US costly, and the procedures against Huawei have slowed developments more. The main reason is the US fear of security threats from China, with the US expressing fears about Huawei’s capability to be used as a covert agent of the Chinese government.
The US is putting pressure on its allies and its own telecom companies to come up with a better plan for building 5G. China is waiting for time to run out on the Trump administration, with Trump due to run for re-election later this year.
However, waiting for Trump to go, if he does, will not in itself be the solution to China’s leadership of 5G. Though the current conflict looks in part politically motivated, there is a real conflict of economic interests between China and the United States.
*A version of this article appears in print in the 9 July, 2020 edition of Al-Ahram Weekly