Gov. Rick Perry's Relationship With Chinese Telecommunications Firm Huawei
By Ian Fletcher
I have written previously about how Mitt Romney has offered a glimmer of hope as a presidential candidate who may-if he's serious, which is a big "if"-implement a real solution to America's trade crisis if elected.
Translation: stand up to China, on currency manipulation, intellectual property theft, and a long list of other unfair trade practices. I'm currently talking to various people, including his campaign, in an effort to determine whether he's sincere or not, and I'll let you know what I find out if I discover anything.
What I have discovered so far is that, of all the Republican candidates who have a shot at winning, Rick Perry is probably the worst on trade. His enthusiasm
As documented by serious China observers like the Tokyo-based journalist Eamonn Fingleton (whose book I reviewed here), Beijing has a deliberate strategy of penetrating the U.S. political system by leveraging Chinese economic power. Resisting this is, in fact, one of America's key foreign-policy challenges for the years ahead.
Beijing uses corporations under its control (every major company in China, given its state-capitalist economy) to indirectly grant or withhold favors to American politicians. This can mean everything from jobs for their home states to lucrative personal investment opportunities to outright bribes.
This problem first emerged in American politics in the Clinton years (remember Al Gore's Buddhist monks with shopping bags of cash?) and it has continued to worsen as China has become richer and more internationally aggressive.
Some politicians who play this game are outright crooks who know what's up. (I must assume Clinton knew.) Others are merely seduced by the easy money, which often comes in forms which are at first not actually illegal. But it's a progressive game, and by the time they realize the game being played, it's too late. They have become too dependent, if not too outright legally compromised, to turn back.
It is in this vein that we should look with concern at Gov. Perry's relationship with the giant Chinese telecommunications firm Huawei (pronounced "Hwah-way") Communications. To be fair, I have no way to know which of the above categories Gov. Perry falls into. But even if he is merely na´ve and careless about expediency, this does not bode well for a Perry presidency.
Some of the payoffs from Huawei to Perry are no secret. For example, the firm decided in 2010 to put its U.S. headquarters in Plano, Texas. Good for him: a few more jobs came to Texas, albeit partly at the expense of American telecom firms. Here's a video of him praising the company at the opening of its new HQ; he apparently spent considerable effort cultivating a personal relationship with the firm's management.
Here the soup starts to thicken.
First, some fairly trivial stuff: Gov. Perry has taken overseas junkets funded, by way of a non-profit called TexasOne, by Texas companies doing business in China. This is not illegal, but it risks undue influence by corporations at the mercy of, and thus doing the bidding of, Beijing. In the words of Craig McDonald, of the liberal watchdog group Texans for Public Justice.
I think it's fraught with conflicts. Those members of TexasOne consistently want favors from Texas government and the governor's office. ... When those corporations send Perry and his family on a sweet vacation to China, it raises conflict-of-interest questions.
The more serious problem, however, is that Huawei is not just any company. According to analyses by both the Obama and Bush administrations, it is both deeply enmeshed in China's military industrial complex and aggressive about pursuing political corruption abroad.
In 2005, a report from the respected Rand Corporation noted that Huawei has "deep ties with the Chinese military, which serves a multi-faceted role as an important customer, as well as Huawei's political patron and research and development partner."
The U.S. Army's Strategic Studies Institute documented, in a September 2007 report, how Huawei has engaged in deliberately corrupting practices in Argentina, specifically that it was "known to bribe and trap clients." One favored tactic: the deliberate provision of illegal favors and gifts in order to obtain leverage for future blackmail.
The fact that Huawei is in the telecommunications business opens up a vast array of opportunities for undetectable eavesdropping on other nations' phone calls and data. In 2009, the National Security Agency warned AT&T not to purchase Huawei equipment for a planned phone network. The NSA feared that Chinese intelligence could insert "digital trapdoors" into Huawei's systems to secretly eavesdrop on Americans. (AT&T ultimately chose other providers, though to this day it refuses to say why.)
Make no mistake. This is not like partnering with a Russian caviar producer during the Cold War. It is like letting Mikoyan Aircraft, builder of the famous Soviet MIG fighter jets, build avionics for Boeing and McDonnell Douglas.
In some ways, it is worse than during the Cold War, because China, as a state-capitalist rather than communist country, is far better equipped to wage successful economic warfare against the U.S.
Some American politicians are wising up to the threat of Huawei and companies like it. In 2010, eight Republican senators asked the Obama administration to investigate its attempt to sell equipment for upgrading Sprint Nextel's mobile phone and data network. The Committee on Foreign Investment in the United States (CFIUS)-which rarely blocks foreign participation-ended up nixing Huawei's involvement. (CFIUS has now blocked the company in three cases.)
Huawei is not just another gang of crony-capitalist crooks. It is, because telecommunications are the nerve system of modern societies, a big part of China's strategy to build its influence around the world.
Huawei's global connections-including to anti-American regimes other than China-are impressive. For example, it is reportedly aiming to take over the telecommunications system of Iran, a country with very limited digital technology of its own. And American ally India recently accused several Huawei employees in their country of espionage and selling spy technology to the Taliban. One doesn't have to be Tom Clancy to dream up scenarios of what kind of mischief this could lead to if the company has a tap installed on America's phone lines.
Obviously, Rick Perry cannot be held responsible for everything Huawei does, or might do, all over the world. But equally, his intimate involvement with them doesn't exactly show good judgment for someone who aspires to be commander in chief of America's national security.
We need a president who understands the dangerous new world of state capitalism, not one who offers to carry its bags.
Ian Fletcher is Senior Economist of the Coalition for a Prosperous America, a nationwide grass-roots organization dedicated to fixing America's trade policies and comprising representatives from business, agriculture, and labor. He was previously Research Fellow at the U.S. Business and Industry Council, a Washington think tank, and before that, an economist in private practice serving mainly hedge funds and private equity firms. Educated at Columbia University and the University of Chicago, he lives in San Francisco. He is the author of Free Trade Doesn't Work: What Should Replace It and Why.
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