Trump flouts national security advice in bid to save ZTE

Critics say President Trump is willing to ignore the national security advice of his own intelligence and defence officials in pursuit of a larger trade agreement with China

PUBLISHED : Thursday, 07 June, 2018, 10:30am
UPDATED : Thursday, 07 June, 2018, 11:18am

The Pentagon was so concerned about the “unacceptable risk” posed by the Chinese tech giant ZTE in April that it banned sales of its cellphones on military bases. The same month, British officials cautioned that using ZTE equipment was so problematic national security concerns “cannot be mitigated.”

Yet the Trump administration’s proposal to reverse a Commerce Department ban forbidding American companies from selling to ZTE doesn’t protect US customers from surveillance, hacking or digital espionage, say experts and lawmakers. Negotiators are reportedly close to a deal on that proposal.

Critics of that proposal say it shows that President Donald Trump is willing to ignore the national security advice of his own intelligence and defence officials in his pursuit of a larger trade agreement with China. Even Trump's new CIA Director Gina Haspel said during her recent confirmation hearing that she would not use ZTE phones.

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“This is where you have unanimity between both the Obama and Trump administration officials talking about ZTE and Huawei — this is a national security concern,” Sen. Mark Warner (D-Va.), the Intelligence panel’s ranking member, told POLITICO. “You don’t trade that away in an off-again, on-again conflict with China.”

Washington lawmakers, military and intelligence officials, as well as cybersecurity experts have become increasingly worried about the risks posed by foreign tech companies, especially considering Russia's campaign to influence the 2016 presidential campaign.

The overarching concerns with both ZTE and another Chinese telecom giant, Huawei, are the companies' close ties to the Chinese government, spurring concerns that Beijing could harness technology sold in the US to steal data, eavesdrop on conversations, or even carry out cyberattacks. The FCC expressed similar concerns about ZTE and Huawei and has proposed steps to discourage American companies from using their products.

In another sign of Washington's unease about foreign tech companies, Warner raised issues Wednesday about Facebook's practice of sharing users' data with Huawei and other Chinese tech firms, such as TCL and Lenovo.

“Concerns about Huawei aren’t new — they were widely publicised beginning in 2012, when the House Permanent Select Committee on Intelligence released a well-read report on the close relationships between the Chinese Communist Party and equipment makers like Huawei,” Warner said in a statement. “The news that Facebook provided privileged access to Facebook’s API to Chinese device-makers like Huawei and TCL raises legitimate concerns.”

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The growing focus on threats posed by foreign tech companies isn't limited just to China. For instance, Washington recently banned federal agencies from using software from the cybersecurity vendor Kaspersky Lab, which was founded in Moscow and still has offices in Russia. Agencies are in the process of stripping Kaspersky programs from their networks.

Many experts say that technology providers based in China and Russia could become portals for espionage either knowingly or without the firms' knowledge.

“The concern is you have big telecom backbone manufacturers and the Chinese government uses one of them for espionage purposes, why wouldn’t they use the other?” said James Lewis, a cybersecurity expert at the Centre for Strategic and International Studies and a former Commerce Department official, referring to past allegations against Huawei.

For its part, Huawei has rejected any notion that it's a proxy for Chinese espionage operations. “We remain committed to openness and transparency in everything we do and want to be clear that no government has ever asked us to compromise the security or integrity of any of our networks or devices,” it said in a statement about the Pentagon's ban on sale of its phones.

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ZTE could not be reached for comment and has not issued a statement about US officials' security concerns regarding its products.

The unease about the potential for a deal to rescue ZTE has led to multiple legislative attempts to block the agreement. The House included a provision in its annual defence policy bill, barring government agencies from using ZTE technology and banning the defence Department from working with contractors that do business with the company. The Senate version of the bill restricts the ability of the Trump administration to lift the penalties on ZTE without congressional notification and tacit approval.

“I don’t want their hardware in our country,” said Rep. Dutch Ruppersberger (D-Md.), the top Democrat on the House Intelligence Committee when it issued a 2012 report originally outlining the potential danger that ZTE and Huawei posed to US national security.

“If they have their hardware in our country, they will have the ability to get in the back door,” said Ruppersberger, adding nothing in the companies’ behaviour had changed since he co-authored the report.

The proposal to reverse the ban, which resulted from the company’s dealings with Iran and North Korea, would force ZTE to pay more than $1 billion in fines, embed American compliance officers in the company, and hire new management, according to an earlier POLITICO story on the proposal.

Early last month, ZTE announced it was shuttering major operations as a result of the ban. Trump first tweeted that he would help save ZTE on May 13, as he sought to engage Chinese officials in trade talks. In a May 25 tweet, he said, “Senator Schumer and Obama Administration let phone company ZTE flourish with no security checks. I closed it down then let it reopen with high level security guarantees, change of management and board, must purchase US parts and pay a $1.3 Billion fine. Dems do nothing …”

“It remains a bad deal,” Sen. Marco Rubio (R-Fla.) told POLITICO.

Along with fellow Senate Intelligence Committee member Tom Cotton (R-Ark.), Rubio introduced legislation earlier this year that would block the US government from buying or leasing telecommunications equipment from the two Chinese companies.

While Reuters reported Tuesday that ZTE signed an “agreement in principle” to the Commerce ban, a department spokesperson told POLITICO that “no definitive agreement has been signed by both parties.”

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Even if lawmakers are able to block or delay a deal to undo the Commerce ban on ZTE, experts say it may be too late to remedy any threat posed by ZTE. “It’s probably about 10 years too late and it’s pretty much irrelevant,” said Lewis, the cyber expert who worked at Commerce, referring to the fact that ZTE technology is already widely used across the US telecommunications landscape.

“This happens every few years with a company,” according to Lewis. “They’re caught violating sanctions on Iran or violating export control requirements or doing something illegal and the ingredients in the response are always the same: big fine, strengthen compliance and change in management team.”

Still, he said, the proposed deal with the ZTE includes the “right fixes” at this moment.

But David Gomez, a retired FBI executive, described the potential penalties and changes to ZTE's management team as “symbolic.”

“I don’t think that they affect the root problem that ZTE and other telecommunications companies in China that are now looking at the US market represent,” said Gómez, a senior fellow at the George Washington University Center for Cyber and Homeland Security.

The US should scrap the proposed deal, he said. “The company either complies with US trade requirements and opens up their software and hardware to complete inspections by the US government … or we just don’t buy it.”