John Ivison: China relationship requires fine balance between trade and security

John Ivison | October 9, 2012 9:08 PM ET
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Reuters filesA House of Representatives Intelligence Committee released a report Monday that warned U.S. telecommunications companies not to do business with Huawei Technologies or ZTE Corp, two Chinese equipment makers. Given that Huawei also supplies Canadian telcos such as Telus, the public airing of these long-held suspicions raises questions about the safety of information transported along networks in this country.

When written in Chinese, the word “crisis” is composed of two characters — one represents opportunity and the other danger.

This is particularly apropos in light of Canada’s current China crisis — the potential for increased trade comes at a time when the Asian giant is spying on us and stealing our technology.

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U.S. fears Huawei could 'shut down' national security systems

Washington’s real concern with Huawei — and the reason a U.S. Congress Intelligence Committee recommended it be banned from U.S. markets — is a fear that the Chinese telecom giant could be churning out equipment riddled with security “back doors.”

The switches and routers Huawei produces, warns the intelligence committee’s Monday report, might arrive in the United States with hidden code that would allow the Chinese military to control the devices from afar.

Huawei maintains it has no links to the Chinese government and alleges the intelligence committee recommendation is simply a conspiracy to shut out Chinese competition. Either way, the stakes are high.

If much of the United States suddenly found itself wired up with compromised Chinese-made equipment, Beijing could “shut down or degrade critical national security systems in a time of crisis or war,” claims the committee report.

In a worst-case scenario, phone and Internet systems could be crippled, oil and natural gas systems could malfunction and power grid failures could plunge U.S. cities into blackout. Even without such apocalyptic results, compromised equipment could be an easy conduit for Chinese officials to keep an eye on national security information.

Of course, U.S. firms are just as capable of manufacturing compromised switches, but what has U.S. authorities spooked is the threat of Chinese government control over Huawei. No matter how willing Huawei is to keep honest, say U.S. authorities, it would have little ability to resist the totalitarian control of China, a country known for beefing up its cyber war capabilities.

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A House of Representatives Intelligence Committee released a report Monday that warned U.S. telecommunications companies not to do business with Huawei Technologies or ZTE Corp, two Chinese equipment makers.

After an 11-month investigation, committee chair Mike Rogers said Huawei gave the Chinese government a way of gathering intelligence on U.S. networks, and even had the potential to close down those networks in the event of conflict. Rogers cited occasions where routers sent data back to China, a process known as beaconing.

Given that Huawei also supplies Canadian telcos such as Telus, the public airing of these long-held suspicions raises questions about the safety of information transported along networks in this country.

Canadians should be concerned, according to Ray Boisvert, president of I-SEC Integrated Strategies and, until recently, assistant deputy director of intelligence for Canada’s spy agency, CSIS.

Mr. Boisvert believes cyber espionage has evolved into as important a national security threat as terrorism — and he is categorical that Huawei is engaged in gathering intelligence for the Chinese government.

“Huawei is a significant threat, I have absolutely no doubts,” he said. “The company has recognized links to the state and furthers the aims of the Chinese military and state security apparatus.”

He said Huawei should not be permitted to bid on the government’s secure shared networks that are currently being developed.

“If it is proprietary information that requires the highest level of security, then exclude Huawei.”

Huawei has denied all allegations of spying, claiming it “protects the integrity of our customers’ networks.” Telus says its networks are secure.

Huawei is attractive to Canadian businesses because its networks are priced lower than its Western competitors.

David Skillicorn, professor at the School of Computing at Queen’s University, said the company was heavily implicated in the theft of technology from former Canadian tech darling, Nortel Networks. Reports after Nortel went bankrupt in 2009 suggested hackers had wandered unimpeded inside Nortel’s networks, including the chiefexecutive’s terminal, for a decade.

“That made its technology really cheap to develop,” he said.

In the constant battle between cost and security, convenience has been winning but Professor Skillicorn echoed Mr. Boisvert’s call for the Canadian government to follow the lead of the Americans and Australians by barring the Huawei “Trojan Horse” from involvement in any sensitive network development.

“We shouldn’t be rolling out the red carpet for this company,” he said. “I think Canadians should be concerned. The potential for terrible things to happen is very large. They could turn the whole system off, which would give them huge leverage over Canadian policy.”

Late Tuesday, the government reiterated that was invoking a “national security exemption” for the construction of a secure national communication network, but wouldn’t comment on how that applies to any individual supplier.

Yet no government can ignore China, particularly not one whose central economic plan depends on boosting exports to the Far East. Ottawa must soon hand down its decision on the $15-billion takeover of oil and gas producer Nexen by Chinese state-owned company CNOOC.

Mr. Boisvert said CNOOC represents a “strategic, rather than a direct, threat,” as part of a broader Chinese game-plan to make investments in the resource sector.

“It’s a far more subtle threat,” he said. “I think it is a very difficult question. Saying no to the deal might close the doors in the near term to foreign investment from China. There are consequences.”

While Nexen has some interests in Canada, including a 7% stake in Syncrude’s oilsands and upgrading facilities, most of its assets are overseas. CNOOC would not be able to deny or place conditions on oil supply, transfer technology or expertise, nor use Nexen to infiltrate or sabotage the Canadian economy. As such, government sources suggest the acquisition will be waved through, albeit with strict conditions.

The government is well aware that the China relationship requires a fine balance.

Dick Fadden, the head of CSIS, waded through a storm of ordure when he said that foreign states (namely China) were spying on Canada and influencing some politicians.

“I’m making this statement because people are totally oblivious to this kind of issue,” he said.

He was roundly criticized but he was correct in his assessment that China sees no inconsistency between maintaining good trade and diplomatic relations, while simultaneously spying and stealing. Canadians need to be more aware about the opportunities from — and the dangers of — dealing with the dragon.