Features | From Pivot Magazine

The right way to deal with Huawei

Banning China’s telecom from building 5G infrastructure in Canada won’t keep us safe from cyber-espionage

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illustration of hand placing 5G tower on globeSome Canadian telecoms already use Huawei radio equipment at the top of cell towers and antennas but have not yet allowed the Chinese company to supply equipment for core networks. (Hand, globe, antenna: iStock)

Canada’s decision on whether to ban China’s Huawei Technologies from building 5G infrastructure here couldn’t come at a more difficult time. Tensions between the two nations are uncommonly high: In December, Canada arrested Huawei’s CFO, Meng Wanzhou, at the behest of the U.S. government, which wants her extradited for violating U.S. sanctions on Iran; China responded by jailing two Canadians working in China, and accusing them of spying. 

Still, it’s useful to remember this isn’t the first time we’ve wrestled with this sort of dilemma. Nor is it likely to be the last.

Six years ago, Canada allowed a state-owned Chinese oil company to buy Calgary’s Nexen Energy for $15.1 billion, despite concerns it would manage the resource in China’s best interests, not ours. We then tightened our foreign ownership restrictions, prohibiting such deals in the future except under “exceptional circumstances.” Last year, Canada made good on that promise when it blocked a state-controlled Chinese company from buying Aecon Group Inc., a large infrastructure company, citing national security concerns.

The Huawei conundrum is somewhat different. For one thing, it’s not a state-owned company, though few doubt that, if pressed, it would do its government’s bidding. (Chinese law, in fact, compels citizens and organizations to assist the government with intelligence work.) And Huawei isn’t looking to buy our natural resources, or a big Canadian company. Instead, it’s looking to supply Canada with technology to power lightning-fast 5G networks. 5G links traditional cell towers and rooftop antennas with multitudes of small cells able to transmit huge amounts of data almost instantaneously through higher-frequency radio waves. Some Canadian telecoms already use Huawei radio equipment at the top of cell towers and antennas but have not yet allowed the Chinese company to supply equipment for core networks. 

But if wireless technology should indeed be considered critical infrastructure, and data the most important resource of the information age, then Canada is on the horns of a familiar dilemma. And so the question is, how great is the risk? Huawei has insisted it would not use its access to the Canadian market to spy on our government, our companies or our citizens. But three of Canada’s Five Eyes intelligence-sharing partners—the U.S., Australia and New Zealand—have already blocked Huawei over just such concerns. Earlier this year, Huawei itself was charged in the U.S. with attempting to steal trade secrets from T-Mobile. (Canadian corporations and banks have been targeted in the past by Chinese hackers, according to authorities in Canada and the U.S.)

At the same time, freezing out Huawei would further anger China at a time when feelings are running hot. And Canadian companies warn that a ban on Chinese technology will carry a great cost, and will further isolate the global business world into two solitudes—those who do business with China and those who don’t.

There are no easy answers, of course, but there’s something else that’s useful to remember. Cyber-security experts say Canadian companies must constantly strive to safeguard their data, no matter which way the decision goes. Banning one company is no guarantee. And even the best safeguards won’t be enough to mitigate all the risks. “I’ve been doing this a long time and I’ve never seen it [like this],” says Danny Timmins, a partner and national leader for cyber security with MNP. 

Timmins advises clients to identify their “crown jewels”—their most valuable and sensitive intellectual property or data—and concentrate on protecting that first. He also advises crafting instant response plans in the event of a security breach. The sooner an organization finds out it’s been hacked, the easier it is to limit the damage, he says.

Canada is a knowledge-based economy and therefore a natural target, says Robert Masse, national partner in cyber security, part of Deloitte’s risk advisory practice: “How do you protect against foreign-government-controlled and overseas companies getting into the infrastructure, back-dooring it, so they can leverage a potential conflict in 10 or 20 years?” It’s a huge challenge. The U.K. has said it can contain the risks associated with Huawei, but Masse has healthy skepticism about its assessment. Confirming the integrity and security of hardware and software systems is almost impossible to audit today, he says. 

Masse shares the belief that to do business globally, all governments and companies must live with some level of risk. Building new walls in a world where the internet, cloud storage and telecommunications have broken them down simply will not work, he says: “It’s very difficult to do that now.”