ZTE Kerfuffle Shows Cybersecurity Doesn’t Operate in a Vacuum

President Donald Trump’s signal last week that he might loosen restrictions that effectively shuttered Chinese phone maker ZTE drew intense criticism from national security-focused lawmakers who worry the company could be used as a Chinese spying tool.

Sen. Marco Rubio, R-Fla., in particular, struck back at the president, charging that the U.S. would be “crazy to allow [ZTE] to operate in U.S. without tighter restrictions.”

Taking a tough line on ZTE over security, however, could have cascading consequences that the U.S. will come to regret, cyber and China policy watchers warn.

The bottom line, they said, is that even if Chinese tech companies pose cyber risks to U.S. consumers, that threat must be viewed within the nations’ broader, bilateral relationship.

It's an Extremely Complicated Relationship

The president’s efforts to halt the ZTE ban stand in stark contrast to how the Trump administration treated another foreign company that officials said could be a launching pad for cyber espionage: Russia’s Kaspersky Lab.

In that case, in addition to banning Kaspersky from federal networks, Trump Homeland Security and national security officials have acknowledged urging major corporations and critical infrastructure owners to similarly jettison the Russian anti-virus firm.

When it comes to a major Chinese company, however, the calculus is more complicated. China has a massive tech sector and major U.S. brands, including Apple, Cisco and Juniper Networks have major Chinese operations.  

That means that a conflict that starts with cybersecurity could end with a slate of unrelated consequences including higher prices for consumers.

“Unwinding the U.S.-Russia tech relationship is not very hard,” said Adam Segal, a China and cybersecurity expert at the Council on Foreign Relations. “It’s Kaspersky and it’s hard to think of many other Russian companies that provide any type of tech to the U.S.”

China’s tech sector is not only much broader, but officials’ and lawmakers’ chief concern about the company—that the Chinese government could force it to cooperate with cyber espionage against U.S. targets—is basically true of any Chinese company, Segal said.

There’s also a danger that China, which during recent decades has been a major player in the global economy, could shift to focus more on its domestic market if it sees too many roadblocks to U.S. sales, said Tim Maurer, co-director of the Cyber Policy Initiative at the Carnegie Endowment for International Peace. That could severely hamper global trade.

“I think security concerns are secondary to broader political goals,” Maurer said, assessing Trump’s decision.  

Where does security fit in?

Trump’s pledge to help loosen restrictions on ZTE, offered in a May 14 tweet, did not appear to have anything to do with security.

The Commerce Department’s decision in April to ban ZTE from using U.S. products for seven years was sparked when the Chinese company violated a settlement agreement by selling telecom equipment with U.S. components in it to Iran. ZTE ceased major operations following the Commerce Department decision but said it was working to get the ban reversed or modified.

Trump’s official reason for trying to revisit the ban, as stated on Twitter, was that it produced “too many jobs in China lost.” The unstated subtext was that reversing the decision would give Trump a carrot to offer in U.S.-China trade negotiations that began last week as the nations exchange a series of escalating tariff threats.  

The Commerce Department’s decision was also damaging to U.S. companies that supply materials to ZTE, including Qualcomm, a San Diego firm worth over $85 billion, which supplies most of ZTE’s computer chips.

Critics, however, were quick to seize on security concerns.

Rubio, who has sponsored legislation that would ban ZTE from U.S. government contracts, declared on Twitter that the “problem with ZTE isn’t jobs & trade, it’s national security & espionage.”

Rep. Ted Lieu, D-Calif., declared that: “By promising to help Chinese tech company ZTE, the President isn’t just prioritizing Chinese jobs over the U.S.’s wellbeing, he’s jeopardizing our national security.”

The Senate appropriations committee unanimously passed an amendment from Rep. Dutch Ruppersberger, D-Md., on Thursday, that would block Trump from reversing the ZTE ban. The amendment was included in the House version of a funding bill that covers the Commerce Department among other agencies.

It’s Not Black and White

It’s important to draw a distinction, cyber and China watchers say, between protections that apply to the U.S. government—which holds a bevy of secrets and reams of citizens’ personal information that would be of intense interest to Chinese government spies—and those that apply to consumer devices.

“The government can do what it wants and that’s not a big factor in the broader market,” said Bruce McConnell, a former top cybersecurity official at the Homeland Security Department, who’s now global vice president at the EastWest Institute, a non-partisan think tank.

“If the government’s intention is to put Chinese companies out of business for security reasons,” however, “that doesn’t seem to me to be a good road to go down,” McConnell said, noting that U.S. companies might come out behind in a tit-for-tat conflict with China.

Betsy Cooper, a cybersecurity researcher at the University of California-Berkeley, warned against taking a “black and white, full access or no access” approach to foreign companies that pose potential risks to U.S. networks.

“I think it’s very hard to imagine a world in which we allow full and open access of these companies to American markets because of backdoor concerns that do exist,” Cooper said. “But, I do think we have a tendency to swing too far in the other direction.”

Context is Key

The nations announced the broad outlines of a deal over the weekend by which the U.S. will back away from its tariff threats and China will purchase more U.S. goods to lower the nations' trade imbalance. Yet it remains unclear whether the government will reverse the ZTE ban. 

Trump declared in his initial tweet that the “Commerce Department has been instructed to get it done!” but Press Secretary Sarah Sanders seemed to backpedal Thursday, saying only that the president had asked the department “to look into it.”

Security concerns about ZTE go back many years. The House Intelligence Committee issued a 2012 report outlining the danger ZTE and another Chinese telecom Huawei posed to U.S. national security systems in 2012, when Ruppersberger was the panel’s ranking Democrat.

More recently, the Pentagon banned Huawei and ZTE phones from being sold on military bases and the Federal Communications Commission has forwarded a plan that would bar federal subsidies to Huawei and ZTE or to U.S. companies that include them in their supply chain.  

Intelligence officials have also espoused their distrust of Huawei and ZTE in congressional hearings at the urging of Rubio and other lawmakers.

If the government does reverse the ban, it will be a contrast to the administration’s general approach to the Chinese cyber threat.

The administration has been more vocal, for example, about Chinese hackers stealing U.S. companies’ intellectual property and trade secrets than the Obama administration was during its final years in office.

The Obama administration was highly critical of Chinese hacking during its early years and even indicted five members of China’s People’s Liberation Army for the hacking in 2014. The Obama team stepped down its criticism, however, after a 2015 deal between Obama and Chinese President Xi Jinping that neither nation would hack the other for purely commercial reasons.

While Chinese commercial hacking didn’t cease after that deal, it did decrease significantly, according to FireEye and other private-sector cybersecurity firms.

It’s not clear if the Trump administration’s surge in criticism over Chinese hacking is responding to an uptick in the actual hacking itself.

It’s also not clear if the U.S. government believes China has engaged in purely commercial hacking—the subject of the Obama-Xi deal—or if much of the hacking is focused on industries that can yield both commercial and national security insights, such as aviation and energy.

What is to be done?

Bruce McConnell, the former Homeland Security cyber chief, suggests a two-part solution to government concerns about the security of ZTE and other foreign tech firms.

First, the U.S. government—which routinely refuses to share the data undergirding its conclusions about cyber threats out of fear of revealing intelligence sources and methods—must figure out a way to be more transparent, he said.

“It’s a problem that we’re basing our policy off classified information and the general public doesn’t have a clue what the evidence is,” McConnell said.

Second, the U.S. and other governments should work toward a common and transparent process for governments to vet technology for spying backdoors and other vulnerabilities, he said.

Microsoft, for example, has agreed to software reviews to operate in China and built custom versions of software for the Chinese market.

After the British government raised concerns about Huawei, the company agreed to build a British cybersecurity testing center where the code for all British Huawei products is poked and prodded by the nation’s intelligence agency, GCHQ.  

The U.S. could consider a similar model, McConnell said.

In an effort to urge the Homeland Security Department to reverse its Kaspersky ban, the Russian anti-virus company similarly offered to open up its source code for review. The government did not respond to that offer, but should have accepted it, McConnell said.

Code inspections aren’t perfect and there’s no guarantee a backdoor might not slip through during such a review, McConnell said. But, a government’s pronouncement after such a review would carry more weight.

“It’s about creating a transparent and open, crowdsourced evaluation of product security,” he said. “If you put something out in the public domain or through an inspection program, allow the code to be inspected across the board, it would have a lot more credibility.”