“A congressional report this week recommended in no uncertain terms that U.S. companies and government agencies avoid two of China’s biggest telecommunications companies. Buying equipment from them risks national security, the report said,” Verne Kopytoff opines for Fortune.. “The House Intelligence Committee’s withering attack on the two Chinese companies, Huawei Technologies and ZTE Corp., would seem like a big opportunity for U.S. firms to gain ground. The reality for U.S. businesses, however, could be the very opposite.”
“In response to the congressional assault, China may throw up roadblocks against the U.S. tech imports by raising tariffs or prohibiting certain kinds of equipment, according to trade policy experts,” Kopytoff opines. “Such a tactic would harm U.S. companies, which increasingly count on China for sales and growth. The stakes are huge. Last year, U.S. firms sold $20 billion in advanced technology to China, according to the Commerce Department.”
Kopytoff opines, “The bipartisan congressional report looked exclusively at Huawei and ZTE, two global businesses that sell gear for connecting phone calls and routing Internet traffic. Investigators said that China’s government could tamper with the technology to spy and to steal trade secrets. Both companies failed to provide details about their corporate control and government ties, they said. The presence of Communist Party offices in the companies’ headquarters also raised red flags.”
“Indeed, the situation is complicated by the interdependence of both nations. Cutting off trade is nearly impossible. China needs U.S. technology to keep its infrastructure and factories operating. Meanwhile, U.S. tech manufacturers depend on Chinese components. The lines are so blurry that a product’s origin is often a matter of semantics. Apple’s (AAPL) iPhones and iPads, for example, are largely assembled in China,” Kopytoff opines. “Similar cross-pollination is the norm for U.S. telecommunications equipment makers. Congressional investigators, however, did not look at any security risks created by such ties.”
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U.S. House Intelligence Committee: China's Huawei, ZTE should be ban in U.S. – October 8, 2012