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Huawei deal calls for reflection

It is probably time for New Zealand to become a little more worldly when doing business with China.

Since the 1960s, China policy has been based on the principle that, as a small country, if we are not first we will be last.

It’s been spectacularly successful and clearly in our interests.

Even Keith Holyoake’s National government made clear it was keen to recognise the People’s Republic, welcoming Canada’s moves to become the first Western country to do so. New Zealand then formally recognised the People’s Republic under Norman Kirk.

The “first not last” policy was accelerated under Jim Bolger, who wanted to “hitch our old waka to the Orient Express” through his Asia 200 Foundation.

In August 1997, New Zealand became the first Western country to agree to China joining the World Trade Organisation (WTO).

Over the next decade, New Zealand became the first developed economy to recognise China as a market economy, the first to start free trade negotiations and the first to conclude them with a deal.

In wonderfully Maoist language, the Chinese refer to these leaps forward as “the four firsts.”

Had we not been first, we would certainly be close to the back of the queue, as the US, EU, India, Brazil, Russia and the Gulf states barged in ahead of us.

Cross-cultural failure
New Zealand businesses have a spectacular record of failure when internationalising – even in Australia as the Air New Zealand, Telecom and Warehouse fiascos demonstrate.

A major reason has been the belief that, because they talk a bit like us, look like us and follow some of the same sports, doing business in Australia is like doing business in New Zealand. That ignores the power of government, unions, media and big business across the Tasman. While Qantas may no longer be 100% owned by the Australian government, for example, Australian governments are always 100% owned by Qantas.

As a result of immigration, international travel, China’s opening to the world and initiatives like the Asia 2000 Foundation, many New Zealanders regard themselves as fitting in to Beijing or Shanghai as comfortably as they might in Canberra or Sydney.

Paradoxically, that risks New Zealanders not recognising how even more naive it would be, than with Australia, to think business practices in China have anything in common with New Zealand.

China will be the biggest economy in the world as early as 2020, it is already New Zealand’s second largest trading partner and there is no doubt it will eventually overwhelm even Australia in its economic importance to us – but it is also a deeply oppressive dictatorship controlled by the military and party.

Even its more mainstream companies often have parallel party structures within them and there are close ties and cross-over ownerships involving party, army and commercial enterprises.

We have learned at some cost to adopt a healthy scepticism towards Qantas, Telstra or Wesfarmers. It makes no sense to be less sceptical towards Chinese business partners.

Why Huawei?
It has been reported this week that the government actively encouraged Chinese telecommunications giant Huawei to supply Crown Fibre Holdings with equipment for its $3.5 billion ultrafast broadband (UFB) initiative ($1.35 billion of the project's funding comes from the taxpayer, the balance from private partners Chorus, Enable, Ultrafast Fibre and Northpower).

Quite why John Key singled out this particular firm for involvement is unknown but it led to Finance Minister Bill English, superminister Steven Joyce and Trade Minister Tim Grocer all visiting China to encourage them to pitch.

Because of concerns about possible links to Chinese agencies, Huawei is banned from working in the US and from having any part in Australia’s $36 billion broadband initiative.

Key concerns are said to be the security of Echelon, which includes the signals gathering operations of the US National Security Agency, the UK’s Government Communications Headquarters, Canada’s Communications Security Establishment, Australia’s Defence Signals Directorate and New Zealand’s Government Communications Security Bureau of New Zealand, whose listening station is at Waihopai.

This intelligence arrangement was seen as valuable to New Zealand by prime ministers as different as Holyoake, Kirk, Muldoon, Lange, Bolger and Clark and even survived the anti-nuclear fuss.

Whether Huawei really threatens Echelon is beside the point. The US and Australia, our closest allies, clearly think it might.

That the government singled out one foreign company for special treatment during the broadband process is odd enough. That it did so for a company distrusted by our closest allies is extraordinary.

It couldn’t hurt to be more wary of our new partners to maintain relations with our old ones. 

Comments and questions
51

Chinese recent military history, politics and human rights gives me no comfort in any prospective commercial arrangement. I liken this discussion to a proposal that Iran should manage our power generation.

Why do people conveniently ignore the American human rights abuses eg. Guantanamo Bay, black civil rights etc etc. The Americans are just a bit more clever at 'sanitising' their human rights abuses. Personally I admire the Chinese for their hard work ethics andf if we are going to cosy up to any 'superpower' then we have better prospects with the Chinese than anyone. As a small country we are not in a position to 'dictate'. We can continue to be 'belligerent' and dogmatic about our own sovereignty (a bit like the tramp with the run-down house sitting on a gold mine being the last person in the street to sell) and doom future generations to debt and the inevitability of having to move overseas to work; or we can embrace the modern global economy, accept that we are now part of Asia, and leverage what we have to offer as a way to future prosperity. And no, I am not Chinese. I am a 5th generation Pakeha Kiwi with an open mind!

Most of Huawei's projects in the region are at loss. I have been wondering who is financing their close to billion dollar loss... I'm not comfortable for Huawei to build our key infrastructure.

Let Australia dance at all times to the US tune.

That's their wish and that was what led the Aussies into Iraq.

NZ was right, Australia was a ass for blindly following the US.

Matthew

What you forget to add to the article is that whilst the USA and Australia are our close allys, the US economy is deterirating in a global sense at a very rapid rate

We can and should still remain friends with them but also enhance our relationship with China and growing companies like Huawei - that si the future

All the talk about Huawei and insinuating espionage on our broadband network is no more risk than what we already have with the USA ( CIA ) and France ( Rainbow Warrior ) - ie if they want to infiltatrte our society or broadband infrastructure, they can any day they w ant now by other means.

The current spin is looking somewhat like the usual USA sponsored spin that they get other parties to promote - to protect their current global standing and also normally to promote USA businesses - instead of better companies in other counries - like Huawei or even LS Cables of Sth Korea who should have got the Huawei contract if it wasn't for mismanagement by Crown Fibre Holdings.

These days the average Kiwi is more globally savvy and the USA sponsored spin about Huawei is quite frankly pathetic - their own inbred middle America probably still believe this BS but the majority of kiw's now assess the spin and make valued judgements.

So it is time to move forward and John Key and his government have in this case made the correct decision for the benfit of NZ inc

It's a shame that Shearer and mallard and co aren't being productive and should actually be supporting the Huawei/ China relationship - after all it was the Labour Govt that arranged the FTA

Totally agree. This is not about Huawei supposedly spying this is about protecting US companies aided and abetted by Australia. In these days of supposedly free trade the US and Aussie shouldn't get away with making these allegations.

Excellent oped Matthew.

I've been intrigued by the hysterical comments from democracy haters which seem to have flooded articles about this on NBR. It's one thing to attack America (every loonbag the world over does) but it's something else to start seeing Australia-haters popping up too.

It seems to be the same politician's names popping up too.

Nothing is free in this world, not even obedience, and I'm sure there are many who would like to know just how much and to whom obedience has been procured.

After all, it only cost Kim Dotcom $10 million - officially.

I remember reading a story about what happened to the Briton's when the Saxons came. Initially it was thought they all moved to the West coast (i.e. Wales etc.) But studies show it was those in power that moved West as did some move north when the Normans came. The rank and file people stayed where they were - one master was as good as another - they had food to provide and they could provide it to whoever was there.

It is obvious that some of these big countries are in power plays (we are not one of them). But for a small country like NZ - as long as we have sufficient allies to hold our land (and don't sell it all away) then I think issues about whether we get our Internet hacked by the USA, China, a raft of companies and individuals is irrelevant.

Everyone knows - don't keep secure information in a place where it can be accessed from an external network - even in some cases on an internal network of any size.

Our main issue is to ensure we keep onside with both the US and China and a number of other big players - i.e. we need to play the middle ground.

Sometimes that means encouraging one side or the other at differing times.

It's all very well being certain of our own opinions but I don't think US, Aust and India are any less informed in this matter than we are. They have all banned Huawei. Surely it behoves our leaders to fully examine the reasons behind these countries' rejections before proceeding holus bolus with this Chinese company.
It has been said (Steve Jobs) that changing your mind can be a sign of intelligence.
Let us show some intelligence in this important matter.
Willie Getonwithit

There is no middle ground with China, just ask a Tibetan.

Most Tibetians living in exile are actually instigated by the jealous Westerners and/or Missionaries to disrupt the Peace and Prosperity of China....

Haha. Are you a 网络评论员? Been paid your 50 jiao yet?

Happy to do business with Huawei and the Chinese, people need to realise where the world is going and get on the train before it is traveling too fast

By all means hop on your train and here's hoping it goes as fast as this Chinese train:

http://www.economist.com/blogs/banyan/2011/07/chinas-high-speed-train-crash

The comments here simply reinforce my belief that Kiwis will sell to whomever hes the money first, without any consideration for long term planning. This is evidenced by over 100 years of deforestation to produce pasture, relying on low value commodities and our chronic inability to create any business worth more than $1Bn.

You better start teaching Mandarin in the classroom, because China will eat NZ's lunch before Kiwis are finished with breakfast.

If you read your history books you'll realise that it is the good ol' Tangata Whenua Maoris who are responsible for most of the deforestation (especially native bush) in New Zealand! The Chinese are too clever to destroy the assets that generate the wealth and I believe they would be better stewards of the assets they control than the Maoris. You don't need to look too far to see evidence of wastage and corruption in Maori organisations; so why is everyone so worried about the Chinese! Bring it on!

The Doctor makes an interesting point. These actions against Huawei (although we know Huawei to have previously stolen Cisco IP) could well be anti-competition actions motivated more by the US lobbyist sector than real security concerns.

Lest we forget, we've seen the power the US lobbyists have over the governance and judiciary sector in the US just recently, in the case of Kim Dotcom.

From Business Spectator:
It was just a little over a year ago that major NBN supplier and former Mike Quigley employer Alcatel Lucent was forced to pay $137 million to settle a bribery case with the US Department of Justice.

From their comments section

Doesn't anyone suspect simple American industrial self-interest? (Red flags on Huawei's NBN ban, March 26.) ASIO have said it was done on US advice. Where are our own technical experts? Huawei have been undercutting American suppliers all over the world.

From NZHerald today

Huawei New Zealand public affairs manager Mark Champion describes trying to put the company's side of the story as "like going into this debate with one arm tied behind your back". He says Huawei New Zealand has to defer to the Government - which he adds was perfectly happy with its assurances as recently as October - and ministers are understandably reluctant to talk freely on potential security matters.

But he questions why a Chinese company has been singled out for so much attention by Australia and the US.

"I think this is more commercial than security."

Any agency private or governmental that has an Internet connection must surely realize in this day and age that their privacy may be compromised, regardless whose or what hardware is used. The action against Huawei is based not on hard evidence, but guilt by association, founder and chairman are ex Red Army and they are Chinese, and China has been prominent in hacking western firms and government agencies. While not excusing this, America have been the most active in this area, the US military is now developing software that will let it secretly manipulate social media sites by using fake online personas to influence internet conversations and spread pro-American propaganda.(guardian.co.uk, 17 March 2011)
Some of the recent articles in the media in New Zealand in regards to Huawei are from people with ties or former ties to US governmental agencies, giving grave warnings and telling us how lax our government is in not seeing the Chinese fox in the telecommunication hen house. Of course foreign government agents work in New Zealand, Israeli, French and Russian have all been caught out, U.S. cables obtained by WikiLeaks indicate senior New Zealand Defence Ministry officials have been spying for the U.S., which to me is more sinister than what Huawei might or might not do. Mr Hooton describes the Chinese government as a “deeply oppressive dictatorship” he could also have said the American Government is not a true democracy but one –purchased by lobbyists and special interests groups, some of which are actively engaged against New Zealand's best interest (Dairy and Pharmaceutical for example)

Xenophobic racist morons of the world - unite in NZ!

How pathetic! At this day and age after all the revelations about how the US actually does business (dirty, underhand, unethical, selfish, immoral, crookish and above all, political) for US arse-kissers to complain about doing business with China!

Did NZ not see France as an ally until Rainbow Warrior?

Did NZ not see US as a democratic ally until the nuclear ban?

Did Great Britain not abandon NZ for EU, and now attempts to be separate from EU?

What has China done to NZ except good?

Poll tax on Chinese, anyone?

even so, i was still a lot more comfortable about things when my only contact with them was when buying cauliflower and cabbages.

Huawei are contracted to provide internal fibrein NZ i.e. UFB not external fibre. All external internet traffic does not go through Huawei. So what's the big issue. Surely it's simple to find out what traffic goes to the Chinese mothership. Hooton as usual scare mongering on no actual facts

All the anxiety is because of the fact that the world is fast changing with China at the crux of the process. Too many stereotypes have been said about China in the past decades and fed into the mindset of a generation of people. People of today find it hard to reconcile between where the reality sits and what they were led to believe. All these will be solved over the time. Earlier movers who embrace changes will reap more benefits. Change is the only constant in the world.

The bad thing for Aussi to ban Huawei is that Aussi customers will pay more for their broadband usage. Huawei can definitly compete with Telstra and bring down the cost. Unfprtunately, Aussi will pay more for their broadband for another decede.

Your comment is admirable....

From Australian Business Spectator:-
Opposition finance spokesman Andrew Robb speaking:
"Over the last four years the Rudd-Gillard governments have damaged our relations with China, India, Japan and Indonesia at a time when the middle class across that region is exploding," Mr Robb told AAP.

NSW Premier Barry O'Farrell says the federal government's decision to ban a Chinese telco from tendering for NBN contracts is illogical and "a huge insult".

He also fears it could damage Australia's economic relations with the Asian giant.

Mr O'Farrell weighed into the debate over the Huawei ban on Wednesday, saying it was a "huge insult" to the company.

"This looks to be the latest clumsy, offensive and unprofessional instalment of a truly dysfunctional government."

"We must bear in mind that this is a company which is heavily involved in eight of nine NBN roll-outs around the world," Mr Robb said.

Justin O'Brien:-
Much has been written about how Australia can use the birth of the “Asian Century” to inculcate higher standards of corporate governance and effective regulation within the country and across the region. It is an opportunity that has just been squandered.

It is, of course, appropriate to have restrictions if there is evidence to support them or if risk cannot be dealt with the through imposition of security clearance procedures as the Singtel/Optus tie up demonstrates.

The purchase of Optus by Singtel, which is partially controlled by sovereign wealth funds from Singapore, was approved only after inclusion of specific undertakings to ensure ongoing security protocols were in place.

Placing barriers to entry in the government space for the building of a network when Huawei operates extensively in the corporate sphere here in Australia seems more than a little political. It mirrors the overtly partisan nature of the debate in the United States, which is mired in assertion rather than evidence and procedures for determining investment occluded rather than transparent. A Coldplay indeed.

Justin O'Brien is a professor of law at the University of NSW.

Good article, Hooton.

Pity about the last part.

We are not Yankee Doodle's stooges and clowns.

Who took control a first world telecommunication system, stripped billions out of it and left NZ with a third world Telecom?

You got it - Yankees!

Dunno if it's true or not, but me mate reckons that all Huawei mobiles sold here are slaves to an intranet thingymajig back to China.

http://www.smh.com.au/world/ng-urges-wife-to-flee-after-appeal-rejected-20120331-1w52h.html

A warning about doing business with the Chinese.

If Huawei's going to do NZ a good offer with the UFB then why not let them do it. There is no proof the Chinese govt. told Huawei to do anything

Chinese government involved in hacking foreigners who highlight Chinese human rights abuses:

http://arstechnica.com/news/2012/03/reports-identifies-chinese-grad-student-in-hacks-against-tibetans-others.ars?clicked=related_right

Company that does business with Huawei has proprietary technology hacked and stolen:

http://www.reuters.com/article/2012/03/09/us-symantec-hackers-idUSBRE8281D820120309

Very very very satisfying to feel the fear now evident from the white trash out there about China.

Well, keep fearing.

Australia is an extension of the U.S. spy network and a freely used military base by the Americans.

Wait till China refuses to import your minerals....may be too late.

Gifford likes to about CRONY politics as values but doesn't reflect it when her government proclaimed Huawei is guilty when its never proven to be or when it's never been criminally prosecuted for decades.

ENDACE makes spying tools for the world i think we are in no danger here

ENDACE ENDACE ENDACE

US conspiracy to keep itself relevant by spreading misinformation and outright lies - so evident for all to see, save the white trash so evident here who are still swimming in American sewage.

Iraq WOMD, anyone?

China will cross around the world business relations. And this partnership will give work for unemployed people. pmp certification irvine

New Zealanders, wake up, for goodness sake!

Air NZ was screwed over big time by the Australian government working in cohorts with Qantas - demonstrating the close linkage between state and companies over there.

What does this tell us about the Australians?

International trade is about self interest ie the Aussies will screw us given the chance so will the Yanks, Chinese, French, English, etc etc. Our job is to accept this fact and get on with it - but try and be smarter than the other side. That is what all business is about. We are small, so we can't be precious abut who and what we deal with as the big economies can. Yes, the Chinese have a rigid political structure, and they are agressively pushing out into the world but who cares? lets deal with them on our terms, sell them as much as we can, buy a few broad band cables and get on with it. Lets do the same to the Aussies, Yanks etc. If we are smart we will end up like Singapore and Switzerland, wealthy small autonomous economies answering to noone. Isn't that the kiwi way?

I think we could be made to feel more loving and faithful to USA desires if there was a fair free trade agreement in place withthem. They really don't want us to have good access to their markets so just want a one-sided deal.
We would acceptthe same deal with USA that China signed up to.
Who are our real friends?

There is no field for me to put my name above the comment.

"Key concerns are said to be the security of Echelon."

There is a counter-argument to this.
I suspect intelligence agencies guard their real secrets very closely and don't like passing them to other agencies because they fear they may get leaked.

Currently Israel is complaining about America leaking Israeli sensitive information.

http://www.ynetnews.com/articles/0,7340,L-4210439,00.html

Obama betraying Israel? US making deliberate effort to hinder Iran strike by leaking classified info, intelligence assessments, says Ron Ben-Yishai in special Ynet report
http://www.ynetnews.com/articles/0,7340,L-4209836,00.html

I don't think America passes any real secrets onto us and offhand I can't think of any real secrets that NZ may have.

If China wanted to find out some secrets I suspect they wouldn't start with Echelon as they may have already figured out that its probably all low level stuff that wouldn't interest them

Why would China be interested in NZ???????????

Australia - makes sense as Australia sees itself as the Deputy Sherif of the US for the Asia Pacific region.

But NZ??????

Heck, we are not even trusted by the Americans!!!!!

Its really a matter of who is accessing our secrets - China, Australia and the USA they are all the same.
If Australai was interested in protecting our interests they would let our apples in without so much protectionist activity going on. They would open up their borders and drop the insistance of our having to show our passports at immigration. they would mention our win in the 2nd Cricket test when discussing NZ cricket stats.
No Australia is not really our friend they just want to rape and pillage our country just like everyone else. Also don't

People seem to think that the risks involved here are mere "eavesdropping" by the Chinese. Huawei could potentially be taking control of NZ's basic public communication infrastructure e.g. it could cripple NZ telecommunication literally. But I believe this is not even the main issue, personally China is yet to show its sincerity and transparency. Until all the corrupt communist officials are flushed of their government, it would really be hard to trust China with your national security at stake. You may say the same thing with the USA, but at least you USA is not controlled by one party and the Americans are not as "suppressed" as the Chinese today. USA has a big problem to solve but unless China can show it has a better deal inside and out then we'll have to VERY CAREFUL.

It's not a question whether China could "eavesdrop" intelligence info from the Echelon. That's nonsense as there are better ways to do that. The problem I see is that Huawei will potentially be in control of a basic public infrastructure, which during war time can easily be disabled or taken down, thereby crippling NZ telecommunications.

But personally, this is not even the main problem. My problem is China being controlled by a highly secretive and oppressive small group of people. It's a double-faced country in all the worst possibility. In the case of USA, there is also possibly some unseen sinister that is attempting to control the nation but at least people don't generally get shot by speaking against a politician or spewing out some "secrets". I believe that democracy still works in the USA, although it's being challenged but it's alive and Americans are fighting againsts this sinister force.

Probably China is also a deeply oppressive dictatorship controlled by the military and party.
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