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Should U.S. limit China-government influenced IT systems?

Some see it as good "first step" but others predict it might backfire as major trade dispute erupts

By , Network World
April 03, 2013 09:38 AM ET

Network World - New federal restrictions now preclude four U.S. agencies from buying information-technology (IT) systems from manufacturers "owned, directed or subsidized by the People's Republic of China" due to national-security concerns. But is this a smart tactic?

Stuck into the massive spending bill passed by Congress and signed by the President are two short paragraphs about these new IT-purchasing restrictions that have been placed on the Department of Commerce, Department of Justice, the National Aeronautics and Space Administration (NASA) and the National Science Foundation (NSF). These restrictions represent a U.S. backlash against what many believe to be evidence over the last decade of massive cyber-espionage and theft of intellectual property by China. It comes amid rising fears that IT equipment produced, assembled or manufactured by a company "owned, directed or subsidized by the People's Republic of China" could be used to somehow sabotage the U.S. But it remains to be seen if this will be a short-lived backlash brought by Congress or it becomes the foundation for U.S. policy moving forward.

[RELATED: China slams U.S. for discriminating against nation's tech vendors

RELATED: Is EVERYTHING made in China?]

It's clear that some in the U.S. government, including the House Intelligence Committee -- which issued a scathing report last fall that called Huawei and ZTE a threat to national security -- and the Treasury Department's Committee on Foreign Investment in the U.S. are also working in other ways behind the scenes to keep technology made by China-based manufacturers out of U.S. commercial networks as well.

Sprint Nextel is being pressured by federal regulators to not integrate equipment from Chinese suppliers, such as Huawei and ZTE, into its network as a condition for approving Japan-based Softbank Corp's $20 billion acquisition of it. And since as part of the deal, Sprint Nextel wants to acquire wireless carrier Clearwire, which uses Huawei equipment to some extent, that's become an issue. Rep. Mike Rogers, chairman of the House Intelligence Committee, said Sprint and Softbank are giving the government assurances they will phase out Chinese-supplied equipment, including Huawei's, in Clearwire's network. Sprint declines to discuss the details.

Huawei's Vice President of External Affairs William Plummer commenting on the new federal provision related to procurements, simply stated, "The provision does not apply to Huawei or Huawei products" and that Huawei does "not fit the criteria outlined in the section of the bill." He added Huawei doesn't sell to the federal government.

The Chinese government -- which has long had its own bias toward supporting and acquiring home-grown information technologies in China -- has shot back against the new U.S. procurement rule for the four federal agencies that appears to make China-related purchases suspect in terms of national security.

"The contents of the U.S. Congressional act sends a very wrong signal, and could directly affect normal trade between Chinese enterprises and U.S. business partners," the country's Ministry of Commerce said in a statement earlier this week. "This abuse of 'national security' measures unfairly treats Chinese enterprises." The Chinese Ministry said the U.S. stance presumes all Chinese companies are guilty of security risks, and thus in China's view, violates fair-trade principles.

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