Germany, U.S. Hegemony, and Huawei’s Waning European 5G Infrastructure Prospects

By Thomas Cavanna

In late September, Germany’s leaders reached an agreement in principle on a new bill that will severely restrict access to the country’s 5G network infrastructure market. Although forthcoming legislation is unlikely to take the form of a ban, the Chinese company Huawei is expected to see its prospects dramatically curtailed by new technical verification requirements, a political evaluation of suppliers’ “trustworthiness,” and the involvement of national cybersecurity and intelligence services in the decision-making process. The news is a severe blow to Beijing and a major victory for the United States, whose leaders have pushed back intensely against Huawei in the last 18 months. However, the whole Huawei saga also brings to light the relative decline of America’s influence over one of its most important allies.

Several reasons explain why Germany was a focal point of President Donald J. Trump’s global battle against the Chinese company. To begin, the country’s own market offered major expansion opportunities to Huawei. Partnerships with German multinationals enabled Huawei to emerge as the world’s main Internet equipment supplier. But Germany also hosts important U.S. military bases, is Washington’s chief intelligence ally—besides the United Kingdom—in the region, and sits atop “fiber-optic cables that are key to intercepting communications from Russia to the Middle East.” Additionally, Germany, whose exports to China (EUR 100 billion per year) represent more than half of the EU’s exports to the country, is the driver of Beijing’s relationship with Europe. Last but not least, Germany’s positions often shape the ones taken by European institutions. Therefore, the Trump administration engaged in “an endless stream of cajoling and threats” that included possible cuts in intelligence ties and expressions of concern about the future of NATO.

For a long time, Germany appeared to lead Europe in resisting U.S. injunctions. There were several reasons for this intransigence. First, Huawei was deeply involved in local 4G networks and had demonstrated the competitiveness of its products and services. Second, its 5G European rivals—Ericsson and Nokia—seemed unable to keep up and the United States did not offer any alternative. Third, a Huawei ban was expected to delay 5G rollouts and cause major additional costs. Fourth, Washington’s warnings about the Chinese company prompted highly skeptical reactions due to the 2013 scandal over the NSA’s massive spying program on some of America’s closest allies. Fifth, German Chancellor Angela Merkel worried that hostile measures would trigger Chinese sanctions.

This fear reflected the central role of the Chinese market in Germany’s post-financial crisis recovery, with China emerging as Germany’s main trade partner by 2016. Although highly visible in other strategic sectors such as machine tools and engineering, the new market’s pull was particularly strong for the country’s vital car industry, which makes 30 to 40 percent of its sales in China. Combined with expectations that Beijing would ultimately open its economy fully, the reality of these commercial links explain why the German government consistently privileged engagement over other concerns, including China’s blatant human rights abuses. Additionally, Merkel was less interested in pleasing Washington given the Trump administration’s overt contempt for the EU and threats of sanctions on the German car industry, not to mention the possibility that a purported Sino–U.S. trade deal would hurt European exports.

Significant cracks appeared in the China–Germany relationship in recent years. Merkel’s Huawei policy always faced acerbic domestic critiques. But, most importantly, the evolution of President Xi Jinping’s regime generated growing frustrations across the German political spectrum. After years of patience, Berlin’s elites started to publicly protest Beijing’s persistent “bureaucratic obstacles, forced technology transfers, subsidies and assorted protectionist barriers.” German leaders also increasingly worried about China’s breakthroughs in industries that they used to dominate and about its acquisitions of European technology flagships, which forced Berlin to restrict “unwanted takeovers” and to support an EU investment screening system. Finally, those tensions were compounded by Beijing’s brutal domestic repression in Hong Kong, Xinjiang, and elsewhere, and by its military assertiveness in the South China Sea.

However, as of early 2020, the Trump administration still seemed unable to convince Germany to reject Huawei’s 5G network equipment. It took three major developments for Berlin to finally change course. First, China’s initial deceit regarding the Covid-19 pandemic and its ensuing economic shutdown triggered a reorientation of European supply chains and rekindled suspicions about Beijing’s authoritarian regime. Second, the United States initiated new sanctions that devastated the Chinese company’s worldwide access to high-quality chips. Third, after the UK, France, and Italy all decided to erect new protections on their 5G networks, U.S. leaders renewed pressures on Merkel.

Berlin’s decision constitutes a big victory for Washington. Although Huawei has convinced some European countries, such as Ireland, Switzerland, and Serbia, to welcome its 5G infrastructure equipment and it remains under consideration in others, including Spain, Austria, and Hungary, the new German bill marks the end of Huawei’s bid to dominate Europe’s 5G networks. What’s more, this outcome could further rattle a Sino–German relationship already affected by Berlin’s discomfort with Beijing’s post-Covid 19 industrial breakthroughs, the prospect of Merkel’s retirement, and the growing assertiveness of Xi’s regime.

America’s victory, however, needs to be put in perspective. Given the depth of the United States’ historical hegemony over Europe, flipping the region in a strategic domain like 5G technologies was always going to be a tall order for China. The Trump administration’s success required a long and brutal campaign and might have failed without the Covid-19 crisis. Plus, the Huawei issue revived Germany’s desire for digital sovereignty, which could hurt America’s interests and access to European data. And despite the controversies that erupted in 2020, China is likely to retain some appeal given Berlin’s structural “economic entanglement,” Beijing’s role in the post-Covid-19 stabilization of the German economy, and the depth of the recessions in America and the EU. In that context, although Democratic candidate Joseph Biden’s election would be received positively in Berlin, a successful long-term partnership with Germany will require Washington to reckon with its receding hegemony.

Thomas Cavanna is an assistant research professor at The Fletcher School of Law and Diplomacy.