In Huawei Battle, China threatens Germany “where it hurts”: car manufacturers

BERLIN – Chancellor Angela Merkel and Chinese Prime Minister Li Keqiang settled in the backseat of a driverless Volkswagen truck, fastened their seat belts and walked around a runway of the disused airport in the center of Berlin.

“There is nothing like seeing what is possible in practice,” Merkel said when they returned.

That was in July 2018, when economic cooperation between the two countries seemed unlimited, combining Germany’s powerful auto industry and China’s tech giant Huawei.

Eighteen months later, Germany is involved in a tortured debate about whether to allow Huawei to help build its next-generation 5G mobile network. But with German car manufacturers, including Audi and Daimler, who already work closely with Huawei, it may be China who sits in the driver’s seat.

Whatever Germany decides will shape its relations with China for years and reverberate throughout the continent. It will send a powerful political signal on how united or fractured Europe will be in the digital era of rivalry between Washington and Beijing.

Germany, like all of Europe, is under tremendous pressure to exclude Huawei from the US government, which fears it is a Trojan horse that allows the Chinese to spy on or control European and American communication networks. The pressure continues even after President Trump signed an initial trade agreement with China on Wednesday.

But for Germany that decision is especially tense. Relations with the Trump administration are infused with threats of tariffs against German automakers and the growing distrust that Europeans have come to believe can permanently reshape, if not break, a transatlantic alliance that was once an armor.

China, on the other hand, is making its way on the European stage as a new strategic player and an increasingly indispensable economic partner. By far the largest market in the world, it has become the largest source of growth for Germany’s leading car manufacturers and the key to its dominance in the luxury car market.

It is a position that China has not been shy to arms.

“If Germany made a decision that would lead to the exclusion of Huawei from the German market, there would be consequences,” said Wu Ken, China’s ambassador to Germany last month. “The Chinese government will not stand idly by.”

Konstantin von Notz, legislator and member of the digital affairs committee in the German Parliament, put it this way: “The Chinese have made it clear that they will retaliate where it hurts: the automotive industry.”

For months, German lawmakers have danced on the issue of whether to effectively exclude Huawei from the bidding process. The issue is expected to be discussed again in Parliament in the coming weeks. As a decision approaches, Chancellor Merkel finds herself trapped among worried German automakers, who accompanied her on a dozen trips to Beijing, and her own cautious intelligence community.

Merkel, administrator of the pro-business Christian Democratic Party, opposes banning the Chinese company.

“It is not about individual companies, but about safety standards,” said the chancellor in November. “This is the certification that we will carry out. That should be our guide point of reference. “

But a revolt is brewing in the intelligence and foreign policy community in Germany, fearful of US threats to limit the exchange of intelligence, and even among some of the chancellor’s own legislators, who wish to submit a proposal to Parliament with criteria of Tighter security than, in effect, keeping Huawei out.

Merkel’s critics say that the current certification process, which simply requires companies to sign a promise not to spy, is inherently flawed because it depends on trust.

At their party’s annual conference in November, the Chancellor’s Christian Democrats defused Huawei as a corporate sponsor and passed a motion demanding that only companies “that demonstrably meet a clearly defined catalog of security requirements” can submit bids. A key requirement would be to rule out state interference.

The motion did not name Huawei or China, but the implication was clear.

“Under Chinese law, companies are required to cooperate with the Chinese Secret Service,” said Norbert Röttgen, a conservative lawmaker who co-authored the motion against Merkel’s Huawei policy. “When you deal with Huawei you also have to accept that you could be dealing with the Chinese Communist Party.”

Cars that can drive by themselves can make driving safer, but they also open opportunities for government surveillance and control.

Beyond the fears of espionage and sabotage, lawmakers warned that if Germany allowed Huawei to bid, it would not only alienate Washington but run the risk of undermining a much-needed European front.

“Our only hope is to stay together as Europeans,” said Röttgen. That, he said, was also an argument to grant the 5G contract to European companies such as Nokia or Ericsson.

Analysts say Nokia and Ericsson, which have won 5G contracts in Denmark and elsewhere, have the competence to build the 5G network, but it would take longer and cost more, especially since Huawei is already a large part of existing networks. in Germany. The change will be messy and expensive.

Still, Röttgen said, given the scale of the new offer, if it were for Huawei, Europe would run the risk of being left behind permanently.

“If you let Huawei build a large part of the 5G network after a while, you won’t understand your own system,” he said. “It would be a maximum loss of control and sovereignty.”

“Strategically it is a clear case like glass,” Röttgen said.

Others, however, say that giving the offer to Huawei may not be a bad idea.

“If we ban Huawei, the German car industry will be expelled from the Chinese market, and this in a situation in which the US president also threatens to punish German car manufacturers,” said Sigmar Gabriel, former foreign minister and vice president of Germany. chancellor.

“Just because we have an American president who doesn’t like alliances, do we give up all that?” He said. ‘‘ Why would we do it? Especially because it does exactly what the Chinese do and threatens the German car industry. “

German car manufacturers such as Volkswagen, Daimler and BMW continued to record sales gains in China and take part in rivals such as Ford, even when the general market has collapsed.

“See, last year, 28 million cars were sold in China, of which 7 million were Germans,” said Wu, China’s ambassador to Germany, in his comments in December, which many in Germany interpreted as a veiled threat .

“Can we declare German cars unsafe because we manufacture our own cars?” He said. ‘‘ No, that would be protectionism. ”

German automakers deny that their dependence on Chinese sales has made them advocates for Chinese interests.

“We don’t want political developments to extend to product development,” Bernhard Mattes, president of the German Automotive Industry Association, said in an interview in Berlin.

But Mr. Mattes admitted: “We are not operating in a policy-free space, that is clear.”

Huawei has understood so much. Its German headquarters are in Bavaria, along with BMW and Audi and many other deeply rooted companies in China. The company has been a generous sponsor of all major parties, including the conservative governors of Bavaria.

Markus Söder, the conservative leader of Bavaria, has publicly defended Huawei’s right to bid while attacking the United States.

“To say in advance that I discard it because another partner in the world doesn’t like it,” he said, “is a bit problematic.”

Stephan Weil, prime minister of Volkswagen’s home state in Lower Saxony and a member of the company’s supervisory board, took a similar line and urged Germany to protect its 5G network from all sides. “I wouldn’t necessarily put my hand in the fire for anyone else,” he said, without naming the United States.

When Peter Altmaier, Germany’s minister of economy, recently pointed out that Germany “had not imposed a boycott” on US technology companies after it was revealed that the National Security Agency had intervened Chancellor Angela Merkel’s phone, she obtained a strong reprimand of the ambassador of the United States. Richard Grenell

“There is no moral equivalence between China and the United States and anyone who suggests that it ignores history, and is obliged to repeat it,” Grenell said.

In July 2018, when Merkel and Li left the driverless van in Berlin Tempelhof, once it was the site of the Berlin air bridge and a powerful symbol of Germany’s alliance with the United States, the symbolism was not lost on Some.

“The truth is that, if the US security guarantee were what it used to be, we would not be having this debate,” said von Notz, the legislator. “But it isn’t. And now we need to find a way to defend our freedom and rule of law in this digital world.”

Christopher F. Schuetze contributed the reports.

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