The Shackleton Crater, the most likely candidate for NASA’s 2024 moon landing. See https://www.nasa.gov/feature/moon-s-south-pole-in-nasa-s-landing-sites. Image source: https://svs.gsfc.nasa.gov/4716.

NASA recently awarded Nokia $14.1 million for “putting a 4G network on the moon” [cnn.com]. This network, say NASA, “will allow astronauts on the Artemis mission to control vital command functions, operate the lunar rovers from afar, use real-time navigation, and even stream high definition video.” [businessinsider.in]

But why not award it to the world’s largest 5G company, Huawei?

Once the laughter has died down the question is worth reviewing. It’s what we’ll discuss here. Simply:

  1. The claim that the US is blocking Huawei thereby departing from the Free Market Principles it so espouses, and
  2. Rather than merely block Huawei from entering US markets, the US government is actively trying to handicap and hurt Huawei.

Ironically, this is not even a controversial claim and is commonly presumed true and agreed with by most commentators. Neither is the truth hard to discover — all it took me was simple searches and the references are either NYT or original sources. Let’s begin.

In a truly free market, theoretically, we get the best results when participants are in unfettered competition. In economic theory, there is no difference between theory and practice. In practice, all bets are off.

The point of NASA’s contract is, of course, to exclude Huawei for Nokia’s benefit. Including Huawei would be akin to inviting the erstwhile-USSR into NATO¹.

Quickly perusing through NASA’s website looking for their criteria awarding contracts to companies is remarkably explicit on the China question: “NASA welcomes proposals from non-U.S. organizations…, except… doing business with China”. The quotation is from NASA’s “Announcement of Collaboration Opportunity (ACO)” nasaprs.com, Section §3.3 “Proposals Involving Non-U.S. Organizations”, pg 14. But it was in 2019’s ACO. The current grant to Nokia is part of the 2020 ACO. What does that say?

Proposals will only be accepted from “U.S. for-profit entities” as defined herein. Teaming partners must also be U.S. domestic entities as set forth in Section 3.0 Eligibility. It is NASA’s intent to support and develop U.S. domestic industry through this ACO. [PDF nasaprs.com, Section §3.2 “Foreign Participation”, pg 20]

They’ve certainly simplified the rules. But wait, how did Finnish Nokia get this award? The skullduggery is in the fine print. NASA awarded the money to “Nokia of America Corporation of Sunnyvale, California” [nasa.gov]. The hypocrisy is more evident when you consider that Nokia’s press release announcing this award is from Espoo, Finland [nokia.com].

Nokia acquired AT&T’s Bell Labs and can now call itself an American company. Why doesn’t Huawei do the same? Because it’s blocked by regulators. When the Singapore (but assumed associated with China) chip manufacturer Broadcom tried to acquire Qualcomm, it was blocked. In general, Chinese companies are blocked from acquiring American companies [NYT, Jan 2018].

(I didn’t check but I’m guessing Ericsson doesn’t have an equivalent US based research center.)

A measly $14M given to Nokia doesn’t prove much, of course. So let’s look at the other American endeavors. They are:
⒈ Blocking Huawei in the USA and EU
⒉ Impeding Huawei’s manufacturing pipeline.

My methodology in this article is simple. I just searched, sifted, and selected through the NYT. I searched for “Huawei 5G”.

In a Jan 2019 article by David E. Sanger et al., they quite plainly say, “the United States has embarked on a stealthy, occasionally threatening, global campaign to prevent Huawei and other Chinese firms from participating in the most dramatic remaking of the plumbing that controls the internet since it sputtered into being, in pieces, 35 years ago”.

The reasons given to block Huawei are the usual — security concerns over Chinese spying. While security concerns might be real it falls upon the accuser to provide evidence. As of date there is no evidence. In the above article, they point to code in Huawei’s routing equipment which executes code remotely. Upon investigation, they found “the code that Huawei had installed in its network-control software did not appear to be malicious. Nor was it hidden…It appeared to be part of a system to update remote networks and diagnose trouble”. In other words, it was like the remote system that updates cellphone software. In Feb 2020, Sanger et al, wrote there’s a “lack of definitive US intelligence showing that Huawei has ever gained access to data that flows through its networks during the two decades” it operated in the EU.

Implicit in all talk about Huawei’s is that American telecoms can intercept and spy on traffic flowing through their networks. In fact the only country that has spied on its foreign customers (Europe included) is the United States. We know this thanks to Edward Snowden’s disclosures. The US agency, NSA, was found to have installed backdoors in Cisco’s networks [cnbc.com]. Cisco, of course, claimed it was unaware of these backdoors but we should treat such statements as we treat Captain Renault’s statement at the end of the movie Casablanca. “I’m shocked, shocked, to find that gambling is going on in here,” he says, as he collects his gambling winnings.

In February, Bob Davis and Drew FitzGerald reported in the WSJ that both “the White House is working with U.S. technology companies to create advanced software for next-generation 5G telecommunications networks” and, in a huge violation of Free Market principles, the US “is protecting the enormous U.S. market for Finland’s Nokia Corp. and Sweden’s Ericsson AB, as well as other non-Chinese companies”. Note also the acknowledgment that Nokia is Finnish.

The list of countries which have banned and allowed Huawei is a continually changing one. The most reliable method to keep track of this dizzying information is to Google “which countries have blocked Huawei” and navigate through the results. Some links provided here.

In addition to blocking Huawei’s efforts to expand, the US is also hurting its businesses. These include arresting Huawei exec Meng Wanzhou (who is also the founder’s daughter), blocking AT&T from selling Huawei smartphones, and most interestingly, thwarting their manufacturing pipelines. Before concluding, let’s briefly look into this last point.

“The administration has been working on multiple fronts to isolate Huawei” says the NYT, putting the future of “a major portion of Huawei’s business firmly in the hands of the [US] Commerce Department”. This shows, says Raymond Zhong, in another NYT article, “that for all of China’s economic progress, the United States still has final say over the technologies without which the modern world could not run”. How?

The United States announced a rule change that bars “Huawei and its suppliers from using American technology and software” [NYT, May 2020] that delivers “a one-two punch of industrial policy”.

Free Market Fans should pause here and consider if any of these actions align with the principles they espouse. Principles, by definition, must apply consistently. Whereas the current US actions are more like Captain Black’s in Catch-22 (1961), Joseph Heller’s masterpiece first novel. This is what we turn to now.²

Life imitates art

The fictional events of Catch-22 occur on a tiny island called Pianosa off the coast of Italy. In one of its many episodes, a Captain Black is passed over a promotion to squadron commander. The post went instead to Major Major, perhaps my favorite character in the book. Major Major: rank Major, last name Major (his first and middle names were also Major). Furious, Captain Black who was also the military camp’s head of intelligence, decides that henceforth “every son of a bitch who comes to my intelligence tent [must] sign a loyalty oath”. Pretty soon everyone in the camp was signing loyalty oaths for everything from getting their pay to getting their mess food to getting a haircut. Everyone except one.

Try as he might, Major Major was not allowed to sign the loyalty oath. When challenged on this, the book says: “‘Of course not,’ Captain Black explained. ‘That would defeat the whole purpose of our crusade.”

Perhaps that, more than anything else, explains the current scenario.

Footnotes

¹ The proposal that the USSR join NATO is ludicrous only to the people who formed NATO. As early as 1954, the USSR offered to join NATO or form a similar alliance (NATO was formed in 1947). “In May 1954 the Western powers rejected the Soviet proposal to join NATO on grounds that the USSR’s membership of the organization would be incompatible with its democratic and defensive aims.” [wilsoncenter.org] Western “incompatibility with democratic aims” was an obvious farce because NATO had just admitted Greece which, at the time, had a fascist government that “resulted in further economic devastation, mass population displacement and severe political polarisation” [wikipedia.org]. One can only speculate growing up in a world without the Cold War or a still present threat of nuclear destruction.
 In 2000, Vladimir Putin also proposed Russia join NATO but was turned down by the Clinton administration. The hawkish Bush administration that followed advocated NATO “membership for all countries ‘from the Baltic to the Black Sea’” [guadian.com].

² Though Catch-22 was written after the events in footnote 1, there is no way Joseph Heller could have known of the events because they weren’t discussed publicly in the 50s. His illustration is original.