The Chinese Force Obama's Hand

By Steve McCann

President Obama, after his obsequious behavior toward the Chinese President, Hu Jintao, has been placed in a difficult position regarding a Chinese company, Huawei, and their takeover of a U.S. server technology company, 3Leaf Corporation.

Huawei, the third largest telecom equipment sellers in the world (3^rd largest), was founded by a Peoples Liberation Army soldier. In a 2008 Military Report to Congress, the Pentagon stated that Huawei "maintains close ties" to the Chinese People Liberation Army (PLA). In the same year, another proposed merger with U.S. based communications company 3COM Corporation, after an investigation by Congress and the Director of National Intelligence concluded that the 3COM-Huawei merger would undermine U.S. national security.

The British blocked Huawei's bid to buy the telecom company Marconi in 2005 and in 2009 the British government was briefed on the potential security problems posed by Huawei's equipment in the British national telecom network BT. In 2009 and 2010, Australia and India aired similar concerns. The Indian Security Intelligence Service blocked and cancelled orders with Huawei citing these same security concerns. In 2010 this same concern was raised by a group of Republican lawmakers about Huawei's bid to supple mobile telecommunications equipment to Sprint Nextel Corporation.

The company has also been linked to the theft of intellectual property in the past. In 2003 Cisco Systems filed a lawsuit alleging Huawei was "engaged in blatant and systematic copying of Cisco's router technology." The case was settled out of court. In July 2010, Motorola filed a complaint alleging loss of confidential information to Huawei.

Last May, Huawei bought 3Leaf Corporation and failed to alert the U.S. government of the deal. After completing the review of the proposal, the Committee on Foreign Investments in the United States (CIFUS), suggested that the merger not be approved and Huawei divest itself of 3Leaf. CIFUS is an inter-agency panel that reviews deals with national security implications. Its members are drawn from the Defense, State, Homeland Security, Justice, Commerce and other departments.

However, Huawei, in an unprecedented move, has chosen not to voluntarily walk away from the deal and instead force the White House to make the final decision. That means the decision will, under law, now fall directly to President Obama, who has sole authority to issue a decision following a 15 day review of the panel's findings.

So how will the President in light of his behavior with the Chinese and dependence upon them for loans react? Obviously the leaders of Huawei and the Chinese Government expect his approval or they would not have taken the unprecedented step of forcing him into potentially overriding the panel tasked with making certain American security is tantamount in any business transaction of this sort.