Department of State United States of America

Telephonic Briefing with Keith Krach, Under Secretary for Economic Growth, Energy, and the Environment

SPECIAL BRIEFING

KEITH KRACH, UNDER SECRETARY FOR ECONOMIC GROWTH, ENERGY AND THE ENVIRONMENT

June 25, 2020

An audio file of this Briefing is available here.

Moderator:  Greetings from the U.S. Department of State’s Asia Pacific Media Hub in Manila.  I’m Zia Syed, the Hub Director, and I’d like to welcome our participants dialing in for this briefing.  Today we are very pleased to be joined from Washington, D.C. – Keith Krach, Under Secretary of State for Economic Growth, Energy, and the Environment.

We will begin today’s call with opening remarks from Under Secretary Krach.  We will try to get to as many questions as we can during the time that we have.  Please note that, due to the high number of journalists on this call, we ask that you please limit your questions to just the one question so others can participate.

Finally, as a reminder, today’s call is on the record.  And with that, I will turn it over to Under Secretary Krach.

Under Secretary Krach:  Thank you so much, Zia, and thank you all for being here.  I look forward to taking your questions.

First, I want to take a moment to expand on a statement sent out by Secretary Pompeo yesterday, and what he talked about at the podium.

As he said, the tide is turning in the favor of trusted 5G vendors and against Huawei in its quest to dominate global 5G.  I think the reason is simple:  citizens around the world are waking up to the danger of the Chinese Communist Party’s surveillance state.

Huawei’s deals with the telecommunications operators around the world are evaporating, because countries are only allowing trusted vendors in their 5G networks, many of them.  A few examples are  the Czech Republic, Norway, Poland, Sweden, Estonia, Romania, Denmark, Greece, New Zealand, Japan, Australia, Taiwan, Israel, Albania, and Latvia.  The list goes on.

The UK foreign secretary, Dominic Raab, recently remarked that it isn’t just the devastation of COVID-19 that takes the shine off of China, but also the fact the CCP doesn’t live up to the deals that it makes.  The crackdown on Hong Kong is a case in point.  As Foreign Secretary Raab said, it comes down to an issue of trust.  He said, “Otherwise, why would anyone trust them with other deals we might make?”

And that is precisely the question that governments and businesses around the globe are asking about 5G:  Who do you trust?  The primary choices are two world-class European vendors on one side in Ericsson and Nokia, who are trusted European, and Samsung.  It’s only been a month since Beijing broke its promise and trust with the people of Hong Kong.

The United States continues to build this trust among countries, companies, civil society around the world in support of freedom of expression, privacy, and security of personal information.  And that’s why we unveiled the 5G Clean Path initiative to promote safe, secure, resilient, and trusted communications over next-generation networks built by trusted vendors.

Following the pandemic, the crackdown in Hong Kong, skirmishes at the Indian border, and so many other efforts by Beijing to conceal, coerce, and co-opt the world, citizens of the world are waking up to the Communist Party’s true intentions to dominate 5G.  And Huawei’s efforts are running out of steam. 

And it’s really giving the political will to government leaders around the world, and also to corporate leaders.  Telefónica states in its digital manifesto that security is paramount.  And its CEO and chairman, Jose Lopez, this week declared, “Telefónica is proud to be a Clean Path company, and Telefónica in Spain and the UK are fully clean networks.  And Telefónica Deutschland and Brazil will be, in the near future, without equipment from any untrusted vendors.”

Just a few weeks ago, the big three telcos of Canada decided to partner with Ericsson and Nokia because Canadian public opinion was overwhelmingly against allowing Huawei into the 5G networks.

The largest telco companies in major countries around the globe are also becoming “Clean Telcos.”  In addition to Telefónica, we’ve seen this with Orange in France, Reliance in India, Telstra in Australia, SK and KT in Korea, Cosmote in Greece, NTT in Japan, and O2 in the United Kingdom.

The momentum in favor of securing 5G is building.  The more countries, companies, and citizens ask whom should they trust with the most sensitive data, the more obvious the answer becomes:  not the Chinese Communist Party’s surveillance state.

The United Kingdom’s decision to reconsider the use of Huawei and its 5G networks resulted in a dramatic backlash from China.  It threatened to punish the British bank HSBC, and pull investment from major British infrastructure projects.  Clearly, the Chinese Communist Party sees much more than mere financial benefit to having Huawei embedded in foreign 5G networks.  And I think it is no wonder why so many countries are reevaluating their partnerships with Chinese firms and standing up to that – the Chinese Communist Party’s aggression, like Australia.

Earlier this year, Huawei boasted that it had 91 5G commercial contracts signed.  But from what we can see, that list has dwindled down to low double digits.  Huawei’s deals have evaporated in direct proportion to the threats to retaliate against any country taking steps to protect its citizens and businesses’ most personal, sensitive information.

For too long, Beijing bullied other countries and threatened retaliation if it did not get its way.  China is a big marketplace, and consequences of retaliation are real.  Just ask the people of Norway, who suffered economically for years after the committee that awards the Nobel Peace Prize bestowed that prize on a democracy activist who questioned the Communist Party.

The bullying is out of desperation, perhaps fear.  China is feeling its 5G dream of global domination suddenly slipping through its fingers.  We’ve all had experience with bullies in our lifetime, and if there is one thing we know about bullies, it’s that they back down when they’re confronted.  And they really back down when your friends are standing by your side.  And the U.S. is proud to do exactly that.

As Secretary of State Mike Pompeo recently said regarding UK’s actions on 5G, “The United States stands with our allies and partners against the CCP’s bullying, and we stand ready to assist our UK friends with any needs they have.”  And that goes for all freedom-loving countries, because the CCP’s 5G strategy is a real and urgent threat to all who value liberty and justice around the world.

Huawei is an extension of the Chinese Government and a tool to extend its surveillance state.  5G is the backbone for that surveillance state.  All you have to do is hook up cameras and microphones, and you’ve got Big Brother, George Orwell’s 1984.

Where are they headed with this?  They want to export that surveillance state.  5G gives them the capabilities to repeat what they’ve done in those horrid camps in Xinjiang province in the west of China.

Fortunately, the world is waking up.  Huawei is losing its luster.  And the appetite for trusted networks and carriers has never been higher.  This is good news for all who value freedom and security.

With that, I’m happy to take any questions.

Moderator:  Thank you very much.

Just a reminder, if you’re asking a question, please state your name, media affiliation, and location.  Our first question will go to Melo Acuna from Asia Pacific Daily, in the Philippines.  Melo, can you please go ahead?

Question:  Mr. Under Secretary, greetings from Manila.  How would countries like the Philippines know if 5G technology is indeed safe?

Under Secretary Krach:  Well, a good question to ask yourself is: what countries do they come from? Because one of the facts of the matter is that the technology providers have the keys to that kingdom. They are updating that software almost every day.  A lot of times, Huawei will say, “We’ll sign an agreement that says there are no back doors.”  The fact of the matter is there is a front door every day in the software business.  

And the other thing a lot of companies will say, “Well, we won’t put them in the core, we’ll just put them on the edge.”  The other thing about a 5G system is that it’s like a necklace with chains; you’re only as strong as your weakest link.

So, it really boils down to: who do you trust?  And do you trust two companies that come from a country that has a National Intelligence Act that requires any company, state-owned or otherwise, or any citizen, to turn over any information – proprietary technology, intellectual property, data – upon request to the Chinese Communist Party, the government, or the People’s Liberation Army?  And if you don’t do that, you suffer the consequences.

So, that’s the question that you have to ask with this particular technology.  And this is not one where the United States has a company. There are’s three. There’s Samsung from Korea, there’s Nokia from Finland, and then there’s Ericsson from Sweden.  And I think that’s the question the country of the Philippines really has to ask. 

The United States, along with many of our allies, really believes in this.  And the Philippines has been a great partner with the United States.  And that’s one of the reasons that many of us have expanded our financing capabilities to help countries like the Philippines and others, particularly when they are suffering from this horrific pandemic.  So, we are here to help, and this is an important thing.  So, I hope that answers your question, sir.

Question:  Thank you, sir.

Moderator:  Thank you very much.  Next, if we could, go to Jiyoung Seo from the Korean Broadcasting System, KBS, in Washington, D.C.

Question:  My name is Jiyoung Seo from KBS.  Last time, you mentioned on a teleconference that Washington is ready to do – it’s almost [inaudible] South Korea, if South Korea would be faced with any retaliatory action from China when South Korea joined the U.S.-led EPN or sanctions against Huawei.

Concerning that situation, there are serious concerns that South Korea is stuck in the middle in the conflict between the U.S. and China.  I mean, South Korea should avoid choosing sides, or defend its own principles.

So my question is, can you specify how the U.S. will protect those countries, including South Korea, which may be retaliated by China?  Thank you.

Under Secretary Krach:  Yes.  And there is one thing that I want to make perfectly clear – because I’ve seen some things written in the Korean press.

The Economic Prosperity Network is comprised of like-minded countries, companies, institutions, and civil society that operate under a set of trust principles for areas of all economic collaboration.  And it is built on the idea that strong partnerships advance shared prosperity.  And so, it is by harnessing the innovation of resources and synergies of its members that the EPN creates a unified and equitable global framework for trusted geo-economic partnerships.

And, the Economic Prosperity Network enables a set of shared principles, that form the basis of trust.  And those trust principles are based upon those shared values like integrity, accountability, transparency, reciprocity, respect for rule of law, respect for property of all kinds, respect for sovereignty of nations, and respect for basic human rights.

And it does this in pursuit of three long-term goals:  the first is ensuring sustained economic growth and prosperity for all partners; the second is expanding fair, transparent, and reciprocal collaboration and trust principles to all aspects of economic partnering; and the third is creating a level playing field for companies, economies, and countries, based on integrity, reciprocity, accountability, transparency, and fairness.

And one I want to be very clear on, is that countries that currently do not abide by those trust principles will be excluded from membership.  But it doesn’t mean it’s forever.  No country is excluded forever.  And the Economic Prosperity Network does not prevent members from working with any country or organizations outside the network, or compel them to choose between partnerships.  So, this is not a choice between China and all the other countries on the Economic Prosperity Network.  We wouldn’t be respecting a country’s sovereignty if that was the case.

And with regard to your question, in terms of how do we protect, we really believe that there is strength in unity and solidarity.  We see the Chinese Communist Party retaliate against the country of Korea when you put up the defense capabilities.  I mentioned the example of Norway.  It happens to companies.  It happened to Lotte.

It happened to America’s National Basketball Association, where one general manager of one team, the Houston Rockets, sent out a seven-word tweet from the United States that was sympathetic to Hong Kong.  This was last year.  And within 24 hours, $100 million of sponsorships to teams and to players were dropped.  And that is obviously, a retaliation playbook.  And they temporarily canceled their schedule.  And then they called up the CEO of the NBA and they said, “You have to fire the general manager of the Houston Rockets.”  And they also said, “You have to apologize to the country of China,” and then they sent them, “These are the exact words you need to use.”  And we see that quite a bit.  And for every time we see it, there is a lot more out there.

And this is what I was referring to – the world has woken up to these aggressive tactics.  And the pandemic has certainly done that, because the pandemic is the result of the concealment of the virus.  And it’s a practice of concealment, co-option, and coercion.

Countries have woken up and seen that their economies have been co-opted by entangling supply chains.

And China’s so-called “face mask diplomacy” is a tool for seduction and coercion to get countries to do the things they really don’t want to do.  And the citizens of the world don’t like it.  And that’s what’s given the political will to government leaders around the world, and to corporate leaders around the world.

And when Beijing threatened the British bank, HSBC, because the UK said, “We want to reconsider letting Huawei in part of the 5G network,” and then the Chinese ambassador to the UK said, “We’re going to pull our investment from the rail system in England, and also investment into a plant,” Mike Pompeo was pretty clear.  He said, “We stand with our allies and our partners.”  And he also said, “Whatever the UK needs, we are here to assist you.”

And he said that’s true for any nation. This is an important stance for the United States. We know a lot of other countries feel the same way.

You saw what happened down in Australia.  And you saw that retaliation.  The Australians held their ground.  And we all have experience with bullies.  When a bully is confronted, they back down.  And they especially back down when you have all your friends by your side.

The world has thought about it, it’s always been the 800-pound elephant in the room, and it’s time people started talking about it.

Moderator:  Thank you, Under Secretary.  Next, we’ll go to Jennifer Dudley-Nicholson from News Corp in Australia. Jennifer, please go ahead.

Question:  Thank you.  And thank you, Under Secretary.  We’re talking about 5G networks, and Huawei’s involvement in them at the moment.  But is there a case to be made to discontinue the use of Huawei equipment in other networks, as well?

Under Secretary Krach:  By the way, could you repeat that question?  I had a hard time hearing you.

Question:  Absolutely.  So, we’re talking about Huawei in 5G networks.  In Australia, there is still the use of Huawei equipment in 3G and 4G networks.  Is there a case to be made that that shouldn’t continue?

Under Secretary Krach:  Well, I think there is, but it’s really 5G – we look at that as the bigger threat.  It really expands the capabilities, and the speed, and the transmission, and all of that – and this is what was really laying the backbone for the internet of things. Also, with 5G capabilities, that enables the surveillance state.

So, to the extent that countries are putting in 3 or 4G systems from Huawei, my recommendation is don’t even begin.  And then, when countries are choosing their 5G systems, this is definitely the time to do a rip-and-replace, a transition.  And that’s what I mentioned.  And that’s where there is a lot of financing tools that I think many countries like us are willing to help provide, because we recognize this danger.  Thank you for that question.

Moderator:  Thank you, Under Secretary.  Next we will go to Pearl Matibe from the Mail and Guardian.  And Pearl, if you could, mention your location please.

Question:  Sure, absolutely.  Thank you very much.  I’m actually here in Washington, DC with you, Under Secretary.  It’s a beautiful morning.  But my geographic area is southern Africa.

Under Secretary Krach:  Great.

Question:  My question to you is, it seems to me that your greatest concern is potential espionage and surveillance issues, if I understand you correctly.  Correct me if I’m wrong.  And so, given the growing ties that Africa has with China, that it has with Russia, do you have any particular concerns with countries in southern Africa?

For instance, I’ll point out one – Zimbabwe has very strong ties now with China.  And other countries –  they’re not the only ones – Mozambique.  What about South Africa?  Do you have any particular concerns with this growing relationship and the use of 5G on the continent?  Thank you.

Under Secretary Krach:  Yes.  By the way, I don’t have any specific concerns about trading relationships. We believe in free markets. But also, when somebody comes into a free market and they don’t play by the rules, the market is no longer free.

And we, obviously, have concerns.  Because it’s not just espionage or senior citizens’ most private information, or taking intellectual property – and the amount of intellectual property that the Communist Party has stolen from countries all around the world is unbelievable.

I have personal experience. I spent 30 years in Silicon Valley, and I saw that. And now that I’m at the State Department, I’m seeing that all around the world. And I was blown away when I found out that there is actually a law – yes, a law – that is the National Intelligence Act, that requires any company, state-owned or other, or any citizen to turn it over, or suffer the consequences.  And we know what those consequences are – we’ve seen them, we’ve heard about them, and it’s pretty dramatic.  And it scales from A to Z.

So, from that standpoint, we’re concerned for countries’ national security.  And South Africa is a great partner with the United States, so we’re concerned.

And we’re also concerned about global economic security, and anybody who values freedom of speech and liberty.

And t puts the country of China in control.  They can shut those 5G systems down.  There’s all kinds of things that they can manipulate when they control 5G.  Autonomous vehicles will be hooked up to those systems. That’s one aspect of the internet of things.  It’s not just machine equipment and power plants, it could be the very vehicles that you and your family are in.

And so, what it provides is a tremendous point of leverage.  And when we look at Africa, yes, that’s certainly as important as anywhere else.

And then also, you look at the other leverage that the CCP has on the continent of Africa with its debt diplomacy.  The interesting thing is that, if you look at the sovereign debt – when Japan, Australia, Germany, the United States, offer financial assistance to countries, they don’t ask for collateral.  China is the only nation that does that.  And when you do that, you have to sign a non-disclosure agreement.  So, you’ve got to keep it secret.  And we hear about these agreements when all of a sudden, a new government comes in.

I’ll give you an example outside the continent of Africa. Ecuador owes the country of China $13 billion.  Now, if they don’t repay it, then the PRC has the right to seize any asset in the country, other than their historical artifacts and their military. Think about that.  That’s called leverage.  So, all of a sudden, you can’t make the debt payment, you go hat in hand over to China and say, “Please, can we renegotiate?”  Or they take your ports, or they take your highways, or they take your airports, or they take your office buildings.  They have the right to seize anything but historical artifacts.  So 5G is a big point of leverage, just like that.

It’s a multi-pronged strategy.  And I think it’s been an awakening for me, because I’ve just been a businessman my whole life, to actually see this, and how entangled it is, how co-opted economies are.  And everybody is afraid to talk about it, because everybody is afraid of that bully.  And the most important part of this solution is for people to talk about it – because they cannot retaliate against every country in the world.  They cannot retaliate against every company in the world.  And it’s just gone on too long.

The citizens have really woken up to it, thanks to great journalists like all of you on this call.

This information will not get back inside the country of China.  And if you think about, well, why does the bully become a bully? A bully becomes a bully because chances are, they’re insecure within themselves.  And so why does the Communist Party have a reason to be insecure? They’ve got one million members of the Communist Party in China.  But that also means they have 1.4 billion minus a million who aren’t. I guess I’d be insecure, too.

And you think about that.  What do they do to their own people?  They bully them.  They have this Great China Firewall, where all day they can come in, nothing can come out.  They use the data for AI and to further that surveillance state, and control the world.  But if you look at the reciprocal of that, that’s just propaganda.  Everything can come out of that Great Firewall, but nothing can go in.  And nobody talks about it.  So, I think it’s time that it gets talked about, and I really appreciate this question, it’s a great question.  Thank you.

Moderator:  Thank you, Under Secretary.  We may have time for just one more.  If we could go to Olivia Zhang. Olivia Zhang is from Caixin Media, which is based out of Beijing, though I believe she is actually calling in from Washington.  Please go ahead, Olivia.

Question:  Yes, hi.  Can you hear me?

Under Secretary Krach:  I can.

Question:  Okay, well, hi, thank you so much for doing this, Mr. Under Secretary.  I wonder – I think about, like, Huawei – I think the UK excludes Huawei from their core network, but not, like, the whole 5G network.  Does the U.S. consider it acceptable?  And some countries in Europe would see, like, excluding Huawei may cause the lack of 5G networks building for a decade or so.  What would be your response to that?  Thanks.

Under Secretary Krach:  Sure. Those are two fabulous questions from Beijing.  So I appreciate that.  In terms of the UK saying, “this is so risky,” because they understand the security threats that Huawei’s systems have — “we’ll just put it, not in the core, but on the edge.”  If you look at anybody who knows technology, they would say that’s a big mistake.  And the reason why is that 5G is a system, and everything is connected to it.  And I think that’s also a strategy of Huawei:  “Oh, we’re just – just put us in the edge, don’t put us in the core.”  Well, once you’re in, you’re in.  It’s an interconnected system.  And you’re only as strong as your weakest link.

Now, your question with regard to 3 and 4G, Huawei is in other networks around the world.  And what’s your thought of 10 years of effort down the drain?  Because you’ve got to replace it.  By the way, if you’re going to do it, do it now. Those transformation costs are not that high.  And, as I mentioned, there is plenty of government assistance to bridge that gap, in terms of finances.

So I don’t see that as an issue at all.  And you know about those concentration camps in China, and Huawei technology is used for that.  So, I think that really hits at the core of all these countries on the phone.

And I’ll tell you one of the things that I wish.  I wish I could publish an op-ed for the citizens of China in your newspaper. My first time in China was in 1981.  I have a tremendous love and respect for the Chinese people.  And they have a tremendous history and culture.  They’ve invented everything from spaghetti to gunpowder.  Great business people, great scientists.  But it’s that one million in the Chinese Communist Party that are really holding them back.

So, any time you hear me talk about this whole thing, it is not aimed at the wonderful people of China.  It is that Chinese Communist Party.  And the irony, of course, is that Communism, everybody is supposed to be equal.  But I think the manifestation of it in China is some are more equal than others, and we can see that.  And it’s just gotten so aggressive.  And to extend that surveillance state, to extend that great firewall beyond the borders of China, this is the time to stop it.  And if you would ever let me write an op ed, I’d love to do it. Thank you so much for that question, xiexie.

Moderator:  Thank you, Under Secretary.  I’m afraid we are now out of time.  But, Under Secretary, would you like to make some closing remarks?

Under Secretary Krach:  Well, I’d just like to thank all of you.  As I mentioned, freedom of the press is key to freedom and liberty.  And my mission is to advance global economic security and advance prosperity and peace throughout the world.  And I think one thing:  We all believe it.  And I bet there is about 1.4 billion people, minus a million, in the country of China that believes the same thing: that there is no sustaining prosperity without liberty.  And we need to talk about that, and we need to call out the bully.

So, I hope and pray that you great journalists have the courage to do that, because I know that the Communist Party is not afraid to retaliate against the media.  And I admire what you do.  So, thank you for your time.

Moderator:  That concludes today’s call.  I want to thank Keith Krach, Under Secretary of State for Economic Growth, Energy, and the Environment.  And I also thank all of our journalists on the line for participating, and I apologize to the – to those of you that were in the queue and we weren’t able to get to your question.

Please stay on the line for information regarding access to an audio recording of the call.  Also, please be aware that a transcript of the call will be posted to our social media platforms and sent out to all of you within a day.

If you have any questions about today’s call you may contact the Asia Pacific Media Hub at AsiaPacMedia@state.gov.  Thank you.