US warns Italy over the Huawei job

US Secretary of State Mike Pompeo is back in Europe and this time he is attempting to scare the Italians into line.

It has been a quiet few months for the White House enforcer, though Pompeo is back in the European ring throwing punches towards Italy and his old foe, Huawei. At a press conference in Rome, the same line has been delivered to the Italian press; if Italy works with Huawei, it does not bode well for its relationship with the US.

“And so to the extent that an Italian company makes a decision to invest in or provide equipment that has a network that our national security teams – our intelligence teams, our Department of Defence – conclude isn’t a trusted network, where we have risk to our information that we can’t figure our way through, we’ll have to make some very difficult decisions,” Pompeo said.

“We want to be a partner with Italy in all of these things, but it is not the case that we will sacrifice America’s national security to put our information in a place where there’s risk that adversaries or the Chinese Communist Party might have access to that.”

Although this is the most relevant point to the telecommunications industry, it should also be noted there is existing tension between the US and Italy.

The US is unhappy over loans and subsidies which have been granted to EU aerospace company Airbus. Thanks to this assistance, Airbus is now able to challenge US rival Boeing on the global stage, though the means by which success has been realised has irritated the White House. Tariffs have been suggested on certain European food exports such as whiskies from Ireland and Scotland, as well as wine and cheese from Italy.

While there have been protests from officials against the tariffs, the World Trade Organization (WTO) has said the US is free to pursue the charges if it chooses to. This has led to increased tension between the US and various European nations, including Italy. During his four-day tour of the country, Italian farmers exchanged stern words with Pompeo to demonstrate their frustration.

It might not be directly relevant to the Huawei saga, but it is another chapter in the story which indicates the US and Italian Governments are not on the friendliest of terms.

In terms of the telco and technology space, Italy has not made any commitments to ban Huawei to date, though Pompeo seems to think it is necessary to edge the Italian Government along. It is a message which the statesman has delivered on several occasions to European counterparts; if you work with Huawei, we might not work with you.

What is odd, however, is that the Italian telecommunications scene hasn’t been the most profitable for Huawei to date. Vodafone and Telecom Italia both rely on Ericsson as their main equipment provider, while Iliad recently announced it was continuing its relationship with Nokia. Wind Tre’s main supplier Chinese state-owned ZTE, which might irritate a few in the US, though Huawei, the victim of much of the White House’s aggression, isn’t a major player here.

More than anything else, this seems to be more symbolic from Pompeo. There might be other distractions in the world of politics, but it is always useful to re-iterate it point about Huawei.

This threat from the White House is not necessarily new however. The same has been said to the UK, largely ignored by the Germans, irritated Hungary and proved somewhat successful in Poland. Only the Poles have taken a firm stance against Huawei, aligning themselves with the US by signing an agreement on 5G security which effectively bars Chinese vendors from supplying equipment for Polish 5G networks.

Looking at the economics side of the argument, the US accounts for 9.3% of all exports, making it the third-largest destination behind Germany and France. Wine accounts for 4.1% ($1.83 billion) of the exports to the US, pasta 0.69% ($310 million) and cheese 0.71% ($317 million). The US is a very important trade partner of the Italian economy, and the tariffs mentioned above will certainly have an impact.

While banning Huawei from the Italian market would not necessarily have a material impact, it would be a symbolic gesture. This is another example of the US attempting to harness support in its on-going battle with the Chinese, though the Pompeo threat causes any reaction from the Italian Government remains to be seen.