The “Australian discriminatory market access prohibition” document from Chinese authorities also reveals potential weaknesses in Australia’s argument on Huawei. It highlights the lengths to which Australian officials went to attempt to portray the decision as a restriction on all 5G network providers, rather than specifically targeted at Chinese operators Huawei and ZTE.

That position was quickly undone in media interviews by Australian ministers in the days after the ban, including by Foreign Minister Marise Payne. The complaint notes that when pushed by former Sky News host David Speers on August 27, 2018 whether the decision meant that Huawei and ZTE could not be involved, Senator Payne responded:

“It will in this case because they have different priorities or different obligations,” she said.

The admission allowed China to lodge the WTO market access claim on the basis of discrimination in mid-2019. In response to the claim and despite the comments from government ministers, Australian trade negotiators continued to maintain that the Chinese companies were not being discriminated against, minutes of a meeting show.

“Australia submitted that their approach had been non-discriminatory as it had not been targeted at any particular country or at suppliers from any particular country,” the minutes state. The Department of Foreign Affairs and Trade would not publicly release any formal written response to the 18 questions submitted by China.

The Huawei claim is not yet a formal investigation but the complaints could now be re-escalated in retaliation for the Morrison government pushing for a formal investigation into China’s launching tariffs on Australian barley. The Australian government and barley industry say the Chinese dumping allegations are without merit and are now preparing for a three-year legal battle at the independent umpire in Geneva.

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Breaches of trade agreements can result in governments facing sanctions from the international community through the WTO but its powers have been undermined by the Trump administration vetoing multiple judges, leaving it without a fully functioning dispute resolution panel.

According to the document, the Chinese negotiators said Australia had failed to notify the WTO of its decision to ban the Chinese operators, there were “no official publicly available documents” and Chinese officials were relying on press releases from the Australian government to establish the policy implications for their companies.

Former Huawei chairman John Lord was called by the former secretary of the Department of Communications, Mike Mrdak, five minutes before the media was notified and was told the company would not be allowed to participate in the 5G network. Formal documents identifying Huawei have still yet to be released.

China has also opted to limit its exposure to WTO litigation by delivering verbal instructions to traders to stop buying Australian exports like coal, while maintaining at the official level that the trade strikes were due to technical infringements and Australia was not being targeted.

Australian ministers have become less patient with China’s claims in recent weeks. Agriculture Minister David Littleproud said on Wednesday Australia had been “thwarted at every attempt” to engage with China.

“There has been mounting evidence that this has more to do around geopolitical issues and our sovereignty, and decisions we’ve made around our sovereignty, and our principles and values here in Australia, rather than technical trade matters,” he said.

Agriculture Minister David Littleproud.

Agriculture Minister David Littleproud. Credit:Alex Ellinghausen

In the complaint to the WTO, the Chinese government rejected the claim that Huawei posed a national security risk, said Huawei was bound to the regulations of 3Gppp, the international 5G-standardisation body, and rebutted Australia’s key claim that boundaries between the external and core of the network would be compromised. It questioned what security standards the Australian government believes the 5G network would follow.

“The mandatory standards for 5G and 5G security are set by 3Gppp,” it said. “The major operators and vendors all over the world are required to comply.”

Former prime minister Malcolm Turnbull asked the Australian Signals Directorate three times to assess whether the security risk of allowing Huawei to participate in the 5G network could be managed. The security agency said it could not be mitigated.

“We had to recognise that if Huawei was requested by the Chinese government to act it would have to do so,” Mr Turnbull said in November. “It was less the identification of a smoking gun than of a loaded gun.”

The comments highlight another potential vulnerability if China decides to pursue Australia at the WTO. National security claims face strict scrutiny at the WTO to avoid them being used widely.

Huawei Australia now faces a perilous task maintaining its presence in the country as it lobbies hard to remain a part of Europe’s 5G rollout after also being blocked in the United States and Britain. The 5G technology will alter the landscape by connecting devices to a super-fast network that will dominate internet communication over the coming decades.

In a submission to the Parliamentary joint committee on intelligence and security published on December 10, Huawei said the security legislation that banned it from the Australian network had resulted in the loss of 900 jobs, 1500 subcontractors and $100 million in research and development.

“In practice the legislation destroyed Australia’s global mobile network leadership, reduced vendor competition, forced up prices for operators and consumers, and isolated Australia from the world’s leading 5G innovation,” the company said.

“Our equipment was never tested and government officials never accepted repeated offers to inspect our manufacturing plants and review our cyber security processes. Two years on from the 5G ban Huawei does not know why the bans have been put in place and have still not received any formal notification about either of the bans.”

Huawei Australia has maintained that its parent company in China is free of state ownership and owned 100 per cent by staff despite Chinese Communist Party restrictions requiring local companies to have party committees within their operations. Huawei founder Ren Zhengfei had long been reluctant to appear at political events but was a key guest at President Xi Jinping’s Shenzhen address in October to mark the 40th anniversary of the founding of the special economic zone.

The company’s attempt to straddle Chinese and Western business environments while expanding its market has challenged regulators and governments, who are wary of upsetting Beijing while attempting to protect national security.

Germany last week decided not to explicitly exclude Huawei from its 5G network but will introduce legislation that will give it the power to block components built by the Shenzhen giant on national security grounds.

The decision, which comes after months of debate between the German economic and national security establishments, is a compromise position driven by Chancellor Angela Merkel after Germany’s business lobby warned the government could be vulnerable to retaliation from Beijing.

The policy will be closely scrutinised across the European Union as Huawei attempts to remain part of Western communications networks despite warnings from Five Eyes security partners such as the US and Australia that it could compromise their ability to share intelligence.

“We’ve created regulation that allows us to monitor trustworthiness in an appropriate fashion,” German Interior Minister Minister Horst Seehofer told German newspaper Handelsblatt on Thursday. “Our security interests played a big role.”

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