The US Department of Commerce is drafting new rules allowing American tech companies to develop 5G standards along with China’s Huawei.

After the Department of Commerce blacklisted the Chinese company, US firms stopped working with Huawei for fear of sanctions. However, since Huawei is a leader in 5G standards, breaking such collaboration puts US companies at a loss.

According to Reuters, the document is being reviewed by the Department of Commerce and will soon be sent to be approved by other departments. It’s possible that the Department of Commerce’s document is a reaction to a letter sent earlier by a group of US senators, including anti-Chinese hawks Marco Rubio and Tom Cotton, to the Department of Commerce, the State Department, and the Pentagon.

The letter emphasised the need to develop legislation that would ensure US participation in developing global standards for 5G. It also pointed out that sanctions against Chinese companies shouldn’t prevent the United States from taking a leading position in developing international technological standards.

The Department of Commerce’s blacklisting of Huawei and a number of other Chinese companies last May put US companies in an extremely difficult position. These sanctions suggest that American firms cannot supply products and software to their Chinese partners without special permission from the Department of Commerce.

These rules were so vague that US firms failed to determine what technologies and intellectual property they could share with Chinese companies. In order not to fall under secondary sanctions, they decided to negate exchanging any information with Chinese firms. 

But developing standards is impossible without such exchanges. International standardisation organisations have representatives from various countries, including China.

Moreover, Chinese representatives lead some of them, including ITU, or dominate as voting members, as in 3GPP. Since common standards have not yet been developed in some new technologies, especially 5G, and Huawei owns more than a third of patents in this area – more than any other company – it’s simply impossible to exclude China from the process of setting global standards.

As a result, it turns out that while discussing important decisions on standards, US representatives are simply forced to keep silent; therefore, decisions are made without them. To improve the situation, the US senators appealed to the Department of Commerce. The new rules should clarify the process of sharing knowledge and technology, as well as make it possible for US and Chinese companies to work together to develop common standards.

Washington is likely to continue limiting competition and preventing Huawei and other Chinese firms from building telecommunications infrastructure. However, they will allow Chinese and American companies to work out standards together, Cui Lei, an associate professor of US studies at the China Centre for International Studies, said. 

"It’s still difficult to consider this step as a US intention to ease sanctions against Chinese high-tech companies. I believe that the US authorities will consider the issues of building infrastructure and developing standards separately. That is, Chinese companies will be given the green light to develop standards, but as for allowing Huawei and other Chinese firms into Western markets, I’m afraid the US will continue defending its point of view and refer to national security issues to introduce restrictions. As for future development, we need to look at several trends. Firstly, we need to look at how the internal rhetoric in the United States will develop regarding China, as well as what China’s strategic positioning will be. Secondly, we need to look at whether there will be any technological progress. For example, Huawei can now conduct unique research and development in 5G, reducing its dependence on the United States".

While 5G commercial networks have already been launched in China, the US still hasn’t decided on the frequency range to create fifth-generation networks.

However, Cui Lei points out that the United States is unlikely to acknowledge its technological lag. The current move by the US Department of Commerce is further evidence that Washington continues adhering to the uncompromising principles of competing with China.

"I don’t think the US will acknowledge its technological lag, because over the past 100 years the country has remained the trendsetter in the field of high technology. The US previously said that it wouldn’t compete with China in the 5G area, but would immediately build 6G networks. I personally believe that this situation suggests that the United States still doesn’t want to compromise, but is striving to compete with China, or even get ahead of it. Of course, this is a difficult way. And US companies understand this. I hope the authorities will take a more pragmatic approach to the issue of interaction with Huawei and other competitors, and will be inclined towards constructive cooperation, and won’t reject it".

The US doesn’t want to give up its position to Beijing in developing standards. After all, the more standards developed by Chinese technology companies are adopted globally, the greater the competitive advantage these companies will have.

The United States understands that, firstly, establishing standards also determines transferring its own patented technologies, the use of which will then be followed by royalties. Secondly, the one who sets the standards will receive compatible systems and a huge array of data that can be used to create new products, and therefore make them universal for everyone.

The experience of American firms like IBM or Qualcomm shows that the companies that came up with standards then occupy almost a monopoly position in the market for many years. They understand this in China. One saying has become a trend in the Chinese business environment in recent years that third-order companies make products, second-order companies develop technologies, and first-order companies set standards.