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Trump administration ‘disappointed’ with UK decision on Huawei 5G

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WASHINGTON — The Trump administration expressed disappointment in the U.K.’s decision to allow Chinese telecommunications giant Huawei limited access to some British 5G mobile networks.

“The United States is disappointed by the UK’s decision,” a senior Trump administration wrote in an emailed statement to CNBC. The official added that the Trump administration will work “with the U.K. on a way forward that results in the exclusion of untrusted vendor components from 5G networks.”

The U.K. said equipment made by Huawei would not be banned but that access will be restricted from “sensitive functions.”

U.K. Prime Minister Boris Johnson’s government made the decision despite warnings from President Donald Trump, who has called Johnson a “friend,” key figures in the Republican Party and members of Johnson’s own Conservative party.

The latest development comes as the Trump administration works to isolate Chinese tech firm Huawei from developing a larger foothold in U.S. partner countries. The administration has specifically worked to keep members of the “five eyes” intelligence-sharing group, which includes the UK, Canada, Australia, and New Zealand, from working with Huawei.

In 2018, the Pentagon halted sales of Huawei and ZTE mobile phones and modems on military bases around the world due to potential security risks.

“We continue to urge all of our partners and allies to carefully assess the multifaceted impacts of allowing untrusted vendors access to important 5G network infrastructure,” Pentagon spokesman U.S. Army Lt. Col. Dave Eastburn wrote in a statement to CNBC.

“It’s been assessed that there is no safe option for untrusted vendors to control any part of a 5G network,” Eastburn added.

Long-standing concerns

U.S. officials have long complained that Chinese intellectual property theft has cost the economy billions of dollars in revenue and thousands of jobs and that it threatens national security. China maintains that it does not engage in intellectual property theft.

When asked about the issue by CNBC on his first day as secretary of Defense, Mark Esper said he was “very concerned about Chinese technology getting into our systems or the systems of our allies.”

“Huawei is the poster child right now for that,” Esper said, adding that the U.S. trade war with China is as much about national security as it is about the economy.

“When I was in Brussels three weeks ago we talked about this among defense ministers on how do we preserve the integrity of our networks as an alliance and so that will continue to be important for me as we go forward,” he said in July, referring to a NATO visit he made while acting Defense secretary.

Read more: New Defense secretary: ‘We need to be very concerned’ about Chinese tech

Last year, in spite of national security warnings, then-British Prime Minister Theresa May reportedly approved a plan to let Huawei build part of the UK’s 5G network. Her decision was leaked and resulted in the dismissal of then-Defense Secretary Gavin Williamson.

Williamson has denied that he was the source of the leak.

A month prior to Williamson’s departure, then-Chairman of the Joint Chiefs of Staff Gen. Joseph Dunford said that if U.S. allies proceed with Huawei’s equipment, intelligence cooperation could be undermined.

“One of the things that underlines an alliance is the ability to share information and when we share information with allies and partners we have to have common standards of information assurance. We have to be sure that our secrets are protected, whether it be intelligence or technology transfer,” Dunford told a House Appropriations subcommittee in April 2019.

Acting U.S. Secretary of Defense Patrick M. Shanahan and Marine Corps Gen. Joe Dunford, chairman of the Joint Chiefs of Staff, give testimony on the Department of Defense budget posture in review of the Defense Authorization Request for Fiscal Year 2020 and the Future Years Defense Program at the Dirksen Senate Office Building, March 14, 2019.

Navy Petty Officer 1st Class Dominique Pineiro | Department of Defense photo

Echoing Dunford’s sentiments, then-acting Secretary of Defense Patrick Shanahan told lawmakers that “China aims to steal its way to a China-controlled global technological infrastructure, including 5G.”

“Huawei exemplifies the Chinese Communist Party’s systemic, organized, and state-driven approach to achieve global leadership in advanced technology.”

What’s more, the Director of National Intelligence, alongside the heads of the FBI, CIA, NSA, Defense Intelligence Agency, and National Geospatial Intelligence Agency testified before lawmakers in 2018 on potential security risks posed by Huawei and ZTE.

“We’re deeply concerned about the risks of allowing any company or entity that is beholden to foreign governments that don’t share our values to gain positions of power inside our telecommunications networks,” FBI Director Christopher Wray told the U.S. Senate Intelligence Committee.

“It provides the capacity to maliciously modify or steal information. And it provides the capacity to conduct undetected espionage,” Wray added.

Huawei’s denials

Huawei and ZTE have previously denied allegations that their products are used to spy on Americans.

Since 2012, the U.S. government has warned against using Huawei equipment and component parts, alongside one of Huawei’s Chinese competitors, ZTE. The company has been effectively banned since that time, with an executive order from Trump making those recommendations official.

“U.S. government systems should not include Huawei or ZTE equipment,” a 2012 report by the Permanent Select Committee on Intelligence said. “Similarly, government contractors, particularly those working on contracts for sensitive U.S. system, should exclude ZTE or Huawei equipment from their systems.”

As for Huawei’s alleged ties to the Beijing government, the company has strongly denied the accusations. The 2012 report and subsequent intelligence briefings on Huawei do not outline specific proof of Huawei’s ties to Beijing, but assert the risk of allowing Huawei to supply this critical equipment is too great. Huawei officials have said they have repeatedly asked the Department of Defense to allow the company to submit to a risk mitigation process, but no agreement has ever been discussed.

Read more: Huawei USA security chief suggests the company could be open to ‘mitigation measures’ to address US national security concerns

“The task of finding and eliminating every significant vulnerability from a complex product is monumental,” the report reads. “If we consider flaws intentionally inserted by a determined and clever insider, the task becomes virtually impossible.”

— Kate Fazzini and Yelena Dzhanova contributed to this report from CNBC’s global headquarters in Englewood Cliffs, New Jersey

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Facebook’s Zuckerberg meets EU’s competition chief ahead of new A.I. rules

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Facebook CEO Mark Zuckerberg is meeting Europe’s competition chief in Brussels Monday, at a time when regulators in the region are preparing new rules that could impact the social network’s business.

The European Commission, the EU’s executive arm, is due to unveil new regulations on artificial intelligence (AI) Wednesday. Media reports suggest the EU could go as far as a temporary ban on the use of facial recognition. Facebook is one of many U.S. tech giants that have invested in A.I. Zuckerberg’s firm recently bought the British A.I. company Deeptide and the London-based computer vision start-up Scape Technologies.

Zuckerberg’s visit also happens at a time when European regulators are assessing whether Facebook’s data practices have disrespected competition law. Margrethe Vestager, the EU’s competition chief, is also looking at Google and Amazon data use in separate probes.

A Facebook spokesperson told CNBC Monday that Zuckerberg is meeting “with European decision-makers in Brussels to discuss a framework for new rules and regulation for the internet.” Shares of Facebook are up by about 30% over the last 12 months.

Facebook’s CEO Mark Zuckerberg answers questions about the improper use of millions of users’ data by a political consultancy, at the European Parliament in Brussels, Belgium, in this still image taken from Reuters TV May 22, 2018

ReutersTV | Reuters

Zuckerberg said in the Financial Times Sunday that private companies like Facebook need help from regulators in defining certain aspects of their work. Facebook’s chief has called for specific regulation when it comes to elections, harmful content, privacy and data portability.

“Mark Zuckerberg has changed his tune somewhat,” Seth Wallis-Jones, principal analyst at Omdia, told CNBC’s “Street Signs” Monday.

“He has been looking at four different areas, he has been talking about things like election integrity,” Wallis-Jones said, adding that Zuckerberg is “trying to avoid, I think, looking at the competition and the taxation aspects, which are probably the most expensive.”

Facebook and other big U.S. tech firms have been under pressure in Europe, but also to some extent in the United States. The Federal Trade Commission (FTC) said last week it would be examining prior acquisitions by Alphabet, Amazon, Apple, Facebook and Microsoft.

Wallis-Jones also told CNBC that on their own these acquisitions are not anti-competitive, “but if you look at pattern-behaviour maybe it does build them into something bigger.”

Apple CEO Time Cook has previously told CNBC that it acquires a company every two to three weeks on average, looking for talent and intellectual property.

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Victoria Beckham always gets ‘nervous’ in the run up to fashion shows

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British fashion designer Victoria Beckham presents for her Autumn/Winter 2020 collection on the third day of London Fashion Week in London on February 16, 2020.

Daniel Leal-Olivas/ AFP via Getty Images

Fashion designer Victoria Beckham said she always gets nervous in the run up to her fashion shows.

“It doesn’t get any easier. If anything, I think it gets, it gets more difficult,” Beckham told CNBC’s Tania Bryer, when she caught up with the designer after her London Fashion Week show on Sunday.

“You literally don’t sleep for about five nights in the lead up to the show,” she added.

The former Spice Girl, who launched her eponymously named brand in 2008, said she was “a little bit innocent” about this when she first ventured into the fashion industry.

Despite what she describes as an “intense” week of preparation, Beckham said it was “fun” and “exciting” to see the “clothes come to life” in the show.

“And it’s about challenging myself every season,” said Beckham, adding that she spent a lot of time “agonizing over every single detail” of her collection and catwalk show.

The designer also explained how she was using her reach on social media to promote her brand. On Instagram, for instance, she has 28 million followers and has launched a filter game which asks users “Which VB are you?”

“I take my job very seriously, but I do like to have fun, and I think that you see that on social media,” she said, explaining that she also tried to do this in the colors and prints used in her fashion collections.

The designer rose to fame in the 1990s, first becoming known as “Posh Spice” in British girl band the Spice Girls. Marrying soccer star David Beckham cemented her place in the public eye but she then went on to develop her status as a fashion icon.

Beckham’s brand made nearly £36 million ($47 million) in revenue in 2018, according to the latest company accounts.

Sustainability

Speaking about the increasing importance of sustainable fashion, Beckham said the industry was “still educating” itself but she believed that it did recognize that it had a responsibility to tackle this issue.

She pointed out that her recently launched line of beauty products, focused on using “clean” ingredients, uses packaging that is made entirely of post-consumer waste. Beckham also opted for sending digital invites out to her show instead of posted invites.

Beckham said she had a “big plan” for the expansion of her beauty and make-up lines.

She also touched on the effect of coronavirus, in limiting travel from China and the impact this was having with designers seeing fewer people at their shows at this year’s various fashion weeks.

As a “big market” for her brand, she said it had affected business but that this was also the case for everyone in the fashion industry.

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Coronavirus could impact 5 million companies worldwide, research shows

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People wearing protective face masks queue to order food from a stall in Shanghai on February 14, 2020.

Noel Celis | AFP | Getty Images

The new coronavirus outbreak and subsequent shutdown of huge swathes of China could impact more than 5 million businesses worldwide, according to a new study.

A special briefing issued by global business research firm Dun & Bradstreet analyzed the Chinese provinces most impacted by the virus, and found they are intricately linked to the global business network.

The affected areas with 100 or more confirmed cases as of February 5 are home to more than 90% of all active businesses in China, according to the report, and around 49,000 businesses in these regions are branches and subsidiaries of foreign companies.

Almost half (49%) of the companies with subsidiaries in impacted regions are headquartered in Hong Kong, while the U.S. accounts for 19%, Japan 12% and Germany 5%.

As of Monday, over 70,000 cases of the virus have been confirmed in China, resulting in 1,770 deaths, according to the Chinese National Health Commission.

Dun & Bradstreet researchers found that at least 51,000 companies worldwide, 163 of which are in the Fortune 1000, have one or more direct or “tier 1” suppliers in the impacted region, while at least 5 million — and 938 in the Fortune 1000 — have one or more “tier 2” suppliers.

The impact on businesses in China and around the world is already dragging down economic growth forecasts for the year.

In a research note published Monday, Moody’s revised down its global growth forecasts by two-tenths of a percentage point, expecting G-20 economies to collectively grow at an annual rate of 2.4% in 2020 with China slipping to 5.2%.

This assumes a baseline forecast that the spread of the virus is contained by the end of the first quarter, restoring “normal economic activity” in the second quarter. However, the global economic toll would be “severe” if the rate of infection and rising death toll do not abate, with international supply chain disruptions amplifying the shock.

“There is already evidence albeit anecdotal – that supply chains are being disrupted, including outside China. Furthermore, extended lockdowns in China would have a global impact given the country’s importance and interconnectedness in the global economy,” Moody’s Vice President Madhavi Bokil said in the research note.

The Dun & Bradstreet report identified that the top five major sectors, accounting for more than 80% of businesses within impacted provinces, were services, wholesale trade, manufacturing, retail and financial services.

Dun & Bradstreet hypothesized that a major portion of Chinese employment and sales originate from companies within the impacted region.

The impacted provinces of, for instance, Guangdong, Jiangsu, Zhejiang, Beijing and Shandong account for 50% of total employment and 48% of total sales volume for the Chinese economy.

The Chinese economy constitutes around 20% of global GDP (gross domestic product) and analysts estimated that if containment of the outbreak is delayed beyond the summer, the “cascading effect” might cause a drag of around one percentage point on global GDP growth.

“No matter which scenario plays out, the Hubei region, China, and the global economy are indicated to see a churn in their business population and some lackluster employment and revenue growth in the near-term,” the company said in the report.

“When (not if) containment and eradication is achieved, factors within the impacted geography are bound to generate economic activity with consumers, satisfying pent-up demand once improved conditions are underway. The sum of the efforts to revitalize the region will place the global economy back on track for sustained growth.”

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