Jan 15, 2019

The slippery slope of supply chain fears

Illustration: Rebecca Zisser/Axios

Now that the U.S. and other countries are barring the use of Chinese-built 5G equipment — thanks to allegations that China's government sabotages those products for espionage purposes — we're beginning to see more suspicious treatment of other infrastructure built in China, too.

The big picture: Following the U.S. ban on Chinese made telecom equipment from Huawei and ZTE, we're going to have to decide whether that means other parts of other supply chains are also guilty by association.

  • Fears that Chinese-built trains might be tempting for Beijing to convert into surveillance machines are leading some in government to question the vulnerability of Chinese mass transit equipment. That recently led DC's Metro transit system to add cybersecurity safeguard specs to a contract for new rail cars.
  • One solar electricity investor wondered to Codebook whether Huawei's line of solar equipment should face national bans, too. "If we’re talking about national security," he said, "why would electricity be any different than telecommunication?"

Regulators often deal with these kinds of supply chain issues product by product only after a problem is discovered. That leaves a lot of the burden on the customers, who are often left hoping that the product they bought won't eventually run afoul of the government.

Take solar equipment as an example:

  • China's main focus in hacking is stealing information, including national secrets and intellectual property.
  • Solar products are not a good venue for stealing the kind of information China is known to steal.
  • They, could, however, be a hypothetical way for Chinese hackers to cause physical harm, including blackouts. That risk is wildly unlikely, say most China experts, and would amount to an uncharacteristic act of war.

With mass transit, there are not a lot of other options beside Chinese components. And there, as in many other industries, Chinese components are typically cheaper.

The big question: How do you maintain global supply chains without getting involved in the geopolitics of smart devices?

The risk management proposition for companies should be "holistic" and case by case, said Edna Conway, chief security officer of the global value chain at Cisco who also sits on DHS's supply chain task force.

  • That means weighing many factors against cost, including the functionality of equipment, tactics to limit exposure to potential damage, availability of replacements and opportunity to fully test the equipment.

But policies driven by economic nationalism are likely to be overly broad and potentially destructive. "The global value chain is a benefit to all. We can and should continue to avail ourselves of it," said Conway.

Go deeper

Coronavirus dashboard

Illustration: Aïda Amer/Axios

  1. Global: Total confirmed cases as of 8 p.m. ET: 1,426,096 — Total deaths: 81,865 — Total recoveries: 300,054Map.
  2. U.S.: Total confirmed cases as of 8 p.m. ET: 396,223 — Total deaths: 12,722 — Total recoveries: 21,763Map.
  3. Federal government latest: Acting Navy secretary resigns over handling of virus-infected ship — Trump removes watchdog overseeing rollout of $2 trillion coronavirus bill.
  4. Business latest: America's food heroes in times of the coronavirus crisis. Even when the economy comes back to life, huge questions for airlines will remain.
  5. World latest: China reopens Wuhan after 10-week coronavirus lockdown.
  6. Wisconsin primary in photos: Thousands gathered to cast ballots in-person during the height of the coronavirus crisis in the U.S.
  7. 1 Olympics thing: About 6,500 athletes who qualified for the Tokyo Games will keep their spots in 2021.
  8. What should I do? Pets, moving and personal healthAnswers about the virus from Axios expertsWhat to know about social distancingQ&A: Minimizing your coronavirus risk.
  9. Other resources: CDC on how to avoid the virus, what to do if you get it.

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Airline industry braces for a forever-changed world

Illustration: Sarah Grillo/Axios

The airline industry got a $58 billion lifeline in the coronavirus federal aid package. But the path is unclear for these companies, whose operations and prospects will be forever changed by the global pandemic.

Why it matters: People may want to minimize travel for the foreseeable future. Investors, analysts and industry watchers are trying to determine how much airlines will need to spend — and how much more in lost revenue they'll see — while they adapt to the new reality.

Trump denies seeing Navarro memos warning about toll of coronavirus

President Trump said at a press briefing Tuesday that he "didn't see" memos from his trade adviser Peter Navarro warning in January and February that the coronavirus crisis could kill more than half a million Americans and cost close to $6 trillion.

Why it matters: Trump insisted that despite not seeing the memos, he did "more or less" what Navarro suggested by banning non-U.S. citizens from traveling from China effective Feb. 2.