China is Dumping Fiber Optic Cables in the Global Market, Commerce Official Says

China is using the same tactics it employed to drive down the price of telecommunications equipment from Huawei to flood global markets with fiber optic cables—crucial underlying infrastructure for fifth-generation networks—a senior Commerce Department official said.  

“China is currently driving massive overcapacity in critical sectors including steel, aluminum and optical fiber cables,” said Nazak Nikakhtar, Commerce’ assistant secretary for industry and analysis.

Nikakhtar spoke on behalf of the Commerce Department during an event Thursday hosted by American Council for Technology and Industry Advisory Council (ACT IAC).

In the case of steel and aluminum, the administration has imposed tariffs on imports from China under section 232 of the Trade Expansion Act, which allows for such action if the Commerce Department finds there are implications for national security.

Nikakhtar said such actions have never been taken before but are necessary because of the lack of structures in international law for dealing with non-market driven economies.

“It’s unprecedented, some of the things that we’re trying to do,” she said. “We’ve never really developed the right tools and toolsets to deal with this. Look at overcapacity. We don’t have international laws that deal with overcapacity, so what does the U.S. try to do? ... We use Section 232 tariffs with steel and aluminum—two prime examples to prevent overcapacity from decimating U.S. industry.”

Discussions of fifth-generation network technology often highlight the importance of making more spectrum available for wireless communications, but none of those connections would be possible without fiber optic cables, something the Fiber Broadband Association noted in June 25 comments to Commerce’s National Telecommunications and Information Administration on the administration’s 5G strategy. 

“In the optical fiber cable market, the lead infrastructure for 5G, western companies are struggling against the tide of overcapacity, plunging global prices to noncompetitive levels, driving companies out of the market and leaving the world with only one supplier, China,” Nikakhtar said. “The danger here is that the country that controls the fiber cable is the country that dictates who can access them, so controls all global communication.”

Nikakhtar highlighted recent executive orders limiting the reach of supply chains for the telecommunications and bulk power systems as other “creative solutions” the Trump administration is employing to counter China’s efforts to dominate the market for key technologies.  

“We’re looking at creative solutions. I say creative because we either have laws that aren’t being adhered to, we don’t have an extradition treaty with China so we can prosecute, it doesn’t go anywhere, and then, like I said, the lack of international rules. So that’s why we need to be creative,” she said, noting rules flowing from the executive orders “have to be defined, soon.”

Speaking on behalf of the State Department during the virtual event was Grace Koh, ambassador and special adviser at State’s Bureau of Economic and Business Affairs. Koh agreed with Nikakhtar but noted a tension between limiting collaboration with China and the kind of innovation such partnerships can lead to. 

To some degree, we have to figure out what we want from China. I know that there are companies who work very closely with Chinese companies and labs to great benefit. Globalization has done great things for innovation,” she said. “We can bring a lot of great technological minds together who can actually engineer some very, very creative and exciting solutions for problems that really break all of us.”

Ensuring the U.S. can still get that benefit while weeding out bad actors and purposes is something Koh said she’s still trying to figure out.

Reacting to this, Nikakhtar again raised the importance of fiber optics and referenced Huawei’s recent approval to build a $1.2 billion research facility for the technology in the United Kingdom.”  

“There’s no question that by investments abroad, they’re endeavoring to collaborate with the great scientists of, you know, the U.K., the western economies, to develop technology,” she said. “By allowing this sort of collaboration and innovation, the information then goes back to China, for example, for them to use underpricing to wipe out competitors.”