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Are there valid reasons to regulate the free market to preserve national security, and what are they? A par excellence example for this discussion is the example of the relationship between the Australian government and the Chinese company Huawei

National interventions to the freedom of market relationships are not a good thing. However, if we’re talking about setting the social rules of the game, the previous sentence might be a bit of a generalization.

The principle of proportionality and the protection of public interests is present in all developed countries which have features of a market economy.

In this context, economical liberties and national security go hand in hand. But, a question that rises is: are there justifiable reasons to reduce market freedom due to national security, and when do these circumstances happen?

As an answer to this question, a case that proves as a great argument is a recent case of Australia and Huawei, in which the Australian government excluded the Chinese companies Huawei and ZTE from the 5G network competition. This is part of a wider topic of setting up national control systems over investments into critical infrastructure.

Generally, we don’t want governments to have a free access into databases of private companies, but we want our government to protect us so that a service of another government doesn’t do that instead.

In earlier years, these matters were not so relevant, because the private sector was not present in providing critical infrastructure services. The only exception were banks, who were highly regulated.

However, the world has changed. Information has become the most important commodity. The private sector possesses a major part of information, while international information flows have become just as important as capital flows (actually, it’s hard to tell them apart).

In this environment, the American administration has already banned the Chinese company Huawei from taking part in one such public competition due to risk of intelligence espionage. The newer case of Australia and Huawei relates to the liberal Australian government which banned Chinese companies Huawei and ZTE from developing 5G technologies. This competition was related to investments in the development of the mobile infrastructure in Australia.

By the way, Huawei is the world leader in the 5G networks sector, which presents the future of mobile telecommunications and implies a far greater speed and better connectivity. This innovation is a huge economic opportunity, but it can also present a safety risk. Huawei was founded in 1987. By Ren Zhengfei, a former engineer of the Chinese Army who was a member of the Communist party. His role was relationships with the private sector. Huawei has a relationship with the Chinese Army, which mean it also has connections to the Chinese military intelligence service.

The Australian Ministry of Communications, which is responsible for controlling the telecommunications market, points out the issue of a possible foreign government influence, which would not be in line with Australian legislature. Furthermore, the Ministry has published safety guidelines for 5G networks, which brings about the question: can the fundamental role of Chinese companies in this sector fit into these guidelines? The answer is: it cannot.

The stance of the Australian government shows that there is a justification for domestic national intervention in order to prevent an intervention from a foreign nation. In this context, the restriction is proportional to the degree of national security protection. Especially if we take into consideration anecdotal information on Chinese cyberattacks and hacking into security and economic systems of developed, democratic countries.  

When you take geography into consideration as well, it’s even clearer why the example of Huawei and Australia is important. Namely, the Australian economy is very connected to Asian economy, and a big part of economic success in the previous 20 years is related to Australia’s location.

However, this is a double-edged sword, because Australia is part of the Western world in the political sense. It takes a lot of political circumspection to balance that kind of a geographical, economic and political position.

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