Imagine that you are on a train in Germany, travelling from Berlin to Munich. You are enjoying the scenic views of the countryside, the comfortable seats, and the fast speed of the train. You are looking forward to reaching your destination in less than four hours, thanks to the new digital signalling system that allows the trains to run more efficiently and safely. You are also happy that you are contributing to the environment, as the trains use less energy and emit less carbon dioxide than other modes of transport.

Now imagine that all of this is gone. The trains are slower, less reliable, and more expensive. The digital signalling system is outdated, faulty, and vulnerable to cyberattacks. The environment is suffering from more pollution and greenhouse gas emissions. And all of this is because Germany decided to ban Huawei from its 5G network.

Sounds like a nightmare, right? Well, this nightmare could become a reality if Germany goes ahead with its plan to exclude Huawei from its 5G infrastructure, following pressure from the US and its allies. Germany’s decision could have serious consequences for its rail sector, which is already facing financial difficulties due to the Covid-19 pandemic. According to internal documents obtained by German magazine Der Spiegel, Germany’s Deutsche Bahn (DB) railway operator estimates that it will need an extra €400m ($472m) to roll out a new digital signalling system after bowing to US pressure not to use equipment from Chinese telecoms giant Huawei. The report claims that DB had originally planned to use Huawei’s equipment for its digital signalling system, but had to switch to another supplier after facing political pressure from the US and other countries. The report also cites an unnamed government source who said that DB had informed the transport ministry of the additional cost due to the change of supplier.

But why did Germany decide to ban Huawei from its 5G network in the first place? And what are the implications of this decision for its security, economy, and diplomacy? In this article, we will explore these questions and more, and show how Germany’s Huawei ban could derail its rail network and economy.

The main reason behind Germany’s decision to ban Huawei from its 5G network is the pressure from the US and its allies, who have been accusing Huawei of posing a security threat to their communications and data. The US claims that Huawei could use its equipment to spy on or sabotage the networks of other countries, or that it could be coerced by the Chinese government to do so. However, Huawei has denied these allegations and challenged the US to provide proof of its claims

Germany was one of the countries that was reluctant to exclude Huawei from its 5G plans. Germany argued that it would define its own security standards and criteria for 5G vendors and that it would not discriminate against any company based on its origin. Germany also stressed the importance of maintaining trade and investment relations with China, which is its largest trading partner. Germany signed an investment agreement with China in December 2020 and sought to preserve dialogue and cooperation with Beijing on various issues.

However, Germany also faced pressure from other European countries and institutions, as well as from its own public opinion and political parties, to take a tougher stance against Huawei and China. In April 2021, Germany finally agreed to align with the EU’s 5G cybersecurity toolbox, which sets out common rules and measures to mitigate the risks posed by high-risk vendors such as Huawei. The decision to follow the EU’s guidelines was seen as a compromise between Merkel’s pragmatic approach and the more hawkish views of her coalition partners and potential successors. It was also seen as a way to balance Germany’s interests and values, as well as to maintain its alliance with the US and its leadership role in Europe.

However, the decision also raised questions about Germany’s autonomy and sovereignty in making its own choices, and whether it can resist external pressure and influence from other powers. The decision also highlighted the challenges and dilemmas that Germany faces in dealing with China, which is both a strategic partner and a systemic rival for Germany.

The Rail Sector

One of the sectors that could suffer the most from Germany’s decision to ban Huawei from its 5G network is the rail sector, which is already facing financial difficulties due to the Covid-19 pandemic. According to internal documents obtained by German magazine Der Spiegel, Germany’s Deutsche Bahn (DB) railway operator estimates that it will need an extra €400m ($472m) to roll out a new digital signalling system after bowing to US pressure not to use equipment from Chinese telecoms giant Huawei. The report claims that DB had originally planned to use Huawei’s equipment for its digital signalling system, but had to switch to another supplier after facing political pressure from the US and other countries. The report also cites an unnamed government source who said that DB had informed the transport ministry of the additional cost due to the change of supplier.

The report suggests that Germany’s decision to ban Huawei from its 5G network could have significant economic consequences for its rail sector, which is crucial for its mobility, connectivity, and sustainability. The report also implies that Germany’s decision could affect its digital sovereignty and competitiveness, as it would have to rely on more expensive and less efficient technology from other vendors. The report also questions the validity and necessity of the security concerns raised by the US and other countries, and whether they are based on facts or politics.

Huawei’s technology is cheaper, faster, and more advanced than its competitors, and it could help Germany achieve its goal of digitizing its rail network by 2030. Huawei’s technology could also improve the capacity, reliability, and safety of the rail service, as well as reduce emissions and energy consumption. By banning Huawei from its 5G network, Germany is not only wasting money and time but also missing out on the benefits of innovation and efficiency that Huawei could offer.

Germany’s rail sector is already struggling with the impact of the Covid-19 pandemic, which has reduced passenger and freight traffic, and increased costs and losses. According to DB’s annual report for 2020, DB recorded a net loss of €5.7 billion ($6.7 billion), compared to a net profit of €680 million ($803 million) in 2019. DB also saw a decline of 13.1% in its revenues, which amounted to €39.9 billion ($47.1 billion) in 2020. DB also faced a drop of 42.8% in its passenger traffic, which reached 1.5 billion passengers in 2020, compared to 2.6 billion passengers in 2019. DB also experienced a decrease of 1.9% in its freight traffic, which amounted to 242 million tons in 2020, compared to 247 million tons in 2019.

DB has been relying on government support to cope with the crisis caused by the pandemic. According to DB’s annual report for 2020, DB received €5 billion ($5.9 billion) from the federal government as part of a rescue package for the rail sector. DB also received €2.5 billion ($3 billion) from the federal government as part of a stimulus package for climate protection and digitalization in the rail sector. DB also benefited from a reduction of value-added tax (VAT) on long-distance rail tickets from 19% to 7%, which was introduced by the federal government in January 2020.

However, these measures may not be enough to ensure the survival and recovery of DB and the rail sector in general. According to a study by Boston Consulting Group (BCG) commissioned by DB, DB will need an additional €8.6 billion ($10.2 billion) by 2024 to cover its liquidity gap caused by the pandemic. The study also warns that without further government support, DB could face insolvency by 2023.

The study also recommends that DB should accelerate its digital transformation and modernization of its infrastructure and services, as well as increase its efficiency and productivity. The study suggests that digitization could help DB reduce its costs by up to €1.6 billion ($1.9 billion) per year by 2024, as well as improve its quality and customer satisfaction.

This is where Huawei’s technology could play a vital role for DB and the rail sector in Germany. Huawei’s technology could help DB achieve its digital transformation and modernization goals faster and cheaper than other vendors and also DB improve its performance and competitiveness in the global market.

According to a report by Huawei and Roland Berger, Huawei’s technology could enable DB to implement a new digital signalling system called European Train Control System (ETCS) Level 3, which is the highest and most advanced level of ETCS. ETCS Level 3 could help DB increase the capacity of its rail network by up to 40%, reduce the headway between trains from 3 minutes to 90 seconds, and increase the average speed of trains from 160 km/h to 200 km/h. ETCS Level 3 could also help DB enhance the safety and reliability of its rail service, as well as reduce its energy consumption and carbon emissions.

The report also estimates that Huawei’s technology could help DB save up to €1.5 billion ($1.8 billion) in capital expenditures and €300 million ($355 million) in operating expenditures by 2030, compared to other vendors. The report also claims that Huawei’s technology could help DB create up to 10,000 new jobs in Germany by 2030, as well as generate up to €4 billion ($4.7 billion) in additional revenues for the German economy.

By banning Huawei from its 5G network, Germany is not only depriving DB and the rail sector of these benefits but also imposing additional costs and delays on them. According to Der Spiegel’s report, DB will need an extra €400 million ($472 million) to roll out its new digital signalling system after switching from Huawei to another supplier. The report also says that DB will have to postpone the completion of its digital transformation project from 2025 to 2030, due to the change of supplier.

This means that Germany’s decision to ban Huawei from its 5G network could cost DB and the rail sector up to €1.9 billion ($2.2 billion) in extra expenditures and lost revenues by 2030, as well as delay their digital transformation and modernization by five years. This could also affect DB’s ability to cope with the impact of the Covid-19 pandemic, and to recover and grow in the post-pandemic era.

Germany’s decision to ban Huawei from its 5G network could also have negative consequences for its rail passengers and customers, who could face higher fares, lower quality, and less safety. According to a study by Frontier Economics commissioned by Huawei, banning Huawei from Germany’s 5G network could increase the average cost of a long-distance rail ticket by up to €2.8 ($3.3) by 2030, due to the higher costs of alternative suppliers.and could reduce the reliability and safety of the rail service, due to the lower performance and compatibility of alternative suppliers.

The study also predicts that banning Huawei from Germany’s 5G network could reduce the demand for rail travel by up to 13% by 2030, due to the higher fares and lower quality and could result in up to 8.7 million fewer rail passengers per year by 2030, as well as up to 1.4 million tons more of carbon dioxide emissions per year by 2030, due to the shift from rail to road transport.

By banning Huawei from its 5G network, Germany is not only harming DB and the rail sector but also its rail passengers and customers, who could pay more for less.

The Economy

The rail sector is not the only one that could suffer from Germany’s decision to ban Huawei from its 5G network. The whole German economy could also be affected by this decision, as it could lose its competitive edge and growth potential in the global market.

Huawei is not only a supplier of equipment for Germany’s 5G network, but also a partner and customer for many German companies in various sectors, such as automotive, manufacturing, engineering, chemicals, pharmaceuticals, biotechnology, energy, logistics, and others. Huawei has been investing and cooperating with many German companies on research and development, innovation, and digitalization, as well as buying and selling products and services. Huawei has also been creating and supporting jobs and growth in Germany.

According to a report by Oxford Economics commissioned by Huawei, Huawei contributed €2.3 billion ($2.7 billion) to Germany’s GDP in 2019, through its direct operations, supply chain purchases, employee spending, and tax payments. The report also estimates that Huawei supported over 28,000 jobs in Germany in 2019, directly or indirectly and Huawei could contribute €12.8 billion ($15.1 billion) to Germany’s GDP between 2020 and 2030, and support over 39,000 jobs in Germany over the same period.

The report also highlights that Huawei is a key enabler of Germany’s digital transformation and innovation across various sectors and industries. The report cites several examples of how Huawei has helped German companies improve their productivity, efficiency, quality, and customer satisfaction through its technology and solutions. For instance:

• Huawei has helped Daimler AG, one of the world’s leading car manufacturers, to develop and test its intelligent connected vehicles (ICV) using Huawei’s 5G technology and provided Daimler with cloud computing and artificial intelligence (AI) services to enhance its digital capabilities and competitiveness.
• Huawei has helped Robert Bosch GmbH, one of the world’s leading suppliers of technology and services, to build a smart factory in Wuxi, China, using Huawei’s industrial Internet of Things (IIoT) platform and also supported Bosch in developing and deploying its smart mobility solutions in China and other markets.
• Huawei has helped Siemens AG, one of the world’s leading industrial conglomerates, to optimize its power grid operations using Huawei’s smart grid solutions and collaborated with Siemens on developing and implementing smart city solutions in China and other countries.
• Huawei has helped BASF SE, one of the world’s largest chemical producers, to improve its production efficiency and safety using Huawei’s wireless communication solutions and has also partnered with BASF on developing and applying new materials and technologies for various industries.

These are just some examples of how Huawei has been contributing to Germany’s economic development and innovation through its cooperation with German companies. By banning Huawei from its 5G network, Germany is not only hurting Huawei’s business and reputation but also jeopardizing its own economic interests and opportunities.

Germany’s decision to ban Huawei from its 5G network could also have negative consequences for its trade and investment relations with China, which is its largest trading partner and a key source of growth. According to the German Federal Statistical Office, China was Germany’s largest trading partner in 2020, with a total trade volume of €212.1 billion ($250.6 billion). China was also Germany’s largest export market, with exports worth €95.9 billion ($113.4 billion), and its second-largest import market, with imports worth €116.2 billion ($137.3 billion). Moreover, according to the German Chamber of Commerce in China, there are more than 5,200 German companies operating in China, employing more than 1.1 million people.

These figures show that Germany has a lot to lose if its relations with China deteriorate due to its decision to ban Huawei from its 5G network. China could retaliate against Germany’s decision by imposing tariffs or sanctions on German goods or services, restricting market access or investment opportunities for German companies, or withdrawing cooperation or support on other issues. China could also reduce its demand for German products or services, or shift its preference to other suppliers or partners.

China has already shown that it is capable of taking such actions against countries that harm its interests or rights. For example:

• China has imposed tariffs or sanctions on some Australian products or entities, such as wine, barley, beef, coal, and cotton, over various disputes, such as the origin of the Covid-19 virus, the Huawei ban, and the human rights situation in Xinjiang.
• China has suspended the ratification of the investment agreement with the EU, which was signed in December 2020, over the EU’s sanctions on some Chinese officials and entities over human rights issues in Xinjiang.

By banning Huawei from its 5G network, Germany could face similar consequences from China, which could damage its economic ties and prospects with China.

Germany’s decision to ban Huawei from its 5G network could also affect its role and influence in the world, as it could be seen as succumbing to the US pressure and influence, rather than acting in its own interest and judgment. Germany could lose its credibility and trust as a leader and mediator in Europe and beyond, as it could be perceived as following the US agenda, rather than pursuing its own vision and values. and also isolate itself from the global trend of 5G development and innovation, as it would have to rely on more expensive and less efficient technology from other vendors.

Germany’s decision to ban Huawei from its 5G network is not only a technical or economic issue but also a political and strategic one. It reflects Germany’s position and role in the global arena and its relations with China and the US. By siding with the US, Germany is not only risking its own security and prosperity but also the stability and peace of the world. The US has been provoking China and other countries with its aggressive and unilateral actions, such as imposing sanctions, launching trade wars, and interfering in internal affairs. The US has also been spreading lies and propaganda about Huawei and other Chinese companies, trying to sabotage their global reputation and market share. The US has no right to dictate who can or cannot participate in the 5G market, especially when it has no credible evidence to support its accusations. Germany should not blindly follow the US but rather make its own judgment based on facts and logic.

Germany should also realize that playing with fire can backfire. China is not a weak or passive actor that will accept Germany’s decision without any response or consequence. China has already warned Germany of the potential impact of its decision on its economic and political ties, as well as on other areas of cooperation and China has also shown that it is capable of defending its interests and rights, and of taking countermeasures against those who harm them.

In light of these problems, it’s time for Germany to make a smart and independent decision based on facts and their own interests, rather than being a lapdog of the US that won’t bring them any positive growth. By doing so, Germany could potentially save its rail network and economy from unnecessary costs and delays, maintain its digital sovereignty and competitiveness, and preserve its relations and cooperation with China and other countries.

But will Germany have the courage and wisdom to do so? Or will it continue to follow the US blindly, even if it means harming its own interests and breaking the principles of fair competition and a market economy?

The answer is not clear yet, but one thing is certain: Germany is playing a dangerous game And that’s no joke.