China has begun what could be a long, drawn-out legal battle at the World Trade Organization, or WTO, over Canberra's decision to ban Chinese telecoms companies from taking part in Australia's 5G network.
China's case was the 24th item on the WTO agenda, listed as "Australia－discriminatory market access prohibition on 5G equipment－request from China".
Australia banned Huawei Technologies, one of the world's leaders in 5G technology, and ZTE Corp, from supplying equipment for the country's 5G network last August, citing national security risks.
"Australia's case is weak at best," said Zhou Weihuan, a senior lecturer in law at the Herbert Smith Freehills China International Business and Economic Law Centre at Sydney's University of New South Wales.
The WTO's Council for Trade in Goods discussed the case during its meeting on April 11-12. Chinese argued the ban was "discriminative" and "appeared" to break global trade rules, according to an April 14 Reuters report citing a transcript of the meeting.
Australia's Trade Minister Simon Birmingham said in a statement on April 14 that the government "stands by its decision in relation to 5G, which was not targeted at any one country or telecommunications company".
Australia is using articles XX (General Exceptions) and XXI (Security Exceptions) of the General Agreement on Tariffs and Trade rules to justify the ban.
Under the rules, WTO member countries are not allowed to discriminate between trading partners or reject imports from member countries, but they can cite "national security" to gain an exemption from the normal global trade rules. This provision, however, is rarely invoked by member states for fear that national security claims could become the norm and undermine the global trade organization.
According to Zhou, "Australia does not have sufficient grounds under the national security exemptions to ban the Chinese companies".
"Unless Australia can prove that Chinese 5G equipment poses a higher risk than the same equipment from other countries, the discrimination would be unjustifiable," Zhou said.
Huawei's director of corporate and public affairs for Australia, New Zealand and the South Pacific, Jeremy Mitchell, told China Daily recently that Australia will pay a "heavy price" for the ban on Chinese telecom companies.
He said banning companies such as Huawei will mean that Australians end up paying more money to build their networks with inferior technology.
This is already having an impact on the Australian market. TPG, an Australian internet service provider, announced recently it will drop plans to build a fourth mobile network, explicitly referencing the absence of Chinese vendors in its decision not to proceed.
Neale O'Connor, professor of accounting at the School of Business, Monash University in Malaysia, said the politics of 5G is interesting as Huawei and Nokia are the key holders of the license for 5G technology.
"This makes it very political and is why there is a lot of pushback among developed countries. Even if Australia bans Huawei from infrastructure installation, the providers of 5G in Australia will still have to pay Huawei and Nokia a license fee," he told China Daily.