For the past several weeks, the United States’ legitimate campaign against a myriad of Chinese mercantilist practices has gone off the rails. It may be that Beijing’s decision to renege on earlier promises for structural reform portended a long stalemate. But President Trump’s decision to add a 10 percent tariff on an additional $300 billion of Chinese goods against the advice of his most expert advisers (except for the questionable counsel of Peter Navarro) has distracted US negotiators. It started a process that ended with the US falsely claiming that China was manipulating its currency to gain unfair export advantage.
via REUTERS
Others have pointed out the fallacies behind the decision to name China a currency manipulator. China’s actions don’t even meet the criteria for the label established by the US government itself, much less those of the International Monetary Fund (not to mention the side collateral damage to the Treasury Secretary’s already questionable reputation). China does indeed “manipulate” its currency, but for the past few years Beijing has intervened to bolster the yuan’s value. Now it has reversed course and allowed a slight drop in value, presumably as a warning to the Trump administration of potential future actions. Though there are limits to what China can do on currency without damaging its own economy, press reports are replete with alarms that a currency war is looming. Meanwhile, trade negotiations have been suspended, and the US is no closer to achieving significant Chinese economic and trade reforms.
But there is one area where the US should not wait to act: that is, on the bold renewal and uptick of Chinese intellectual property theft. As chronicled often in these blogs, as far back as 2015, President Xi personally promised President Obama that the Chinese government would not use espionage for competitive gain for Chinese companies. While economic espionage did decline in the ensuing months, the decline in attacks resultedfrom Beijing reining in government-supported and directed private hackers.
Recently, clear evidence has emerged that Beijing has reversed course and is now actively working in concert with private intellectual property (IP) thieves. Back in December, top US counterintelligence officials told Sixty Minutes that China remained far and away the greatest espionage threat “compared to Russia or Iran or any other country. And if you include economic espionage, industrial espionage, it’s not even in the same ballgame.” They also noted that the main thrust of the attacks were directed at technologies included in Xi Jinping’s Made in China 2025 program.
Then, last week the US cybersecurity firm FireEye reported that the Chinese government had again unleashed the (cyber) dogs of war. It documented a series of attacks by private hackers, tied to Chinese intelligence, that combine for-profit with state-directed economic espionage. While not unheard of, the extensive combination of purely private gains with traditional economic espionage represents a novel and bold partnership.
US firms were not alone. Starting in the spring, but reaching a crescendo in recent weeks, German firms also bore the brunt of highly sophisticated attacks on their computer systems. Among those targeted were Siemens, BASF, and Bayer (along with firms from other sectors).
This bold new offensive by Beijing should not go unchallenged. Though FireEye and other cybersecurity firms have developed formidable analytic tools, the capabilities of US intelligence agencies undoubtedly overmatch them — and certainly are tracking the hacking activities identified by private firms. As argued previously, the US should act to dispatch, and where possible publicly identify, the culprits and their relationships with the Chinese government. Beyond that, the US should warn Beijing — and act on that warning if it goes unheeded — that in those sectors and subsectors targeted for cyberespionage by the public/private Chinese hackers, the US will ban all Chinese companies from the US market even if no direct technology theft and transfer can be identified.
On IP theft, the Chinese government seems to think it can act with impunity. Beijing still blandly denies that it participates in purloining trade secrets. Whatever the future of the larger trade talks and agenda, the US should counter this brazen duplicity with force.
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