At the September summit between President Barack Obama and Chinese President Xi Jinping, the two leaders reached what was counted as a major breakthrough – and concession to the United States – when they agreed that “neither country’s government will conduct or knowingly support cyber-enabled theft of intellectual property, including trade secrets or other confidential business information, with the intent of providing competitive advantages to companies or commercial sectors.” The president warned at the time that the US would be “watching carefully” for future violations of the “understanding” between the two leaders. We are rapidly approaching the time when watching should turn to action.
Chinese attacks continue despite US-China agreement
Just three weeks after the summit, CrowdStrike, a California-based security services firm, reported that a Chinese hacking group known as Deep Panda – which has longstanding links to the Chinese government – had continued attacking leading American technology companies. It appears that the attacks were unsuccessful, at least to this point. CrowdStrike’s chief technology officer, Dmitri Alperovitch, stated that initially “we detected and stopped the actors,” but that the attacks had continued throughout October – well after the summit agreement.
CrowdStrike clearly distinguished these attacks from the traditional espionage that is accepted as within bounds by all nations. Alperovitch pointed out that “seven of the companies are firms in the technology or pharmaceuticals sectors, where the primary benefit of the intrusion seems clearly aligned to facilitate theft of intellectual property and trade secrets.” They had no obvious military or broader security value. To some degree, these incursion merely corroborated what skeptics had thought about the value of the agreement even as it was announced. James Clapper, the director of national intelligence, toed the line for the administration in concurring that the agreement was a good first step, but he also volunteered that he had great doubts it would actually curb the Chinese. Admiral William Godney, commander of the US Northern Command, was blunter, stating: “They’re going to have to show me that they’re going to stop. I just don’t see that happening. They can’t keep their industry moving without robbing our intellectual capital[.]”
There is, admittedly, a delicate question of timing before retaliation is considered. For instance, another cybersecurity firm, FireEye, has also found evidence of continued Chinese hacking since the summit. But a spokesperson for the firm has urged caution, arguing that it is “premature to conclude that activity during this short time frame constitutes economic espionage.” Fair enough, though no doubt there may be some competitive envy working here. Whoever is right, one can be fairly certain that the NSA and CIA have also been monitoring Chinese cyber activities closely – and with greater technological capacity than any private firm.
The administration must be ready to act
The point is that the Obama administration should be ready to act with dispatch if this continues over the next weeks and certainly by the end of the year. Though there are rogue hackers even in China, Deep Panda has been shown to have close ties to the Chinese government. Why have an authoritarian government if you can’t clamp down on your own minions?
There are also compelling strategic reasons for President Obama to act – decisively and promptly. As I have noted in previous blogs, before the summit the administration trumpeted the threat to retaliate against continuing, pervasive attacks by Chinese-based hackers on US companies. It signaled to all the world that it had the goods on specific Chinese individuals and companies that had profited from the theft of intellectual property and trade secrets from leading US high-tech firms. Having established the predicate for action, failure to act expeditiously in response to identifiable attacks will only compound the problem in the future – and signal to Beijing that it can act with impunity without fear of meaningful reprisal. I should add, finally, that implicit in this decision to act would be the calculation that even with the near certainty that the Chinese government will take retaliatory action against American companies, on balance the US will come out ahead by defending our clear comparative advantage in many high-technology sectors against thieving marauders.
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