Is a healthy shot of hysteria over Chinese cyberspying just what’s needed?

Few countries do hysteria as well as America. It’s in the blood. From the Salem Witchtrials to the Red Scares, it’s a talent. So it’s no surprise there is has been a shudder of hysteria in the recent reporting about Chinese hacking of US weapon secrets.

First The Washington Post reports that China has access to a cache of American military secrets. Then the Pentagon downplays the report

The truth is probably somewhere between the two reports. But to be honest, a certain amount of alarm is overdue, especially after decades of complacency about China. Obviously, something is amiss.

The free-trade Utopianists fought to liberate China with most-favored nation status. The thought at the time was that it would, for US business, open whole new vistas of profits. Free minds would follow free markets, I seem to remember hearing from a pre-9/11 America, whose cocksure business lobby was firmly in the driver’s seat of government and much of society.

A decade after China’s accession to the WTO, things haven’t worked out as planned.

Human rights have not marched forward in China – but let’s face it: US business could have lived with that outcome.

Instead, in 2013 Chinese authoritarian capitalism poses a direct challenge to Western business and government. It’s one thing for Western business to have trouble profiting from China, it’s quite another for the Chinese model to threaten the system upon which Western capitalism is based on.

When all blueprints and trade secrets stored on computers are up for grabs by Beijing to be incorporated into the goal of advancing China’s progress (or resumption of their premier place in world affairs – as they see it), it really raises the question of how the US business, but also government and people, will respond.

Looking at tech, David Gewirtz at ZDNet is on to something in his description of the cyberspying of the Chinese as consistent with ancient Chinese notions of war. Give Gewirtz credit for pulling together the strings on this:

“The skillful leader subdues the enemy’s troops without any fighting; he captures their cities without laying siege to them; he overthrows their kingdom without lengthy operations in the field.”

Sun Tzu repeats over and over the idea that once you get to shooting, you’ve given up your advantage. His entire strategic treatise is fighting the war before you fight the war.

Sound familiar? It sure seems like China is engaging in this cyberwar strategy using the Sun Tzu playbook.

And credit to Gewirtz here, too, for wrapping in an example from Battlestar Galactica. (It’s also interesting to read Gewirtz’s views on Chinese cyberprobing in light of the Senkaku-Diaoyu naval adventurism by the China). 

At this point, the reader may say: but the US hacks, too. True. I break out the difference between the Chinese strategic model and the US model here.

Given all of the above, US business, technology, and government must quickly learn something essential. If you want to effectively counter the China model: more of the same won’t work. More of the same, privatizing losses attributed to cyber theft, hiding them from the public, while socializing the risks for the economy and by extension the society won’t work.

And remember, the goal is not for the US economic empire to be “number one,” in anyone’s books. The goal is for the US republic to not get pinned down economically, technically, politically and have to answer to a foreign power wanting to revive an ancient order.

So the world will be watching to see if Obama shames Xi Jinping at their meeting next week in California. As Michael Auslin, from the AEI writes, it’s time to end the abusive relationship between China and the US.

Washington needs to admit that it is in an abusive relationship, and then find the courage to protect itself against further mistreatment.

In an ironic manner, Auslin, who proposes some decidedly non-free-tradey solutions including sending some “viruses back” to China, questions just what kind of relationship the US is fostering with China.

China’s top military leader told U.S. National Security Adviser Tom Donilon that Beijing wanted to create a “new type of major power relations.” Apparently that new relationship entails robbing your partner blind of his most sensitive secrets, then welcoming him for tea while mouthing nostrums about good fellowship.

There is a challenger out there, Uncle Sam, already as big and strong as you. So this is real, Uncle Sam: What are you going to do about it? A tinge of alarm is only necessary.

American and Chinese influence in South America

This article teases out some of the finer points of US-China economic competition in South America, a place that hasn’t seen this kind of geopolitical jockeying since the Old Cold War. In those days, the US and Soviet Union vied for influence across the continents.

Back then ideology and geography were everything. And communist parties with links to the Soviet Union were systematically weakened by the US, either diplomatically or through other means. So it will be interesting how competition in South America between the US and China plays out this time around.

The Bloomberg article notes, of course, that both the US and China aren’t actively competing.

Both the U.S. and China deny they’re competing with one another. The two countries “can play to their respective advantages” and contribute to the region’s development, Foreign Ministry spokesman Hong Lei said May 21 in Beijing.

While China’s demand for resources will surely keep many South Americans working, it shouldn’t be underestimated how much China needs those resources. The US, while in need of some new infrastructure and manufacturing, of course, has a less industrial economy. The Chinese, and the Japanese and South Koreans for that matter, all engage in resource diplomacy, the pursuit of natural resources partially as a political goal. The reason for this is that China needs many more resources than it is naturally endowed with to keep its economy ticking over. Japan and South Korea have few natural resources. It’s worth thinking about this for a moment, too. As the maritime nature of US-China competition becomes clear, many of the resources the Chinese need will be nearer the US. But that is only if the importance of the physical world reasserted itself, in say, an actual war. For now, across this web of resource deals that the advanced Asian economies are pursuing is another web of trade agreements. The most important one is between the US and Asia is the oft-scorned Trans-Pacific Partnership. The Chinese have proposed their own version, too. But what’s interesting is how instead of the fixed geographical borders and delineations that marked the Cold War, there will increasingly be overlapping bands of affiliation, with some countries consistent partners of the US and some of China, but many more countries somewhere in between, in flux.

The US has deep cultural links to Latin America, which it will have to play up, to bolster its influence. But the Chinese can portray themselves as comrades of the Global South. It will be interesting to see what images and themes the US sends out to try to blunt this advantage.

NYTimes asks the $64 billion question regarding the US, China and the global economy

In the story on the US government explicitly naming China as a source of cyber-espionage, David Sanger points out the conundrum for the US.

But the report does not address how the Obama administration should deal with that problem in an economically interconnected world where the United States encourages those investments, and its own in China, to create jobs and deepen the relationship between the world’s No. 1 and No. 2 economies. Some experts have argued that the threat from China has been exaggerated. They point out that the Chinese government — unlike, say, Iran or North Korea — has such deep investments in the United States that it cannot afford to mount a crippling cyberstrike on the country.

What do you do when you learn your trade partner is using the very technology you sold them against you? What do you do when you learn that China’s economy is growing in a way that undermines the US? As an Australian sailor once quipped, regarding Australia and China: “We’re selling China heaps of iron ore. You have to wonder how much of it they’re using to make weapons they will eventually aim against us?”

Good question, Australian sailor.

Take the same conundrum use it for the basis of understanding the China-US relationship. As Jarod Cohen tweeted:

The Obama administration, to their credit, is doing everything they can to alert and awake the American people. And yes, as Sanger notes, the US also has robust cyber-attack capabilities, such as those used against Iran’s nuclear program. But the difference between China and the US is that the US’s Cyber Command is not fused to Wall Street, scanning the world’s computers to siphon off all the trade data, inventions, intellectual property, data bases of valuable information it can. China because of this, and because of its scale, is unique in this way. So it’s a unique threat.

That puts to bed the false equivalence of the US Cyber Command and what China does.

But the biggest question is of course: how to ruggedize the US economy for this kind of world, where your biggest trade partner is your biggest thief. There are a couple options. As the US economy restructures and climbs back from years of low growth and unemployment, it needs the kind of industrial policy that makes it more impervious to China’s tactics.

This is doable. But I’d say one of the first ways to facilitate it is to kill a couple sacred cows.

One is that, while yes, Americans support a free market, they must recognize they are competing against economies that favor government intervention where it aides the national goal of development. In some areas, such as coordinating against external threats, US companies must work alongside the government for the benefit of the whole.

This kind of thing would have happened during the cold war in a number industries.

But in order to do that, US companies must resolve an identity crisis that has come about during the peak of globalization. That is: these companies must recognize whether they’re American and they benefit from the economy and laws of America, or they’re truly globalized institutions with loyalty only to the most advantageous market.

What could possibly cause this change in thinking? It would have to be something big and threatening for Americans?

Maybe, possibly it would be something like the rise of an aggressive superpower across the Pacific. Just a thought.

China cyber competition and free trade

Everything that rises must converge. That is, states won’t be happy to tolerate indefinite cyber attacks aimed at stealing intellectual property, without those attacks beginning to spoil other areas. Trefor Moss of the Diplomat writes…

…If attacks and counter-attacks are left unchecked, cyberspace may become the venue for a new Cold War for the Internet generation. Much as the old Cold War was characterized by indirect conflict involving proxy forces in third-party states, its 21st century reboot might become a story of virtual conflict prosecuted by shadowy actors in the digital realm.

So far, so good. The title of the article speaks for itself: “Is Cyber War the New Cold War”. We at The Cold War Daily see this macro trend emerging.

Moss notes

And as this undeclared conflict poisons bilateral relations over time, the risk of it spilling over into kinetic hostilities will only grow.

But the unique nature of cyberspace means it’s not clear if a body has been attacked, or who has been attacked. What I find unlikely though, is one of the possible remedies Moss outlines. In one future scenario:

victims of virtual theft might instead focus on gathering evidence and then seek reparations at the World Trade Organisation or the International Court of Justice, much as they would do in cases of IP theft or breaches of sovereignty .

Arguably the WTO doesn’t serve its creators as it once did. In fact, as another writer at the

Integrated circuit (Wikicommons)

Diplomat notes: There might be a covert trade war emerging between China and the US. While many US companies find China the cards stacked against them when doing business there, the US is putting restrictions on the use of China-made telecommunications equipment in the US.

The most famous case is the report from Congress urging US companies not to use equipment from Huawei and ZTE on national security grounds. Both US and Japanese regulators are pushing Sprint and Softbank to bar the use of Chinese-made telecommunications equipment as a condition of their merger.

That doesn’t mean the WTO doesn’t have many more fine years left in it. But let’s just say there aren’t nearly as many people in the world who have such high expectations for free-trade and globalization. Increasingly it’s only the die-hards who do. Skeptics can say that while emerging economies have in fact grown and developed, their legal systems and sense of fair-play in business practices haven’t grown at the same pace.

Take the example brought up here of the impact of hacking on start-ups, which are all about their intellectual property. It’s doubtful these small organisations will have the resources to pursue cases at the WTO or the International Court of Justice. But start-ups are the life blood of the US’s dynamic economy. Are we saying these small, innovative companies must operate in an environment where their code is there for the poaching? I don’t think that’s really acceptable.