US-China

US company wants White House to reconsider US-China trade relationship

In case you missed it, a US firm that sells wind turbine design and engineering services has asked Obama to take a second look at the US trade relationship with China.

AMSC, which claims Chinese (non-cyber) theft of its intellectual property has cost it $800 million, has “called on President Barack Obama’s administration and Congress to re-evaluate the U.S. trade relationship with China.”

The US is suing China wind turbine maker Sinovel Wind Group, charging it, two of its employees and an ex-employee of AMSC with stealing trade secrets. In 2011, AMSC said it wanted to recover $1.2 billion in damages.

AMSC Chief Executive Officer Daniel McGahn said: “The fact that Sinovel has exported stolen American intellectual property
from China back into the United States – less than 40 miles from our global headquarters – shows not only a blatant
disrespect for intellectual property but a disregard for international trade law.”

These cases are important because they show the trend of US lawsuits piling up in this area. The bigger question is whether they will be effective over the longer term. Even if they aren’t, it at least shows how the grievances of US companies having their inventions and data ripped off is being etched into US court records.

Bigger question: is the law any match for the scale of this theft, especially that which occurs online?

It’s a legal-technological-diplomatic- and even cultural issue between China and the West. If legal protections on inventions cease to matter, which way does the global economy drift?

Internet nationalism?

I have been an admirer of Bruce Schneier for a while but I think he misses the point on this piece about nationalism on the internet.

Yes, he is correct that companies will try to profiteer from any cyberwar. Citizens should be vigilant. Especially after the war profiteering around the US invasion of Iraq and the global war on terror.

Yes, the government must be kept in check to prevent an assault on the privacy of its citizen – in the name of security. And that is a full time effort.

But if Schneier thinks the biggest risk in the situation arises from nefarious corporations in West, he needs to take a closer look at the implications of State Owned Enterprises in China, which are neither fully private companies, nor fully the government.

SOEs’ fist-in-glove relationship with the Chinese government and the Chinese Communist Party really blur the lines of responsibility in any matter of privacy and profiteering.

The challenge in the West is that capitalism has corroded democracy in recent years. But that trend is slowly being corrected by a rise in participation in democracy and a more vocal civil society movement. The path back to sanity in the West is restoring the boundaries between government and business which eroded during the rise of freemarket fundamentalism. The cure is more oversight and accountability.

SOEs by their design run counter to those ideas. And in fact, it’s the mix of the Chinese military, cyber-thieving on an industrialized scale, only to share the spoils with China’s businesses (no doubt through well-connected SOEs) that forms the threat for Western economies, businesses and citizens.

I’m not sure Schneier takes this into account in his piece. He writes in the same anachronistic tone that many people do, who assume US power in these areas is uncontested. US power in the cyber-industrial realm is very much contested these days, from many fronts, by the biggest single challenge, I would guess, is the new model coming out of China.

Another interesting point Schneier touches on and that we have considered for some time at Cold War Daily, is the possibility of a Balkanized internet. Schneier writes:

We’ve started to see increased concern about the country of origin of IT products and services; U.S. companies are worried about hardware from China; European companies are worried about cloud services in the U.S; no one is sure whether to trust hardware and software from Israel; Russia and China might each be building their own operating systems out of concern about using foreign ones.

It sounds like science fiction now but if the Internet truly becomes Balkanized, you can expect the technology to follow. Some authoritarian governments have a deep interest in making their systems inoperable with the wider internet. Why wouldn’t that extend to the hardware, too? It sounds far fetched but it shouldn’t. There was a time, in the not too distant past, when there were two models of many pieces of hardware. The kind seen in the West, often underpinned by the R&D and industrial policies of those countries; and another version found behind the Iron Curtain. A similar trend could come in the future.