Ahead of Chinese Leader's Visit, U.S. Is Urged to Allow Retaliation for Cyberattacks

[awouk]

May 21, 2013

Ahead of Chinese Leader's Visit, U.S. Is Urged to Allow
Retaliation for Cyberattacks

By DAVID E. SANGER

WASHINGTON - With President Obama preparing for a first meeting
with China's new president, a commission led by two former senior
officials in his administration will recommend a series of steps
that could significantly raise the cost to China of the theft of
American industrial secrets. If milder measures failed, the
commission said, the United States should consider giving
companies the right to retaliate against cyberattackers with
counterstrikes of their own.

The recommendations are from the private Commission on the Theft
of American Intellectual Property, which is led by two once-
prominent figures who parted company with the White House on
strained terms: Dennis C. Blair, Mr. Obama's first director of
national intelligence, and Jon M. Huntsman Jr., the former
ambassador to China who left his post to run, unsuccessfully, for
the Republican nomination for president.

'China is two-thirds of the intellectual property theft problem,
and we are at a point where it is robbing us of innovation to
bolster their own industry, at a cost of millions of jobs,' Mr.
Huntsman said, speaking with a bluntness that would have been
forbidden when he served in Beijing. 'We need some realistic
policy options that create a real cost for this activity, because
the Chinese leadership is sensitive to those costs.'

The commission's report will be published Wednesday, two days
before Mr. Obama's national security adviser, Tom Donilon,
travels to Beijing to prepare for the meeting between Mr. Obama
and Xi Jinping, China's new president. That two-day meeting,
scheduled to start in California on June 7, has been highly
choreographed on both sides. Mr. Donilon was preceded to Beijing
by Treasury Secretary Jacob J. Lew, Secretary of State John Kerry
and the chairman of the Joint Chiefs of Staff, Gen. Martin E.
Dempsey. All have prepared to line up new initiatives,
consultations and military-to-military exchanges designed to show
a maturing relationship between the world's two largest
economies.

But the recent disclosures about Chinese cyberattacks and the
theft of industrial secrets, an operation managed partly from a
Chinese People's Liberation Army unit outside Shanghai, may
affect the ability of Mr. Xi and Mr. Obama to forge anything the
two men could claim to be a partnership. The new effort is
similar to what Mr. Obama attempted with Hu Jintao, Mr. Xi's
predecessor, which despite a promising start during the 2009
financial crisis quickly went sour. For the last three years,
relations between the two countries have been dominated by
disputes with China over its territorial claims and arguments
over how to pressure North Korea and Iran.

Mr. Donilon, who has taken on the management of relations with
China as a personal project, has begun to address the
cyberattacks and intellectual property theft in public speeches,
and he has made the argument that they must move to the center of
the Sino-American relationship. He has steered clear of specific
steps the United States was willing to take in response, and he
has been more delicate about the subject than the Pentagon, which
recently issued a blistering report that for the first time named
the People's Liberation Army as the source of much of the
espionage against American companies and government facilities.
In a sign of the diplomatic delicacy of the accusations, the
White House would not say if it had reviewed the report; the
Pentagon said it was fully vetted.

The new report does propose specific remedies. One is to mandate
that foreign companies that want to be listed on stock exchanges
in the United States must first pass a review by the Securities
and Exchange Commission about whether they use stolen
intellectual property. 'They all want their shares to be traded
here, so this would impose a real cost,' Mr. Blair said.
Similarly, whether companies protect intellectual property would
be considered by the Committee on Foreign Investment in the
United States, which judges whether an investment in the United
States could pose a security risk. Currently it looks only at
national security implications of investments; this would add a
new criterion.

But the commission also said that Congress should 'greatly expand
the number of green cards available to foreign students who earn
science, technology, engineering and mathematics degrees in
American universities and who have a job offer' in the United
States, to assure that they have an incentive to stay in the
United States rather than return home with knowledge they can use
to compete with American firms. That recommendation would most
likely run headlong into the immigration debate in the United
States.

Some of the most interesting of the recommendations deal with
combating China's role in cyberattacks, likely to rank among the
most delicate subjects in Mr. Obama's meeting with Mr. Xi. The
commission argued that American companies 'ought to be able to
retrieve their electronic files or prevent the exploitation of
their stolen information' by designing their computer files to
self-destruct if they fall into the wrong hands. But the authors
of the report also say that if the damage 'continues at current
levels,' the government should consider allowing American
companies to counterattack - essentially taking cyberwar
private.

'If counterattacks against hackers were legal, there are many
techniques that companies could employ that would cause severe
damage to the capability' of the Chinese or other groups
launching computerized theft, the report said. Many in the
administration have opposed such ideas, fearing that they could
lead to a cycle of escalation between the United States and other
nations that could easily spin out of control.

It also said that as a last-ditch measure, Congress could impose
a tariff on all Chinese products, 'designed to raise 150 percent
of all U.S. losses from Chinese' thefts. That measure could
easily run into challenges as a violation of international trade
law.

Mr. Obama will seek to defuse the tensions by holding the meeting
with Mr. Xi at the Annenberg estate in California, allowing the
two men and their top aides to have two days in near isolation.
For Mr. Obama, it is a highly unusual step - he has rarely
even invited foreign leaders to Camp David.

A National Security Council spokeswoman, Caitlin Hayden, said,
'We have no illusions about this.' Mr. Obama, she said, 'seeks
to expand the areas of cooperation in managing regional and
global challenges - and we seek to manage our differences in a
way that prevents disruptive and unhealthy competition from
undermining our interests.'


Copyright 2012 The New York Times Company

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