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Stopping Cybertheft Not a Walk in the Park

12:00 AM, Jun 15, 2013 • By IRWIN M. STELZER
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Then there is cyberespionage, which according to Xi is a fiction created by enemies of his country. The two leaders did agree to establish a working group to tackle the problem of cybersecurity, with Obama hoping to persuade China to end attacks and IP theft from businesses and the US military by hackers linked to the Chinese military, which Xi heads (he is also top man in the Communist Party and head of State). Unfortunately for the American side, it has no credible threat of tit-for-tat retaliation. America has lots of intellectual property that is worth stealing, China has very little. A war based on steal-what-you can therefor favors the Chinese, who can aim at lush corporate targets, while America would find slim pickings in the archives of China’s largely IP-hungry SOEs. US security officials call cybertheft of intellectual property “the greatest transfer of wealth in human history”, costing the US $340 billion and the UK $44 billion annually, or about 2% of each country’s GDPs. Obama could, of course, tell Xi to call off  his cyberspies, or else. Or else -- America’s techies will do to China what some unidentified country’s cyber warriors did when it deployed the Stuxnet computer worm to impede Iran’s drive for a nuclear weapon. Or else -- America will impose sanctions, or deny visas to complicit Chinese officials who might want to visit their children at Harvard. “If the US wishes to stop the Chinese economic cyber-espionage, it will need to increase the costs and reduce the benefits to China of such activities….The US could impose economic sanctions or deny visas to suspected cyberspies,” writes Irving Lachow, a director at the Center for a New American Security, a Washington-based think tank.

But Obama dislikes “or else” and has drawn red lines before, only to ignore them when America’s adversaries pay them no heed. Besides, the doctrine of “proportionality”, voguish in Washington, prevents America from going beyond tit-for-tat to deploy the full range of its technical know-how in response to Chinese cyberspying. The advantages that cyberspying and SOEs give China over international economic and geopolitical competitors, permit Xi to  smile and smile, take off his tie, stroll with Obama, even leak the news that he might consider taking China into Obama’s cherished Trans-Pacific Partnership free trade agreement. But he is not likely to modify a system that has inherent in it the incentive and ability to cyberspy, under-value the yuan, and use SOEs to out-manoeuvre ordinary profit-maximizing businesses in the US and in other market-based economies.

Obama has flexed one muscle. He is redeploying U.S. military assets to China’s backyard, a policy known as the Pacific pivot, in part to satisfy demands of our allies in the region. But, as Xi is aware, America’s commander-in-chief has demonstrated an unwillingness to use such assets lest such a muscular policy interfere with his effort to reduce America’s footprint in the world. 

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