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| Ahead of Chinese Leader’s Visit, U.S. Is Urged to Allow Retaliation for Cyberattacks | |
| (36 minutes later) | |
| 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. | 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. | 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.” | “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. | 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. | 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. | 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. | 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. | 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. | 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. | “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. | 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. | 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.” | 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.” |