October 9, 2016

China’s Hostile Cyber and Trade War: It's Threat To National Security

Ken Blackwell

10/7/2016 9:21:00 AM - Ken Blackwell

As we witness the home stretch of the presidential election with candidate debates, campaign stops, and political ads, both parties have an opportunity to talk substantively about a serious trade issue – ongoing efforts by China to hack and steal intellectual property from U.S. companies and using stolen U.S. trade secrets to manufacture their own cut rate products. One assistant attorney for U.S. National Security describes the Chinese hacking campaign against the United States a true, “national security emergency.”
China has created what some describe as an army of hackers – numbering in the thousands – high tech soldiers that work to identify and steal intellectual property from various industrial, tech or defense related companies. China then uses the stolen intellectual property to produce nearly identical products with the information it hacks. Even worse, China then dumps these products into the United States or floods other countries’ markets with products at prices no nation can compete against.
In September of 2015, China’s President Xi Jinping and President Obama pledged they would no longer condone hacking to steal commercial secrets. But these diplomatic platitudes were shallow at best and subsequent efforts to resolve numerous hacking incidents and trade violations through good faith negotiations have largely been ignored.
The recent U. S. Steel case is a classic example of what the Chinese are up to these days and how they must be stopped. U. S. Steel Corporation invested millions into the research and development of innovative, lighter and stronger steel products. China reportedly hacked into the company and stole the research. They are now manufacturing their own light grade, super strong steel. It’s also important to understand that Chinese steel companies are overwhelmingly supported by their government, meaning they can’t go broke so they don’t worry about making a profit. China can and is selling steel worldwide at prices so low, no one can compete with them.
Even more egregious is how China is engaged in steel laundering – much the same as money laundering. While the steel is in China, it is reportedly labeled as manufactured in another country. The steel products are then shipped through that country before they are dumped in the U.S. This is done to dodge international trade laws regulating how much foreign steel can enter our country.
In correct response, U. S. Steel brought a strong case before the U.S. government to ban the imports of Chinese steel and set a precedent for other companies facing the same threat.
It’s not just the steel industry that is fending off a massive Chinese cyber war and flagrant trade violations. CNN recently reported how the Chinese allegedly hacked into the heart of our banking industry, the FDIC. Westinghouse Electric, Allegheny Technologies and SolarWorld have reportedly been hacked and pilfered. Companies in engineering, manufacturing, chip design, telecommunication and pharmaceuticals are also dealing with cyber-attack and theft.
The US Justice Department describes China's hacking campaign as the, "Great Brain Robbery" and a recent USITC report citied potential losses to US companies at more than $300 billion. That figure doesn’t take into account millions more many companies have lost in terms of brand value and increased costs for IP security.
American technology is especially crucial to our national defense, but Chinese intellectual property theft may one day force our own military to rely on Chinese technology or even worse, one day see our own technology used against us. A 2012 report from the House Intelligence Committee warned U.S. companies to be suspicious of electronic components manufactured by two of China's leading technology firms due to a heightened risk of embedded software and hardware in their products that could be used by China for surveillance or counter intelligence capabilities.
If China can steal from one company and flood US markets with their cut rate goods, then thousands of US businesses, along with potentially millions of jobs, are at risk.
President Obama can certainly use the final days of his administration and candidates running for office can call for an immediate end to these blatantly illegal and unfair practices. It’s time to tell world leaders that this administration, the next president of the United States, and the next Congress, will work aggressively to secure and protect American business interests.
Ken Blackwell is the former mayor of Cincinnati, Treasurer and Secretary of State for Ohio, undersecretary at the U.S. Department of Housing and Urban Development, and U.S. Ambassador to the United Nations Human Rights Commission