July 7, 2013 2:42 pm

US shrugs off Snowden leaks to press Beijing on cyber theft

The Obama administration will try to use a high-profile US-China summit this week to renew pressure on Beijing over the cyber theft of American trade secrets despite recent revelations of its own electronic surveillance activities.

The series of meetings will provide the first test of whether documents leaked by the former National Security Agency contractor Edward Snowden have derailed Washington’s diplomatic effort to limit China’s alleged hacking of US companies.

While Mr Snowden remains stranded at a Moscow airport trying to persuade governments to offer him asylum, the effects of the leaked documents about US monitoring of telephone and email traffic continue to reverberate politically round the world.

“The Snowden revelations have clearly given China a greater opportunity to muddy the waters in the discussion of this issue,” says Ken Lieberthal, a former Asia director of the National Security Council.

In recent months US politicians have publicly accused China of using teams of hackers to steal technologies, negotiating strategies and other sensitive information from US companies – “cyber-enabled economic espionage”, as the White House now calls it.

At last month’s meeting in California between presidents Barack Obama and Xi Jinping, the administration placed corporate cyber theft at “the centre of the relationship” between the two countries, as Tom Donilon, then the national security adviser, put it.

For the Obama administration, this week’s meetings, which include the annual Strategic and Economic Dialogue between the two governments and a separate dialogue on cyber security, were to be another platform in its diplomatic strategy of pressing China on this issue. “It is quite obvious now that the Chinese senior leadership understand the importance of this issue to the United States,” Mr Donilon said after the Obama-Xi summit.

“If there continues to be this direct theft of US property, this is going to be a very difficult problem in the economic relationship.”

The Obama administration has attempted to draw a sharp distinction between traditional forms of espionage, where governments attempt to find out political and military secrets, and the sort of corporate espionage they claim China has been conducting, with trade secrets stolen by military and other government-sponsored hackers and then handed over to state-owned Chinese companies.

With Congress debating new legislation to punish Chinese hackers, and the justice department preparing possible indictments, the administration has in effect warned China that it will take more aggressive action if it does not see a reduction in hacking in the coming months.

If there continues to be this direct theft of US property, this is going to be a very difficult problem in the economic relationship

- Tom Donilon, former security adviser

However, Washington’s negotiating position has been partly undercut by the Snowden revelations, which not only revealed the extent of US surveillance activities but also provided details of Chinese institutions that were being hacked, including universities in Beijing and Hong Kong.

Chinese experts said those claims had caused serious concern in Beijing and had undermined Washington’s attempts to press the Chinese government on similar issues.

In a commentary published last month the state-owned Xinhua news agency said Mr Snowden’s revelations “demonstrate that the United States, which has long been trying to play innocent as the victim of cyber attacks, has turned out to be the biggest villain of the age”.

At a security conference in Beijing last month, J Stapleton Roy, a former US ambassador in China, struggled to evade a barrage of questions on Mr Snowden’s leaks. Though he insisted that Mr Snowden’s revelations had nothing to do with US hacking concerns and were mainly about the balance between national security and privacy, his Chinese interlocutors were having none of it.

But Chen Xiaogong, a member of the foreign affairs committee of the National People’s Congress, China’s rubberstamp legislature, did offer an olive branch. Given the risk of a cyber arms race escalating into full-scale war, China and the US should stop finger-pointing and discuss the two issues of general internet governance and cyber security separately, he suggested.

Chinese officials said on Friday that their agenda for the talks remained focused on expanding bilateral trade and investment. Zhu Guangyao, vice-finance minister, said Beijing hoped the US could create fair and transparent conditions for Chinese investment in the country, recognise China’s market economy status and move towards allowing greater exports of technology products to China.

Although angry at the theft of their technology, US business groups are worried about the broader potential impact on trade if the cyber dispute intensifies. Myron Brilliant, executive vice-president of the US Chamber of Commerce, said the cyber issue “has the potential to destabilise the relationship”.

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