U.S.–China Week: Hacking hysteria, reality in the South China Sea, Medeiros moves on, BIT progress in question (Issue 8, 2015.06.08)

Welcome to Issue 8 of U.S.–China Week. Let me take this opportunity to share my most recent published piece, on progress and challenges in U.S.–Japan cybersecurity cooperation, out last week at Nikkei Asian Review. I extend my usual request for comments to cover this piece as well. I would also like to highlight an updated design for Transpacifica, all credit due to my friend and collaborator Jason Li.

As always: Please encourage interested friends and colleagues to subscribe to the list. You can find a copy of this issue at Transpacifica.net. That’s the best link to share on social media. Please send your comments, quibbles, and suggestions to [email protected].

CYBERSTERIA
China blamed by anonymous sources for massive breach of U.S. government employee data; ‘Experts’ cry ‘cyber war’

Unnamed U.S. officials told reporters “hackers working for the Chinese state” were behind a massive security breach at an agency responsible for millions of federal personnel files. One unnamed official said “big-data theft and big-data aggregation” are “part of a strategic plan” to build a database on U.S. officials. Whoever broke in reportedly used a previously unknown flaw, known as a “zero-day,” to gain access and defeat costly security measures. CFR’s Robert Knake, until recently a top White House cybersecurity official expressed skepticism about reports based on anonymous “officials” or “experts” that the Chinese government was behind the breach, arguing the data concerned was not valuable enough to use up a “zero-day,” that it would be more valuable to criminals than a government, and that knowledgeable sources would be risking a lot to leak this kind of information. Chinese state media and officials decried the allegations as “China-bashing” (Xinhua) and “not responsible or scientific” (MFA).

ANALYSIS: Who broke in and why are questions not likely to be answered for some time, if ever, but two things are certain. First, the U.S. government, like many corporations, has failed to protect individual data despite knowing the risks. These risks existed regardless of whether China was in the picture. Second, the difficulty of “attribution” online does not stop the Wall Street Journal (nor Ian Bremmer) from declaring that “China is waging an unrelenting if unacknowledged cyber war.” We should be more careful with the word “war.” If China’s government stole U.S. government data for intelligence purposes, this is classic espionage, not some “cyber Pearl Harbor.” To confuse the two trivializes war, both online and offline.

REALITY-BASED COMMUNITY
Swaine’s prescription for a U.S. policy in the South China Sea based on interests, not tides of history

The Carnegie Endowment’s Michael Swaine writes: “To allow a dispute over a few rocks and islands in a corner of the Asia-Pacific region to derail a vital relationship critical to both regional and global peace and prosperity is the height of folly. Hyperbolic statements, veiled threats and calls for more military action serve no useful purpose and will only lead to hardened positions and redoubled efforts on both sides to counter the other. What is needed is a far sharper level of clarity by both Beijing and Washington regarding their claims and grievances, and, on that basis, a clear indication of the consequences of unacceptable behavior, along with a commitment to provide mutual assurances over the near term to avoid specific tripwires, while working to stabilize the long term situation.” Detailed policy prescriptions follow.

ANALYSIS: Though Swaine’s prescriptions may not be perfect, this piece, not those based on geopolitical speculation, should be the starting point for debate. Keeping this kind of reality-based policy discussion in the public sphere should be a collective goal of China policy thinkers as the U.S. election looms.

MUSICAL CHAIRS
Top White House Asia official Evan Medeiros steps down, to be replaced by No. 2 at U.S. Embassy Beijing

Evan Medeiros, a key China policy figure at the National Security Council throughout the Obama administration, stepped down as Senior Director for Asia. As a China specialist and a scholar at RAND, Medeiros had written about Chinese military affairs and international behavior. He will be replaced not from within the NSC but by Daniel Kritenbrink, a 20-year State Department veteran who has been serving as deputy chief of mission at the U.S. Embassy in Beijing. Medeiros’ next move is not yet clear. As a side note, though, one of his last publicized meetings was with the Taiwanese politician Tsai Ing-wen, the Democratic Progressive Party candidate in the coming Taiwanese presidential election.

ANALYSIS: Medeiros’ departure marks an end to a continuity in the top ranks of China policy making that stretched from the beginning of the administration. Assistant Secretary of State Daniel Russel had the NSC job before Medeiros and remains in a top role, but he did not have the same career-long China focus, and he had Medeiros as his China deputy at the time. Kritenbrink’s familiarity with both Japan and China should serve him well and may allow him to span a classic divide based on a false choice in China policy—those focused on “the allies” versus those focused on stable China ties. The challenge of coordinating the Pentagon, State, Treasury, and others remains daunting.

PROGRESS OR PULLOUT?
A milestone for BIT negotiations, but U.S. skepticism on the rise; Chinese firms ‘disenchanted’ with U.S. market

Reuters reports the United States and China could exchange “negative lists” in the ongoing bilateral investment treaty (BIT) negotiations as soon as today. But U.S. business interests are increasingly skeptical. “After 35 years of reform and opening in China, there are enough data points out there to suggest we are now seeing a reversal,” one source told Reuters. The skepticism is based in part on new Chinese draft laws on national security and foreign nonprofits that could significantly limit U.S. commercial activities and introduce new regulatory burdens. U.S. trade negotiators will be looking for a short “negative list” (the list of areas where investment would still be restricted), but expectations are low. // Meanwhile, Chinese tech firms and book publishers are having their own troubles in the U.S. market, with the tech firms seeing less opportunities from listing in the United States and the book publishers seeing virtually no interest from U.S. readers.

ANALYSIS: If the Chinese BIT negotiators come to the United States with a negative list identical to the one recently revised (see Issue 2, third item) for China’s free trade zones, BIT negotiations could be practically dead for the rest of the Obama administration. U.S. trade negotiators are focused on the Trans-Pacific Partnership (TPP) but would be eager to engage in real BIT negotiations. For negotiations to be substantive, the negative list has to be closer to what the United States could accept. If news of a disappointing negative list emerges, it will only reinforce dark views among U.S. businesses. Still, one reason for optimism is that China’s government has an incentive to deal, so that real progress can be announced during Xi Jinping’s visit in September.

THIS LAND IS MY LAND, THIS LAND IS MY LAND
Local Chinese and Filipinos say South China Sea disputes are not just about geopolitics

Will Englund has a wonderful pair of stories in the Washington Post, apparently produced on one of the East-West Center’s press tours, exploring the human-level ties of local Filipinos and Chinese to disputed areas of the South China Sea. Both are worth reading in full, and they are a reminder of how little U.S. journalism on these issues covers the people directly affected by civilian and military jockeying in the region. These stories suggest local fishing communities in China could really use shelter from storms when working so far from home, and that Filipinos can feel helpless as Chinese ships chase them out of fisheries and the U.S.–Philippine alliance is limited in scope.

ANALYSIS: This kind of reporting, if more widespread, could give policymakers in the United States and elsewhere a better vision of what is concretely at stake in the South China Sea. Too much of the current discussion is based on abstract geopolitical calculus. The Swaine piece discussed above suggests the U.S. government should drop its opposition to bilateral negotiations—but any negotiations will need to take into account the economic interests of people and the sustainability of these rich fisheries.

ABOUT U.S.–CHINA WEEK

U.S.–China Week is a weekly news and analysis brief that covers important developments in U.S.–China relations and features especially insightful or influential new policy analysis.

Graham Webster is a research scholar, lecturer, and senior fellow of The China Center at Yale Law School, where he focuses on U.S.–China diplomatic, security, and economic relations through research and Track II dialogues. A full bio is available here.

Disclaimer: Opinions expressed here are my own (and I reserve the right to change my mind).

Subscription to U.S.–China Week by clicking here or e-mailing me is free and open to all, and an archive of past editions appears at my long-running website on U.S.–East Asia politics, Transpacifica.

Contact: Follow me on Twitter at @gwbstr. Send e-mail to [email protected].

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