As Chinese Leader’s Visit Nears, U.S. Is Urged to Allow Counterattacks on Hackers

from apperspective.net: 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 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, 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 intended 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 tried 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 had been 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 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. 

**CONTINUE READING**