US-China cybersecurity talks: Will Snowden leaks thwart US goals?

The Obama administration has a long agenda for this week’s US-China strategic and economic dialogue in Washington, but topping the list of US concerns is Chinese theft of intellectual property – a practice President Obama believes could destroy the product innovation that is the core of American economic strength.

“It’s something the US side will focus on like a laser beam,” says Kenneth Lieberthal, a former National Security Council senior director for Asia and now a senior foreign policy fellow at the Brookings Institution in Washington.

When Mr. Obama met with new Chinese President Xi Jinping in southern California last month, he explained at length how the hacking of US corporations to steal their industrial secrets and product innovations “strikes right at the core of American economic interests,” Mr. Lieberthal says.

One result is that cybersecurity will be at the heart of two days of high-level “dialogue” between the two global powers – also the No. 1 and No. 2 economic powers – beginning Wednesday morning. Demonstrating the importance of the issue to both sides, a new US-China cybersecurity working group had its inaugural meeting Monday as part of a run-up to this week’s annual dialogue.

A potential complication for US aims in this dialogue is the Edward Snowden affair, which burst onto the international stage since the Obama-Xi summit. The former NSA contractor’s revelations of US spying on Chinese institutions and hacking into Chinese databases could offer the Chinese with a convenient foil for deflecting the Obama administration’s cybertheft concerns, some experts in relations between the two countries say.

But senior administration officials insist the two issues are “apples and oranges” and that the US will not allow questions of spying among international partners to be confused with the specific threat of economic damage from intellectual property theft.

It’s not clear the Chinese see things the same way, however. The Chinese state news agency Xinhua has called the US claim of cyber-victimization “bizarre,” and last month declared that Mr. Snowden’s revelations about US hacking into Chinese companies and a university data base "demonstrate that the United States, which has long been trying to play innocent as a victim of cyberattacks, has turned out to be the biggest villain in our age."

US officials say the new cyber working group demonstrates that the issue is important to both countries. “We want to continue to ensure that a strong regime is in place to protect out intellectual property rights,” says a senior administration official, who spoke about this week’s strategic and economic dialogue, or “S&E D” in diplomatic speak, on condition of anonymity.

An annual senior dialogue with the Chinese was started under President George W. Bush, and was expanded and upgraded by Obama in 2009 to include high-level officials and to raise the profile of the dialogue’s economic component.        

Last year’s dialogue in Beijing was marked by the demands of Chinese dissident Chen Guangcheng for US asylum – an incident that forced then-Secretary of State Hillary Rodham Clinton to balance a sensitive human rights case against the broader diplomatic interests of the US-China relationship.

The way Mr. Chen’s case was resolved – he eventually left China for study in the US – without disrupting the high-level dialogue prompted many analysts to conclude that the bilateral relationship had matured to a point where the two powers’ interests in a working relationship trumped one sensitive incident.

This year’s dialogue will be led by four newcomers to their roles: Secretary of State John Kerry and Treasury Secretary Jacob Lew on the US side, while the Chinese delegation will be led by State Councillor Yang Jiechi and Vice Premier Wang Yang. (Secretary will open the talks in Washington on Wednesday, though his wife, Teresa Heinz Kerry, remained in a Boston hospital Tuesday.)

Officials from the two countries are expected to take up issues ranging from North Korea and Syria to monetary policy and international investment practices. In addition, this year’s dialogue will for the first time include special sessions on climate change and energy security, demonstrating the rising importance of those issues to the two governments.

“We want to demonstrate to the world that the two largest economies in the world can cooperate to help tackle these environmental challenges,” says a senior administration official.

Adding a special session on climate change would not have been possible if only one side was interested in the topic, some US-China specialists say.

“Kerry got the green light from the Chinese to make [climate change and clean energy] a working group,” says Brookings’ Lieberthal. “The big story [of this year’s dialogue] is how the climate change issue has moved significantly up the Chinese agenda over the past year,” he says.

That, and the fact that growing bilateral accord on the climate and energy issues may allow for some diversion of attention from discord over cyber issues.

In the cyber area “the US is trying to draw a bright red line by saying, ‘We also do espionage, but we don’t do commercial espionage to benefit our corporations – and we want that to stop,’ ” Lieberthal says.

What the Snowden revelations have done, he adds, is to blur that “red line” and “give the Chinese an opportunity to muddy the waters.”