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

from 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

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.

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