The Snowden saga highlights the importance of US-China dialogue on cyber security.

By exposing US government surveillance programs, former national security contractor Edward J. Snowden has complicated the US-China dialogue on one of the most contentious issues in the bilateral relationship: cybersecurity. The affair provoked widespread public condemnation both in the US and around the world. While America is long overdue for a serious discussion about the dangers of state power and the tradeoff between security and liberty, far less attention has been given to the broader impact of this incident on China-US relations, in particular, and the geopolitics of cyberspace, in general.

In June, President Barack Obama met with Chinese President Xi Jinping in California. The informal summit was an unprecedented opportunity for the two leaders to establish a closer personal relationship, find common ground, clarify their differences, and discuss the substance of a "new type of great power relationship." Obama was also expected to present Xi with evidence detailing China's cyber activities. The real test of their mutual understanding came at the recent US-China Strategic and Economic Dialogue (S&ED) in Washington DC. Officials on both sides were optimistic that positive momentum from the presidential summit could carry over to the S&ED talks.

It is unlikely that Chinese officials were surprised by details of the National Security Agency’s (NSA) PRISM program or of US intelligence operations targeting China. In fact, the Chinese have long suspected the US of conducting cyber espionage. They did not miss the opportunity, however, to make timely use of the propaganda prize that is Snowden, just as Obama was ostensibly lecturing Xi on China's hacking activities. Pundits in China's state-run media attacked the US government for its arrogance and hypocrisy, asserting that these revelations strained the already "soured relationship" on cybersecurity. After Snowden avoided extradition by leaving Hong Kong (possibly at Beijing's direction), the White House called it a "serious setback" to relations with China. Secretary of State John Kerry said it was "disappointing" that Snowden was allowed to fly to Moscow and warned of "consequences" for ties with both Russia and China. Then, at the ASEAN Summit in Brunei, Kerry struck a more conciliatory tone, assuring his counterparts that US-China relations would not be upset by the Snowden affair.

Cybersecurity is just one issue among many in US-China relations, yet it is critically important. How the US and China choose to handle this issue will set the overall tone for their relationship in the near-term: whether their interactions will be characterized by more or less cooperation and competition. Other pressing issues, such as North Korea, show that the balance of mutual interests and differences is largely shaped by history and traditional security concerns. Yet cyberspace is an area where new technology evolves faster than policy can keep up, common ground is less clearly defined, and the risks of inaction are less obvious. Right now, officials on both sides are rhetorically committed to cooperation. Amid rising competitive tensions, however, the issue of cybersecurity threatens to destroy trust, compounding the risk of confrontation and conflict.

The Distinction Between Traditional and Commercial Espionage

While China is already a global economic power, it is still a developing country with low GDP per capita, and an export-driven economy with a competitive advantage in labor cost. Structural economic reforms are currently a topic of heated debate, but have yet to materialize. Moreover, structural reforms would mean slower short-term growth. From the perspective of Chinese businesses, cyber theft is simply more cost-effective than trying to compete with foreign firms that have an edge in innovation. In the context of a faltering economic recovery, the US government is rightfully concerned that commercial espionage could undermine its competitiveness in high-tech, innovation-driven industries.

US officials want to differentiate between traditional espionage and commercial espionage. The first is defined as intelligence gathering activities, such as those described by documents leaked by Snowden. The latter involves intellectual property theft to give competitive advantage to one's own business and firms, and the US believes this is rampant, extremely costly, and destructive. The Chinese have not explicitly recognized this distinction, but seem to be ready to talk. The two countries have formed a special working group on cyber issues that met during the S&ED.

Divergent views stem from relative capabilities. Chinese officials are extremely concerned about traditional, national security espionage. According to Brookings scholar Kenneth Lieberthal: “The US position is everyone conducts espionage… but, the US does not do commercial espionage to benefit our own firms competitive position.” In other words, military espionage is fine but stealing trade secrets undermines fair competition in an open market. For Chinese leaders, however, espionage is often seen as part of an American scheme to contain China’s rise to great power status.

The US-China Dialogue on Cybersecurity

For some time now, the US government has been building pressure against China for its cyber activities. American companies have complained about network intrusions and data theft for years. Last fall, a number of prominent media organizations claimed they were compromised after running articles documenting the family wealth of certain Chinese officials. This February, Mandiant Corp, a computer security company, released a report claiming the Chinese military was behind the systematic hacking of US businesses and military operations. Subsequently, the White House, Department of Defense, and Department of State, all expressed their concerns, publicly pressuring the Chinese government to engage in dialogue on hacking and cyber warfare. 

Until recently, however, Chinese officials have been reluctant to discuss cybersecurity at all. Instead, they prefer to dismiss US claims as lacking evidence, pointing out that China is itself a victim of cyber attacks. Their ambivalence is rooted in what they perceive as a weak bargaining position with respect to the US. Chinese security experts have previously traced network intrusions to IP addresses originating from the US and its allies: South Korea and Japan. They have refrained from making public accusations because it would undermine their case in defense, namely that relying only on linking IP addresses to hacking attacks "lacks technical proof." Hence, like much of Chinese diplomacy in the post-reform era, their strategy has been to avoid confrontation while biding their time. Now that the Chinese have more leverage where they previously struggled under US pressure, it stands to reason that they will be much more open to a meaningful conversation on cybersecurity.

Even in light of the NSA leaks, the US and China still share a common interest in improving communication and enhancing mutual understanding on cybersecurity. As the dominant power and the rising power, the US and China must share the burden of establishing the rules and institutions that govern the use of a new technology. Cooperation on one issue could also translate into better conditions for cooperation on other issues, for example, drone warfare and the governance of outer space.

Yet the disclosure of US espionage operations against China for over a decade is, from the Chinese perspective, terrible. Many Chinese elites view the US “rebalance” to Asia as a containment plan, and this latest incident deepens the strategic mistrust that clouds relations between the two powers. Mistrust leads to misunderstanding and heightens the risk of conflict. It undermines the mutual interests that are a prerequisite for cooperation. If cybersecurity issues are mismanaged, the Snowden affair could ultimately play into the hands of those who seek to cultivate an atmosphere of hostility.

Implications for China, the US, and the World

Strategic mistrust manifests in many ways. One serious consequence relates to the trend of securitization in trade and investment. China-US trade relations are highly interdependent and increasingly symmetric. They are top trading partners, with bilateral imports and exports reaching $536 billion in 2012. Economic interdependence encourages mutual gains and win-win situations, but it does not preclude the possibility of conflict. Because it links economic and security interests together, securitization negates the benefits of interdependence to the detriment of both parties. The Snowden incident exacerbates the dynamics behind this trend. 

Securitization cuts both ways. Last year, a House intelligence committee report urged US companies to reject deals with two Chinese telecommunications companies: Huawei Technologies Inc and ZTE Inc. The "Huawei report," which claimed that the Chinese firms pose national security threats to the US, was founded on suspicions that the companies’ equipment could be used for Chinese spying. In light of recent events, US firms such as Cisco, who wish to do business in China, will be negatively impacted.

Trade securitization reflects more than traditional protectionism. Fundamentally, it is about threat perceptions. Securitization reflects what some call a Cold War mentality: The tendency towards polarizing, zero-sum thinking that could undermine President Xi's vision of "a new type of great power relationship.” Therefore, it is vital that the US and China discuss how to deal with these issues. As two great powers who play a decisive role in world affairs, it would be irresponsible to let tensions spiral out of control.

A failure to engage in productive dialogue on cybersecurity would have negative implications for the world economy as well. The securitization of trade and investment is not limited to the US and China. Moreover, commercial espionage distorts incentives for creativity and innovation. For now, high-tech economies such as the US and Singapore are especially concerned, but the information age is already upon us and more are sure to come. Both the private sector and governments need to protect their businesses.

Chinese and American policymakers must consider a framework to mitigate tensions and establish rules and principles for conduct in cyberspace. A concerted effort by both parties could reduce anxieties, not just with espionage and commercial espionage, but in other aspects of cybersecurity as well. Cyber sabotage is one aspect of new technology where capabilities and limitations are unclear. Another is the question of cyber warfare, and whether principles of conventional warfare, such as collateral damage, are applicable.

Cyberspace is uncharted territory in international relations. There are no norms, rules, or institutions governing its use. Recently, US Chairman of the Joint Chiefs of Staff Gen. Martin Dempsey said of the Chinese position: “Their view is that there are no rules of the road in cyber, there are no laws that they’re breaking." Indeed, there are no standards of behavior in cyberspace. It is up to the US and China to establish them. Considering the current lack of conceptual policy framework, we should hope they do so soon. 

The advent of transformative new technology is not without precedent. At the end of World War II, few understood the implications of nuclear weapons. Academics and policymakers gradually developed concepts and doctrines to deal with them. Likewise, American and Chinese thinkers need to work together to find ways of managing potentially destructive new technologies. This applies to outer space and drone technology as well. 

Snowden's revelations were significant in timing and content. He probably did not reveal much that China did not already know. He did, however, change the dynamics of US-China relations by giving China leverage on an issue it was previously reluctant to discuss. This paves the way for constructive dialogue while, at the same time, deepening strategic mistrust between the two countries. The importance of a cooperative US-China dialogue on cybersecurity should not be overlooked, as it will set the tone for other issues of global governance and nontraditional security.

The views expressed in this article are the author's own and do not necessarily reflect Fair Observer’s editorial policy. 

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