Trump-Xi meeting sets stage for confrontation over economic espionage

U.S.-China trade tensions are poised to come to a head this week when President Trump meets with Chinese President Xi Jinping, and a major component of those talks will likely focus on intellectual property (IP) theft.

Federal officials have repeatedly accused Chinese hackers of stealing trade secrets, saying those actions are the underlying reason for billions of dollars worth of tariffs on imports from China.

{mosads}And while trade talks are expected to dominate the conversation between Trump and Xi at the Group of 20 summit in Buenos Aires, Argentina, lawmakers on Capitol Hill say they expect the two leaders to discuss the economic espionage that has plagued American companies for decades.

“I don’t know how you could have a conversation without bringing it up,” said Sen. Marco Rubio (R-Fla.), a member of the Senate Foreign Relations Committee, on Tuesday.

Sen. Mark Warner (Va.), the top Democrat on the Senate Intelligence Committee, said the same day that Trump should “absolutely” raise the issue with Xi.

“We’re not really seeing a dramatic decline in IP theft,” Warner added.

The Office of the U.S. Trade Representative (USTR) alleged last week that China continues to conduct economic espionage despite the U.S. trade penalties.

“China shows no sign of ceasing its policy and practice of conducting and supporting cyber-enabled theft and intrusions into the commercial networks of U.S. companies,” USTR wrote in its assessment, arguing that tariffs are needed to counter China’s hacking efforts.

China has denied the allegation.

The Trump administration’s weapon of choice for combating cyber theft has been tariffs, and the president upped the stakes for the Xi meeting earlier this week when he told The Wall Street Journal that he was leaning toward slapping another series of tariffs on $200 billion of Chinese imports, including popular electronics like iPhones that are manufactured in China.

White House economic adviser Larry Kudlow said at a press briefing Tuesday that intellectual property theft was one of the topics that needed to be resolved in order to reach a trade deal with China.

While intellectual property theft from U.S. companies has been a common practice by China for decades, cyber experts told The Hill that hackers have been more aggressive in recent months, with some adopting new tactics that are more destructive and make it more difficult for them to be detected.

“President Trump should state that a large percentage of the reason why he is sanctioning them, or why his advisers have advised him to sanction them or to conduct tariffs basically, is for the reason that intellectual property theft is so rampant,” said Tom Kellermann, the chief cybersecurity officer for security firm Carbon Black.

If the president takes a hard line with China, it wouldn’t be the first time the U.S. has confronted the world’s second-biggest economy over the practice: Former President Obama negotiated a 2015 agreement with China to not use cyber means to steal trade secrets.

But that didn’t resolve the problem in the long term, according to Rob Joyce, a senior National Security Agency official who alleged earlier this month that China let up on its hacking in the immediate aftermath of the agreement but is now in violation of the deal — a claim that’s in line with the findings of several cybersecurity researchers.

Adam Meyers, vice president of intelligence at the cybersecurity firm CrowdStrike, said there appeared to be a decline in reports of Chinese hacking of intellectual property after the agreement was signed. But he noted that the country’s People’s Liberation Army was undergoing a reorganization around that time that included a reshuffling of China’s offensive cyber operations, and the pause in activity could be tied to that instead.

He said the hackers are motivated to gain an economic advantage. Even though China manufactures goods for the United States, Chinese companies often don’t own the technology behind the products.

Meyers said the Chinese are trying to “effectively buy, borrow or steal the technology they need to get equilibrium with everything that’s out there today, and then try to innovate on top of that.”

The federal government has several tools at its disposal to help curb economic espionage. For example, the Committee on Foreign Investment in the United States is tasked with reviewing foreign acquisitions of U.S. companies to ensure overseas firms aren’t purchasing American businesses solely to obtain their technology and patents.

Steve Weber, faculty director for the Center for Long Term Cybersecurity at the University of California at Berkeley, said that in the 25 years he’s been tracking intellectual property theft, China consistently plays a prominent role.

What’s new, he said, is how the Trump administration has elevated to a national level what was previously viewed as a profit-margin issue for companies.

“I think that’s the big shift that’s happened in Washington in the past year or so,” Weber said. “It’s moved from ‘this is a business model problem that companies have to solve’ to ‘this is a foreign policy problem that the United States needs to solve as a government.’ ”

Administration officials signaled last month that they are prepared to consider methods other than tariffs to penalize Chinese hackers by introducing a series of charges against some cyber actors.

Earlier this year, the U.S. scored a win with the extradition of a Chinese intelligence officer for economic espionage. American officials have largely been unable to bring indicted Chinese hackers to trial, but the extradited hacker was in Belgium at the time of his arrest, allowing for him to be sent to the U.S.

That move added some fuel to the charges unsealed last month, suggesting that even if hackers can’t be extradited from China, they are limited from going to other countries where they could be arrested and brought to the U.S.

Kellermann, the cybersecurity expert with Carbon Black, noted that Chinese hackers may have ratcheted up their activity in response to the U.S. tariffs, as opposed to the trade penalties leading to a slowdown in cyber-theft efforts.

He said the Chinese are more sophisticated in their techniques than they were during the Obama administration, when he said the joke was that hackers could infiltrate U.S. networks but “sound like a bunch of drunks in the kitchen.”

Still, he warned that the U.S. should expect cyber activity from its adversaries during times of geopolitical tension — and that because of vulnerabilities in critical infrastructures like the power grid, the U.S. could be far more susceptible to attacks.

“The challenge here is that President Trump has engaged the Chinese in a game of chicken and I don’t think that’s a game the U.S. can currently win if you throw cyber into the mix,” Kellermann said.