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Increasing Engagement and Connectivity is in the United States’ & China’s Shared Interest

As President Obama prepares to welcome Chinese President Xi to the White House this month, cybersecurity concerns should be a priority topic of discussion. For the benefit of both countries, however, the dialogue should be aimed at reducing, not escalating bilateral cyber tensions. Not only are the U.S. and Chinese economies closely intertwined - as recent market events have proven – but a closed China is a much greater threat than one that engages in the global economy.

China has experienced enormous transformations over the last 35 years. The country has gone from a closed, planned economy, in which individual livelihoods were determined by state-run work places, to a central player in global markets and institutions, whose citizens now have social mobility and opportunities for individual choice that were unimaginable a generation ago. Multinational information and communications technology (ICT) firms have been at the forefront of connecting China globally, beginning a dialogue between Chinese citizens and the outside world that had been nearly dormant for the previous 30 years.

U.S. and global ICT companies have played an important role in facilitating greater openness and dialogue between China and the rest of the world, and their activities in China have been hugely beneficial to the Chinese people. The Chinese ICT market, according to some estimates, will reach $465 billion this year. Bilateral ICT trade between the United States and China was valued at nearly $150 billion in 2014. At the same time, China now has twice as many Internet users as the United States has people, and it is producing globally competitive ICT companies largely based on the strength of its home market.

Policies of economic opening have enabled China to become an integral part of global ICT supply chains and make enormous leaps in consumer electronics, communications, and transportation technologies, with Chinese companies becoming commercially successful on a global scale. It is clear that solutions to pressing challenges in China, such as advancing economic development and protecting the environment, require solutions that global ICT companies can provide. At the same time, meaningful access to the Chinese market is vital for multinational ICT firms to be competitive globally, now and into the future.

In recent years, however, global ICT firms have experienced a shifting political environment that has made it significantly more difficult for them to operate in China. This year alone, China has released at least six draft regulations or conventions related to national security and cybersecurity that either directly or indirectly have the effect of disadvantaging global technology firms vis-à-vis their Chinese competitors. Chinese regulators’ trust of foreign technology is low, and international companies are the first to bear the brunt of any aggravation in U.S.-China cyber relations. Continued deterioration in U.S.-China cyber relations hurts global tech firms and their ability to drive interconnectivity between China and the world.

U.S. and Chinese frustrations continue to run high due to concerns over Chinese involvement in the recent high-profile hack of the Office of Personnel Management, as well as continued Chinese concerns following the revelations of former NSA contractor Edward Snowden. But pursuing actions of escalation would only serve to widen the divide between the two countries, hurt the companies that build the connections between the two nations, and ultimately hurt both countries economically. With this in mind, a group of 19 trade associations sent a letter to President Obama in August calling for him to make discussions on cybersecurity a key priority for the upcoming summit with President Xi.

Strong and constructive engagement during the Presidential summit would best be focused in a few key areas:

  • Presidential communiqué committing to market competition and free trade. Building on past commitments from bilateral dialogues, the Presidents should publicly commit to the importance of free trade and open systems of innovation as the best way to promote competition, stimulate high-tech development, and protect national security.
  • Establishment of consultative mechanisms. The United States and China should establish or intensify mechanisms, such as the bilateral cybersecurity dialogue or another annual high-level dialogue within the current bilateral framework. This would provide officials from both nations with a channel for exchanging ideas and discussing concerns with their cybersecurity policies.
  • Proactive engagement to address policies that create barriers to interconnectivity. Focusing aggressive policy engagement on policies that divide the countries would hold the most benefit, including continued discussion on China’s many formal and informal investment restrictions in ICT sectors, lack of transparency in regulatory and standards setting processes, and concerns regarding China’s draft Foreign NGO Law and its arduous restrictions on foreign organizations.

Focusing on these areas in relation to the bilateral ICT environment would facilitate increased engagement and dialogue, which should continue to be the core goal of diplomacy with China. At this vital point of engagement, when President Obama and President Xi meet this month, it is important that the leaders of both countries acknowledge the many benefits that open trade and connectivity have provided their nations. The two countries cannot allow further escalation of cyber-tensions, as it threatens to undermine the mutually beneficial policies of commercial engagement we have enjoyed for the past 35 years.

Public Policy Tags: Trade & Investment, Cybersecurity