[bestbits] Fwd: [JNC - Forum] US-China digital cold war is well and truly under-way

[parminder]

I hardly ever post to these lists now-a-days, because rarely are
substantive issues posted here in any case, but thought of forwarding
this because this refers to my - by now, favourite :) - issue of
pointing to the culpability of civil society actors in the IG space over
the last one decade or so in being partisan to narrow US led western
interests and having considerably forgotten to promote global public
interest, and the interests of the weakest sections, groups and
countries. And, as often happens in the mid to long term, such
partisanship is no longer serving even western interests that well.

My posting and engagement on this issue are aimed at proposing and
promoting an effort at a collective rethink and re-orientation among the
IG civil society about its politics and role, as we enter a digital
society where Internet or digital governance is one of the most
important political subjects.

parminder

-------- Forwarded Message --------
Subject: 	[JNC - Forum] US-China digital cold war is well and truly
under-way
Date: 	Mon, 30 Apr 2018 12:34:50 +0530
From: 	parminder <parminder at itforchange.net>
Reply-To: 	Internet governance related discussions
<forum at justnetcoalition.org>
To: 	Forum at Justnetcoalition. Org <forum at justnetcoalition.org>




As in the earlier times, cold war alignments were determined by, or
determined, where a country acquired its armaments from, in the digital
cold war there is going to be a similar schism in terms of whose digital
security equipment you finally trust and buy, as everything gets
underpinned by the 'digital'.... Coupled with the  "digital security"
based polarisation will be data flows polarisation -- EU is determining
adequacy tests about where its data can flow to, the new US CLOUD Act is
determining adequacy test about which countries can access data residing
in the US for regulatory and law enforcement purposes.....

We were headed towards such a polarisation when, over the last decade or
so, we rejected global institutions and agreements for Internet and
digital governance... What is significant is the role that civil society
groups played in such rejection, and thus must share the blame of the
oncoming digital polarisation which leaves all countries that are not
the US and China at the abject mercy of these digital super powers ...
parminder



internetgovernance.org
<https://www.internetgovernance.org/2018/04/29/a-chinese-perspective-on-the-growing-high-tech-cold-war/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+internetgovernance%2FabwE+%28IGP+Blog%29>



  A Chinese Perspective on the Growing High-Tech Cold War

by Jinhe Liu
9-12 minutes
------------------------------------------------------------------------

In Chinese online discussions, many people are using the expression “one
sword throat-slashing strike.” [一剑封喉] This forbidding term refers to the
United States’ seven-year export ban on China’s second-largest telecom
supplier, ZTE
<https://www.commerce.gov/news/press-releases/2018/04/secretary-ross-announces-activation-zte-denial-order-response-repeated>,
which threatens its very existence and has put the company “in a state
of shock.
<http://www.scmp.com/tech/article/2142557/zte-calls-us-government-ban-extremely-unfair-vows-fight-its-rights>”
In the Chinese language, the “one sword throat-slashing strike” means
that in battle a master swiftly strikes a death blow before the victim
has a chance to resist. Chinese use of this idiom with high frequency in
the context of the Sino-US trade war shows that there is both a feeling
of helplessness and a fighting atmosphere dispersing though the Chinese
society.

In January this year, the United States blocked Chinese tech company
Alibaba’s acquisition of American remittance company MoneyGram; also in
the name of national security it forced AT&T to end cooperation with
Huawei. At the same time, the Trump administration ordered high tariffs
on imported steel and aluminum and threatened several rounds of tariffs
on China. On March 22nd, Trump signed the presidential memorandum and
announced the Section 301 investigation of China, which was widely
regarded as the focus of the outbreak of trade disputes between China
and the United States. In April 16th, the United States launched its
“throat-slashing strike” on ZTE. While some analysts are still
discussing whether a Sino-US trade war will happen, on the other side of
the Pacific the war fire has already begun to burn, as a sense of
economic conflict develops between the two largest economies in the
world. The /New York Times Chinese version/characterized the Sino-US
dispute over technology and trade as a “New Cold War Era
<https://cn.nytimes.com/business/20180326/trump-china-tariffs-tech-cold-war/>.”

After the news of the US sanctions on ZTE came on April 16, all of China
is engaged in a big discussion of this event. A large number of articles
about it emerge in the mainstream media and social media platforms every
day. The strength of the reaction have probably exceeded the
expectations of American society, and even China’s own. On the whole,
Chinese society has discovered that its high-tech industry is weak and
unable to resist the US punch, especially because of its dependence on
US semiconductors. It has been pointed out that none of the 20 top
semiconductor companies in the world is in mainland China (see the table
below, which shows only the top 10). Civil society, academia, industry,
and even the government are contemplating the fragility of China’s
industrial development and trying to provide effective solutions. The
fact that ZTE violated American law has not been evaded in China. But
China fears  that just as a few days ago America launched a precise
strike against Syria, the United States is now launching an accurate and
fatal strike to Chinese national enterprises.


After ZTE’s violation of the embargo two years ago, it has paid  892
million US dollars for its mistakes and has reached a settlement
agreement with the US government. Because this strong penalty against
ZTE was closely followed by the fierce Sino-US tariff war, Chinese
people do not believe that America’s main concern is just ZTE’s
violation of the sanctions. According to the /Wall Street Journal/, the
US Trade Representative Office (USTR) is considering actions against the
business of Alibaba Cloud
<https://www.wsj.com/articles/u-s-is-examining-ways-to-retaliate-against-chinese-restrictions-on-u-s-tech-companies-1523910784?>in
the US. A US congressional report
<https://www.uscc.gov/sites/default/files/Research/Interos_Supply%20Chain%20Vulnerabilities%20from%20China%20in%20U.S.%20Federal%20ICT.pdf>also
accuses other Chinese companies, such as Huawei and Lenovo, of
facilitating commercial espionage. The latest news shows that the US
Justice Department has launched an investigation
<https://www.wsj.com/articles/huawei-under-criminal-investigation-over-iran-sanctions-1524663728>into
whether Huawei breaks the Iran embargo. This series of actions make the
Chinese worry that ZTE is just the first step in a bigger war.

Americans may not realize that these actions can be counterproductive.
They provoke nationalistic sentiment in Chinese society. In history,
whenever China has encountered damaging and perceived unfair treatment
from outside, there was always a strong nationalistic reaction. Signs of
this familiar pattern are appearing again. On April 6, China’s central
news agency used very tough words and phrases after the extra tariff on
China’s $100 billion exports to the US was announced, such as “the
Chinese will struggle resolutely! And do not blame us for not having
forewarned you!” [勿谓言之不预！] These words are generally used for the
announcement of a war in Chinese diplomatic rhetoric. The ZTE chairman
said that “we have the support of 1.3 billion (Chinese) people, and we
have the ability and determination to tide over this difficulty,” after
Hou Weigui, the founder of ZTE, retired and at 76 years old, rushed to
the United States to plead but without any fruit, which aroused huge
empathy by a picture
<https://m.21jingji.com/article/20180419/herald/2778441bb91bbbe0189f188b09405445.html>spread
widely in WeChat, the biggest social media in China . Then ZTE further
issued a statement
<http://www.zte.com.cn/global/about/press-center/news/201804CZY/20180420-1>that
the sanction was “unacceptable.” Subsequently, a spokesman for China’s
Ministry of Commerce also made a strong statement, saying that China is
“ready to take necessary measures to safeguard the legitimate rights and
interests of Chinese enterprises.” Chinese netizens even began to
discuss whether the country should take corresponding measures on Apple,
widely quoting an article in Forbes
<https://www.forbes.com/sites/jeanbaptiste/2018/04/18/study-what-if-china-bans-apple-to-retaliate-for-u-s-sanctions-against-huawei-zte/#49d1bf0b1e5d>which
suggests that if China retaliates against Apple, it will cause massive
layoffs and crash in its stock price.

The US moves have also encouraged high-level political leaders in China
to push for abandoning American products and developing their own
high-tech industries. Chinese President Xi Jinping stressed on April
21stthat “core technology is the pillar of the country” at the national
network security and information conference. And the Premier Li Keqiang
also spoke at the Executive meeting of the State Council to promote a
national innovation system aiming at science and technology development.
In fact, Chinese are concerned not only about the economic losses of the
US sanctions, but also about inadequate self-protection, and, what is
more, about the future of international trade.

In a more profound context, these actions of China and the United States
are not only solutions to the trade deficit, but an abandonment of
globalization. Since the end of the US-Soviet Cold War, the world
entered a golden age of “neoliberal” globalization. International trade
promoted the growth of the world economy. According to the statistics of
the World Bank
<https://www.wto.org/english/res_e/statis_e/wts2017_e/WTO_Chapter_03_e.pdf>,
whereas the average growth rate of world trade in goods was 1.5 times
that of the world’s GDP since the end of World War II, and in the 1990s
trade grew more than twice as fast as GDP. Trade exchanges between China
and the United States have brought great benefits to both sides. The
low-cost manufacturing industry in China provides a continuous supply
for the high consumption society of the United States. The huge demand
and advanced industrial technology of the United States have brought a
strong pull to the Chinese economy. While the order of economic
globalization was established by the United States, it is now the United
States who destroys it. Today’s trading system is so closely intertwined
that it is not all beneficial for the US to undermine the order it
built. The share prices of ZTE’s U.S. suppliers fell on the news of the
ZTE ban. Research by Brookings
<https://www.brookings.edu/blog/the-avenue/2018/04/09/how-chinas-tariffs-could-affect-u-s-workers-and-industries/>also
points out that China’s proposed tariffs would affect about 2.1 million
jobs spread across 2,783 US counties.

The damage wrought to the Sino-US economy and the global economy by a
trade war will be huge, but it is even more worrying that the global
free trade order is being disrupted. On the Boao Asia Forum on April
10th, Xi Jinping announced further opening up
<https://www.nytimes.com/2018/04/11/business/xi-jinping-china-trade-boao.html?mtrref=www.google.com&gwh=D31A11675F599E1C6551FFB29003BCA7&gwt=pay>of
the Chinese market and strengthening the protection of intellectual
property to integrate China deeper into the world trade system. But the
Trump administration seems to ignore this deliberately. As mentioned
above, Chinese society is worried mainly about the prospect of its
national development in the context of the times. Therefore, if more
trade wars happen, it is not only likely to lead to China’s aggressive
self-protection measures but also is likely to have a far-reaching
impact on how Chinese understand international rules. Solving the
impartiality of trade rules is a process that requires stakeholders to
sit down and negotiate. A direct blockade might well backfire.

If we look at the Sino-US trade dispute from the perspective of Internet
governance, it can be found that the Internet seems to be splitting up.
A one-world Internet should be interconnected across the borders of
states, but now territorial governments are trying to strengthen their
control by aligning the Internet with national jurisdictions. China has
selectively rejected the products of some American Internet giants, and
now, the United States has also begun to block China’s products. The
United States is becoming Chinese
<https://www.internetgovernance.org/2018/01/05/cfius-blocks-deal-u-s-becoming-chinese/>.
The state has labeled Internet equipment one by one and excludes it from
its own territory in the name of national security or the protection of
its own industries. Some commentaries assert that the actions by the
United States against Huawei and ZTE are trying to keep the US the
leading position in the 5G technology. But the establishment of walls to
exclude competition deviates from liberalism. The United States is a
strong advocate of the freedom of the Internet. It developed the
multi-stakeholder model, advocated bottom-up technical autonomy and open
industrial competition; it has resisted giving governments too much
control of the Internet. But now, on the contrary, the government of the
world’s most powerful Internet country is holding high the banner of
national security to expel market actors who place it at a competitive
disadvantage.

When the advocates of rules break the rules, global confidence is badly
damaged. But it is still hopeful that United States Secretary of the
Treasury Mnuchin is on his way to China to negotiate. So the rule of
free trade and Internet openness has not been completely abandoned yet.

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