Hacking issues still boil as U.S. and China work for limited deal

Disputes over what’s acceptable behavior in cyberspace threaten to overshadow the agenda when Chinese President Xi Jinping and U.S. President Barack Obama meet in Washington this week.

A simmering conflict over hacking comes at a time when the U.S. is seeking cooperation with China on issues from North Korea to anti-terrorism and climate change. Xi arrives in Washington on Thursday for a two-day visit.

The Chinese president was scheduled to meet with business executives in Seattle late Tuesday.

The U.S. and China hope to announce an agreement to limit certain types of hacking, though people familiar with the negotiations say they have been contentious and any deal unveiled this week will probably be modest.

“Cybersecurity is shaping up to be one of those things whose impact is so enormous that it could affect the trajectory of the relationship,” said Wang Fan, director of the Institute of International Relations at the China Foreign Affairs University. Xi and Obama are likely to only reach an agreement in principle or risk “derailing the entire bilateral relation.”

U.S. government agencies and companies are reeling from a string of sophisticated attacks alleged to have been carried out by the Chinese government or its proxies, including the theft of corporate information and millions of health care and federal personnel records. China denies being involved, saying it’s a victim of cyberespionage itself and opposes hacking.

“We are preparing a number of measures that will indicate to the Chinese that this is not just a matter of us being mildly upset,” Obama said on Sept. 16. It was his most forceful comment to date and indicates a mounting frustration within the U.S. over what it says is Chinese theft of trade secrets and intellectual property.

Obama said his “hope” is that the U.S., China and other countries can agree to “some basic international framework” governing cybersecurity activities.

One goal is a bilateral agreement embracing a code of conduct put forward by a United Nations working group in June saying that no country should intentionally damage critical infrastructure providing public services, according to current and former government officials with knowledge of the talks who spoke on the condition of anonymity.

Areas where the two governments hope to announce agreement include language restricting attacks on power grids and other vital services and legal cooperation on prosecuting criminal hackers, the officials said.

While such a deal would allow the U.S. “to have a deliverable on cyber,” it would largely be symbolic, said Bonnie Glaser, a senior adviser on China at the Center for Strategic and International Studies in Washington.

Reaching agreement on the problem most vexing the U.S., Chinese-sponsored hacking of trade secrets and intellectual property from U.S. companies, is seen as much more difficult.

Obama said he wants to put an end to a “government or its proxies engaging directly in industrial espionage and stealing trade secrets, stealing proprietary information from companies.” The Obama administration differentiates hacking for intelligence gathering and traditional espionage purposes.

“Cyber-enabled espionage that targets personal and corporate information for the economic gain of businesses undermines our long-term economic cooperation and it needs to stop,” U.S. national security adviser Susan Rice said during a speech Monday in Washington. “We’ll continue to urge China to join us in promoting responsible norms of state behavior in cyberspace.”

This story was originally published September 22, 2015 at 6:19 PM with the headline "Hacking issues still boil as U.S. and China work for limited deal."