China's Digital Silk Road

good morning everyone my name is Matthew Goodman I hold the Simon share and political economy here at CSAs delighted to welcome you here to our humble abode for this event on the digital Silk Road we're delighted to have you we're also delighted to have as always our big online audience nice to have you with us as well I hope this isn't getting distorted because it's a loud so we are here to talk about the digital Silk Road and I'll introduce that in a second and our in our initial speakers but let me just first do some administrative things first as usual please turn off your phones or at least mute them so they don't disturb the discussion if we have any kind of security event I'm your warden or just follow me basically obviously we can go down front if we if that's appropriate or there are emergency exits at either end here there's an alley in the back and the rally point is by national geographic down on M Street unlikely we've never had such a thing so and finally let me thank our sponsors JETRO the Japan External Trade Organization which has been a supporter of us for a long time and really appreciate their support that enables us to do this kind of programming and we really appreciate it so Digital Silk Road this is like one of these terms that has just suddenly appeared out of nowhere in the last year or so and now everybody is buzzing about it and no one quite understands what it is and and so that's the point of today we're gonna try to understand a little bit more what we mean by the digital Silk Road and why it's important for the United States to be focused on it and what we should be how we should be potentially engaging or responding you know to the extent it's you know what's clear about it is that that like much other hard infrastructure that's being built across the Eurasian super continent and beyond part of the digital story is about laying down of fiber optic cables and satellites and other hard infrastructure that's supporting the information and communications technology business but it's also and included in that is the the technology that underlies the this telecommunication story and particularly 5g which we're going to hear about I'm sure today and again has been in the news a lot I'm sure that that you all know something about that subject but hopefully we'll we'll delve into that a little bit more you know by its it's estimated in about five years about half the globe is going to be covered by 5g and over a billion people will actually be using 5g technology maybe maybe more nobody quite knows so there's a lot at stake there this story also though covers the notion of technology that's embedded in traditional infrastructure roads bridges pipelines all have technology embedded in them and I think that's also an important part of this story and I hope we touched on that as well all of this provides a lot of opportunities it presents risks it produces a clear need for policy thought and discussion and policy responses there issues ranging from privacy to security to commercial opportunities as well which is all part of this story so we think it's an important story and we were delighted that you think so enough to join us today so we're we're glad you're here CSAs has been doing a lot of work in this broad space we have a project called reconnecting Asia which i think is advertised up here which John Hillman is going to talk to in a minute but we've been looking at this Hart infrastructure story across the Eurasian super continent for the last two or three years and have this enormous database he'll talk to you about we also are running right now a task force on global infrastructure co-chaired by former USTR Charlene bar chef ski and former US national security adviser Steve Hadley we have a group of experts scholars businesspeople and others who are looking at this story and what is at stake for the US and how we should respond so that's a big part of what we're doing and stay tuned we should we're expecting to have a report out in mid-april so please stay tuned for that we're also doing related issues in digital issues digital governance actually as we speak there's a there's an event downstairs on APEC and and the digital governance in the Simon chair we're going to be doing an event on March 4th on whose rules on digital governance and the story around that so I'm sure and our colleagues a Jim Lewis and the technology program does a lot of work in this space and so CSS is kind of all over this set of issues so with the shameless advertising out of the way I think my my remaining duty is simply to introduce Kai Amazon Hirobumi qiyamah is a senior advisor for Japan's Ministry of Economy Trade and Industry he's also director for jet row in New York he's been in the US for many years not just in this position but I was interested to see that he actually has an LLM from Columbia University and passed the bar in New York which is an impressive thing to do so we're delighted to have Kai Amazon here to talk about a Metis and JETRO perspective on this story of the digital Silk Road Camus on please come on up [Applause] like so I have to turn the pink yes the good morning everybody and then thank you very much for a very kind you know for the introduction of me in that so today the you know on behalf of Mitte Minister of Economy Trade and Industry the Japanese government I'd like to share with you the merits perspectives on the data tools you've got initiative by China I'd like to explore the potential US Japan collaboration on the digital aspect of indo-pacific strategy - so in this sense please look at this slide actually this is an excerpt from the us-china economic and national security web we commissioned 2018 annual report we can categorize projects and that the Chinese Digital so-called initiative into three number one telecommunication infrastructure to e-commerce offering and number three smart city projects and then today assuming that hardware staff basically categorized into the first one will be addressed by Jones presentation and then following panel so in this sense I'd like to focus on the second and third pillars of the initiative and stress the necessity and urgency of public-private partnership among us in Japan given the technological leapfrogging situation in the emerging economies okay economies in Asia Jerry Yang co-founder be a food said in a recent interview quote Southeast Asia enjoying high-speed growth resembles China 10 to 15 years ago so called digital leap frogging such as wide use of mobile phones or smartphones without the period of landline use develops more rapidly in Southeast Asia than in China end of the quote we have already seen that various types of digital leap frogging in this region such as e-commerce right hailing a payment this leap hooking have dramatically changed as the end with Indian economies and societies look at this slide people in the emerging economies of Asia a much more smartphone addicted than Americans and Japanese last year the Indian smartphone sales surpassed the u.s. one and Indian Indian market became the second largest market in the world besides the population in these emerging economies have considerable optimism that new technologies offer more opportunities than risks and more importantly relatively undeveloped infrastructure and in social systems have accelerated various efforts or programs hoping by digital technologies for example modern half population of Southeast Asia do not have bank account and the public trust in the currency is not high due to these circumstances a payment service via smartphones have spread through the Southeast Asia rapidly in Thailand 44 million people around 60% of total population helped registered to prompt pay this is a payment service promoted by the Thai central bank another instance social program is a traffic congestion a congestion you might have experienced difficulties in grabbing a taxi in Southeast Asia ride hailing service companies such as grab in Singapore or go check in the Indonesia have provided solutions to such circumstances grab established in 2000 2012 has increased its number of registered drivers from 100,000 in 2014 to 2.6 million drivers in 2018 there is 60 26 times as much and emerge 2018 grab purchased ubers Southeast Asian businesses now Grove is expanding its businesses a business domain to wide range of consumer and wholesale distribution and delivery services kojic in Indonesia has provided bike ride sharing services in Indonesia where you experience the terrible traffic congestion now Gajic provides food delivery services shopping agent services and even cash accommodation services by bike drivers for consumers Google invested in Gajic last year as such Asia is full of attractive and energetic entrepreneurs with a belief that CEO he can make the world a better place we saw a rise of startups or sharing businesses in two sixteen in China and now we can see the same kind of boom in a sedan and India those entrepreneurs have seized business opportunities by finding challenges the society or corporations face and resolve the challenges with full use of digital technologies in other words Asia is hungry for technology and facing with middle income trap even the government's in this region strongly advocating digital innovation as one of pillars of their growth strategy now many of my SM friends admire China for its technologies not to the United States in Japan nor Japan this reminded me of an anecdote of Chinese culinary students in Tokyo recently we have a laptop Chinese student who had it'll come and learn the Japanese could cook cooking in Tokyo almost all of the all of them in after all days of China because almost all Japanese still use paper currency and coins and our menus of restaurants still written in paper and unchanged frequently so look at the Chinese big IT platformers activities they take this rapid leap frogging changes in Asia as new business opportunities and sees them ahead of us while Chinese government promotes Digital Silk Road initiative Chinese private companies have taken the lead in materializing concrete projects in addition to building telecommunications infrastructure Chinese tech giants have accelerated their efforts of expanding ecommerce offerings and its supplying smart city projects from leading Chinese companies for the leading Chinese companies in digital space such situation in emerging economies of Asia it just like what China had experienced before and thus they must be quite confident that those economies we eventually successfully develop digital economy like China thus Jack Ma the founder of Alibaba recently told quote we think that ecommerce and the internet a great opportunity in Asia and we go to places with countries with young people countries that have a lot of small and mid-sized companies because big companies they don't like they don't need us end of the quote in fact in last year Alibaba provided a city Kuala Lumpur with its city brain service for the somatization of Kuala Lumpur city city brain service uses big data and AI on Alibaba cloud computing infrastructure which is adapted by the city of hanzou the hometown of Alibaba City in China this is the first case of these services being provided for foreign country and then IT platform businesses in japanese' have grown rapidly and in Chinese IT platformers invest in various types of IT platform businesses in this region in ASEAN there are seven unicorns such as graph or Gajic and they are competing each other all of the seven unicorns are injected equity by Chinese tech giants such as Alibaba Tencent and DD in India there are also 12 unicorns such as Flipkart which Walmart acquired last May 7 out of 12 unicorns have received Chinese tech giant's equity investment Alibaba intentioned provide various services covering various consumer life domains these have given that given them outstanding opportunities and capabilities of collecting wide range of data founding funding power of Chinese entity is not the only strengths of them any longer the u.s. in Japan must face up to this reality and we also have to note that the leap frogging technologies in Asian emerging economies not just copycat of US or Chinese e-commerce businesses those technologies have developed in a manner which we have not even thought of and the different environment and the different social settings Indian company oil rooms established as a bargain hotel chain in 2013 has grown that to be the one of the biggest hotel chains which 400 450 thousand rooms in total given the price sensitivity of the market Indian market the company hires more than 700 AI engineers and then changes its room charges forty three hundred times a day taking advantage of that system the company has fostered in Indian market the company plans to expand its businesses to China UK as well as Japan and I also would like to draw your attention to the fact that grab and go check are now trying to play a key role in realizing inclusive growth or endogenous growth in their countries for [Music] example gojaks business model itself facilitates income redistribution from its customers higher income layer to drivers and small merchants the lower income layer grab launched an accelerator which provides capital for startups business expansion and lets them use grabs platforms for doing businesses so we have seen strong wants and wields in emerging economies in Asia nettie believes set for the United States in Japan providing funds technologies and market for such programs solving businesses in Asia might be a new regional strategy as a part of indo-pacific strategy recently you can see some Japanese companies which noticed such dynamism of digital businesses ranging in in Asia found business opportunities there for example last year Toyota invested in grab and Ian one of the biggest distributors in Japan launched a business correlation with Gajic by linking its shopping malls and gore-tex delivery services and even successful IT platformers in Asian emerging economies such as grab-and-go Jack advancing to a different stage where they need to introduce deep technologies of AI or IOT we heard from one of the executive executives observed companies quote we would like to avoid giving a handle of our nervous system that is AI to a big Asian nation we feel scared or being taken data over businesses by the nation and of court so there are real needs in the emerging Asia for active participation of US and Japanese companies in digital transformation and their collaboration with local IT platforms such contribution to the regional growth is essential for building a free and open data distribution space in this region with more with about 600 million population in ASEAN and 1.3 billion population of India otherwise a harmful digital protectionism such as data localization could spread around the region then actually Prime Minister Abe a launched the concept of data free flow with trust at the World Economic Forum in Davos we believe that US and Japan should work together in expanding our investment in Asian program solving digital businesses and facilitating free and open innovation in order to materialize this concept of data free flow with trust so what the government could do in this area as you've already known the u.s. and Japan agreed to cooperate on the digital aspect of indo-pacific strategy in addition to the infrastructure and energy aspects as to the digital aspect of course the security of next generation telecommunications infrastructure such as 5g networks or submarine cables is one of the very important agenda of US Japan cooperation but at the same time US Japan joint engagement in the program solving digital businesses in the emerging Asia is also essential so needless to say the private companies should play leading roles in these efforts but simultaneously governments should play effective roles in providing a sound environment where private companies can enjoy free and open innovation the rapid expansion of the force industrial revolution has also rapidly increased speed of business cycle size of businesses and risks associated with them thus we have to recognize the necessity of securing risk money for supporting rapid digital innovation in Asia while avoiding harmful crowding out in the United States the build act will strengthen the risk money provision function for its private sector in Japan jarick Japan Bank for international cooperation has strengthened its equity financing function and contributed to accelerating digital innovation in Asia units in Japan should pursue a further strengthening an effective coordination of such policy based financing besides that we have to undertake and international rulemaking regarding trade ecommerce investment technology protection privacy infrastructure development which can accommodate rapidly changing business environment caused by digitalization and globalization the concept of data free flow with trust is one of the important pillars of this international rulemaking at the same time us in Japan can work together in capacity-building efforts in the emerging Asia for proper implementation of those international rules in conclusion again we are very much confident of the effectiveness of the us-japan Indo Pacific strategic cooperation in the areas of energy and infrastructure now we have to expand such effective collaboration into the area of digital innovation in Asia thank you so much [Applause] morning everyone I'm John Hillman director of the reconnecting Asia project which is what we keep advertising here and I'd encourage you to check it out if you haven't already for almost four years now we've been mapping infrastructure across the Eurasian supercontinent tracking not only China's belton Road but also many of the other connectivity initiatives that are underway and you can view a lot of the projects that we're tracking on our website where we also have news and analysis one of our recent reports was being handed out earlier hopefully you got a copy and if not it's on the website it's called influence and infrastructure and it basically tries to lay out the ways in which States use infrastructure projects to advance strategic objectives and while the while the report is intended to help serve as a guide for making sense of current developments it draws from examples throughout history and so what I'd like to do briefly this morning is share one of those examples with you but let me start first by underscoring what's relatively new and that's China's rise as a leading provider of infrastructure beyond its orders so let's just for a minute consider one type of telecommunications infrastructure which are submarine fiber-optic cables I feel like that doesn't get a lot of attention right now we're all concentrated on wireless networks but these are incredibly important they carry the vast majority of international data and a decade ago Chinese companies were involved with just a handful of these cables and those projects were almost exclusively in China Taiwan or Hong Kong and as you can see now China's share is growing quite dramatically it's a landing point China's a landing point owner or supplier for 11.4% of these cables globally and more than twice that 24 percent of planned cables the share is as you might expect even higher in Asia you know almost 30% of existing cables and over half of planned cables one of China's planned cables in Asia is a project maybe some of you have heard of it has a clever acronym which I'll let you figure out and it went into production last October when completed in 2020 it will become the shortest route for high-speed Internet traffic between Asia and Africa the cable will begin in Gwadar which is some of you know is a key part of the china-pakistan economic corridor which is a flagship probably the flagship corridor of china's belton road and what's striking about this project among other things is how this cable and several others like it are literally retracing the steps of great powers that came before China so a century and a half ago Britain was wrapping the world with Telegraph cables including one through Gwadar on its way to India which was Britain's prized colonial possession at the time and while every historical comparison has its limits I think this this case illustrates how what begins as a commercial contest can quickly become a strategic contest and I think it's also worth noting the these cables while a bit slower they were cutting edge technology of the day so in 1865 sending a telegram from Britain to India took five to six days and it involved up to fourteen relay stations at each of those relay stations the message was received decoded and then physically transferred to someone else who coated the message and sent it on to the next relay system and so this was you know quite difficult sometimes messages are arriving mangled and it's sort of an international game of telephone before the telephone and it was quite expensive to play twenty word message cost the equivalent of roughly $800 today these early these early communication infrastructure types were also plagued by design and operational challenges and the Telegraph's first few decades there were no international androids and wires were being produced according to various specifications engineers were basically through trial and error still figuring out what materials were best for different climates and how to protect wires against common threats ships anchors and stormy seas and so on the first cable to India was laid in two sections and both failed leaving the British government dependent on a connection that ran through the Ottoman Empire and that was therefore vulnerable to being monitored and frustrated by that experience the British government decided to provide limited support for surveying new routes for negotiating access and for laying a set of strategic cables in the meantime Britain's global share of Telegraph cables was expanding rapidly and that was driven primarily by commercial motives British firms had laid the first the very first cables in the 1850s and their innovative materials and techniques eventually dominated the market so much so that Britain's largest Telegraph Company manufactured two-thirds of the cables used in the 19th century and almost half thereafter and in 1896 Britain owned 24 of third of the world's 30 cable laying ships so this is an illustration of one of their very first cabling ships but Britain owned 24 of 30 of them at the close of the century eventually though strategic concerns took hold at the close of the 19th century the British government began developing a smaller system of cables that touched only Britain and its possessions and this network of all red routes was actually largely opposed by some within the British government the Treasury but they were essentially outmaneuvered by Britain's defense agencies which as the historian Paul Kennedy has written developed a virtual fetish for these routes these investments had little commercial value but they paid off in the coming years as competition among Europe's great powers escalated and finally spiraled out of control and so for German officials the guns of auguste were followed by a deadly silence on August 5th 1914 a day after declaring war on Germany Britain cut five of Germany's Telegraph cables which remain disabled for the duration of the war and so Britain's advantages in that conflict system not only from owning and operating infrastructure but also the abilities of its companies and the international standards they set and in monopolizing much of the expertise to lay in repair cables that ensure that Britain's rivals were unable to to do so themselves so I think the story could end there and it would be something of a cautionary tale about how commerce can quickly turn into a strategic contest but I think the real story is a little more complicated and so there at least two other dimensions that I think are worth pausing on just in conclusion one of those is that the Telegraph was ultimately a double-edged sword for Britain so it solidified Britain's control over its colonial territories initially but then eventually these same infrastructure types undermined that control British cables did not only carry colonial commands but also potent ideas for change especially in India nationalist movements used these tools in their fight for independence and Britain's censors were unable to stem the flow of news and communication the other dimension that I think is worth pausing on is that the source of Britain's commercial success as a global hub for communications was due in large part to its openness so during the global telegraph race unlike most countries Britain granted rights for landing cables on its territory without restrictions so far from weakening its firms it was this openness that helped turn London into the global communications and financial hub that it remains today so collectively I think these experiences suggest that while communications infrastructure can offer strategic benefits those benefits indeed come with some unintended consequences especially for those who try to censor and control information flows these experiences might also suggest that limited strategic investments could be worthwhile but that it would be a mistake to allow strategic concerns to fully eclipse economic fundamentals which often provide the longer-term more lasting benefits and so as I mentioned in the beginning every historical comparison has its limits this report that we just put out is filled with examples and I think that as new as many of develop today's developments are including with much of the new technology they're perhaps not entirely unprecedented so I'd encourage you to visit our site to check out the report and to help you know help us make sense of these developments let us know what you think and with that thank you and let me welcome our panel onto the stage [Applause] [Music] hi good morning everyone I am Kate O'Keefe I'm a reporter with The Wall Street Journal covering us-china issues and I'm going to be your moderator for this panel and I'd like to quickly introduce our panelists to my left we have Robert Atkinson Rob is the founder and president of the information technology and innovation foundation which is a think-tank focused on science and technology policy we also have Emily Rahula Emily was until September the Washington Post China correspondent and she's now based here in DC covering foreign affairs and at the end we have William evil bill is the former deputy commander of the US Cyber Command and a former director of the Joint Staff so hopefully we'll have a lot of interesting discussion for you I'd like to get things started with a more general question that I hope Rob you'll be able to take the first stab at this one my question is what are the key components of China's Digital Silk Road plan and what is Beijing hoping to accomplish with this plan sure well thank you Kate and I think it's a pleasure to be here so I think what you have to understand about this plan is China has a strategy Xi Jingping has said that the strategy is to be the master of our own technologies and by that they mean they don't want to be dependent upon American Japanese or European technologies they want to make all of their own and when I say all I mean all and so the second component of Chinese strategy is what they call the going-out strategy and this is the idea that the first phase of indigenous innovation which is sort of early a little bit before made in China 2025 it was really to gain market share at home think about it as kind of an protected aircraft carrier you've got market share sort of kicked Google out now now they've got Baidu and they don't really allow Amazon and also they have this protected market the next step is to go out and I'm gaining market share they're not going to go out and gain market share in the u.s. first couple of big or Europe or frankly Japan for a couple of big reasons number one the technologies aren't as good they give you pretty good technology at a discount that's kind of that's kind of the business model on the deal and secondly they're facing robust competitors in those home markets and now thirdly as we're seeing in the last year they're facing a lot of distrust and security concerns and all that so the core kind of phase where China is right now is to gain market share in sort of third markets if you will particularly Southeast Asia and Africa and that's really what the digital Silk Road is all about it's to basically give them help but tie that help to selling from Chinese digital companies Huawei ZTE Alibaba and the like so at one level it's good because those countries need better digital infrastructure and digital services but on the other level we have to understand what it is it's a pure it's pretty clear Industrial Policy play for them to gain market share for their companies and then once they have that which by the way means that US companies don't have that market share then the next step after that would be to try to go out and try to you know gain market share in Europe u.s. and Japan thank you very much bill can I go to you for some of the military implications of this strategy by China sure first let me back up and just say that today the only superpower that is a great great power that's capable of deploying military might globally is the United States no-one can produce the type of joint force that is the note the US military can do now increasingly in the past 15 or 20 years the means by which we've been able to do that has become even more reliant on on industry today we are heavily reliant on partnerships within key verticals such as energy transportation sector information and technology sectors and so for our ability to deploy and project power from our space into another space on the way in which we move it in the way which we sustain it is is largely in concert with the powers that possess reside at the homeland so the home of the home game and the away game are merged what we see here with the digital Silk Road that China is doing is attempting to create an alternative system that will compete with that the global telecommute infrastructure is intended to connect countries under a single technology standard and what that does for China is it gets allows them not only to get in front of the the global economy that will be increasingly more digital it will allow them to in addition to tapping new markets it also allows them to set the technology standards the priorities and to dominate it allows them to overpower competitors at its scale it preys on smaller economies it gives them the tools to keep them under check creates dependencies it it gains access to data and we have to remember it does that with companies that are subjected to and must comply with domestic Chinese law so you have a revisionist revisionist power emerging that is challenging fundamentally the way in which we underwrite global security okay thank you so much I'm gonna go to Emily now for some more specifics so Emily I wanted to ask you how do you Chinese telecoms companies like Huawei and ZTE fit into this digital Seoul plan and what impact could the recent US indictments against while we have on the company and on China's broader plans to try to dominate global 5g well first of all thanks for having me my notes are on my phone I am a lip millennial but I'm not currently on Instagram and in case anyone's wondering I think it's a really important and complex question the first thing is when we talk about the digital Silk Road what are we actually talking about and there's two levels here right one is you know the specific elements of Chinese Industrial Policy which are you know laid out in various plans and are part of the belt and road initiative and the second level is one that both my co-panelists have referred to which is this level of strategic competition so it's it's operating both in specific concrete ways and in broader strategic ways and I hope we can discuss both today in terms of concrete you know business operations I think what we're seeing is that the belt and road initiative has just thrown a ton of money into this space and so for specific companies like Huawei and also for others this means that there's contracts to be filled and whether that means building telecommunications infrastructure 5g providing services in various local economies that's really how they fit into this picture and of course the exact relationship between those companies and the government is a subject of much current debate at this broader strategic level I think we really have seen with the recent developments in the huawei case the extent to which the Chinese state is going to back companies that are part of this so for instance if a country were to arrest the CFO of a large Chinese telecom a telecommunications firm on charges related to alleged sanctions violations we would see a very forceful response from the Chinese government in terms of what the indictments mean for Huawei and more broadly for Chinese companies operating in this it's too soon to know exactly but I think it would be hard to find someone who would argue that this has been good news for huawei or indeed for other Chinese telecommunications and tech firms what we've seen over the last few months is this sort of effort I think us-led effort that's fair to rally members of the five I have five eyes intelligence sharing network around sort of the u.s. position on Huawei as a potential security threat Huawei has been saying for years I think quite fairly if you're gonna say we're security threat show us the evidence and what we saw at that press conference two or one week ago I forget was really the first time that we've seen what the United States Department of Justice plans to try to prove in court they have not been proven in court but these sort of meaty details about sneaking into labs and stealing robotic arms which are allegations that have not been proven in court I think are gonna have a big impact on public opinion particularly among five eyes nations I'm covering Canada right now and certainly in Canada the cost of the government going ahead with Huawei and 5g has just gone way up but I do think it's important to note that elsewhere in the world the company is doing really well and a really interesting question for the United States Japan and for Europe is you know despite the u.s. raising all these security concerns about Chinese telecommunication firms they continue to dominate in many markets and so a key question for the United States is why this company is still so attractive and why its services are still being popular yeah I'll leave it at that Thanks if any of the other panelists wanted to respond to any of the issues Emily just raised feel free and then I also have a follow up question which is what do you guys think are the main potential security risks with Huawei and is there actually anything at this point that Huawei or China could do to convince skeptics that the company is not a security risk so maybe we'll start with you bill on that I'm probably the wrong guy to start with because my answer is absolutely nothing ZTE Huawei is in the same category skippers kaspersky lab's they the risks are one of surveillance cyberattacks cyber disruptions and so I firmly in the camp of of of telling our partners and allies that if you want to remain interoperable with us you have to participate in an alternate solution then we need to partner with them to figure that with that out and we need to extend that because I think economically what it does is it it robs competitiveness in other markets and it prevents emerging economies opportunities to participate in the global community so I think in every category we should push very back hard against what wali which is a state-run enterprise is is doing so a couple things here one is there's another issue here would besides security and that's that's a sort of global market share the u.s. used to be the world leader in telecom equipment we had Western Electric which became Lucent and now we don't which which is a serious problem but we don't have one and so it's an interesting thing because we don't have a dog in the fight from a sort of industrial policy or competitiveness challenge so the Europeans have that dog and that's Ericsson and Nokia but if you who are the two sort of dominant players if you will outside of China but if you just look at Huawei nokia Ericsson Cisco ZTE they have 75% of the worldwide revenue in this area but in the last three years Huawei market share has gone up four percentage points all at the expense of Nokia and Ericsson Huawei's telecom revenue now is twice as but it's a little bit larger than Nokia and Ericsson combined so they're they're a big company they're also a unique company in the sense of in the US we tend to have these sort of verticals in companies that make ships the companies that make computers and somebody's that make phones and companies that make telecom equipment why away is sort of the the integrator it makes everything and I'm interesting to see why that model really works it seems to work pretty well for them so that's one issue I mean you could imagine a world in ten years where you really don't have any other choices where you get Ericsson and Nokia you know at a smaller much smaller share themselves and can because of the capital costs of R&D are so high for this industry you know you have to have enough scale to be able to keep innovating and maybe you get to a tipping point where you just can't do that anymore so I think that's one issue the second issue on security it's not so much I think whether you can prove that things are secure or not secure it's that the emerging systems are harder to judge particularly as we move to what are called software-defined networks networks in the past the functionality was all hardwired in and now we're moving into what's called software-defined networks and from talking to experts software-defined networks are just much more vulnerable that's not the right way for software it's harder to determine on software-defined networks whether they've been compromised or not I think that's the key thing I mean if you think about your car for example if you have a relatively new car like a Tesla doesn't software gets updated all the time well how sure are you so you you you you've approved that first set of software you've gone through every line of code but now there's an upgrade how sure are you that that upgrade is legitimate and so I think that is raising some interesting and important questions I'm not going to judge whether they are inherently unsafe or not that's what people in the US government do for a living but it does raise a certain Rush's and then lastly on the thigh G itself because of the network architecture and typology does also raise other sorts of vulnerabilities that are sort of a 4G network don't raise and so I think again that is one of the reasons why the five eyes are thinking much more about this than they were in a 4G world as to whether anything could convince people that always now safe if I was advising the company I would give them the following advice I would say you know rigorously defend yourself in court in US Court there's clearly a demand in the United States for more information about this company's corporate governance structure its operations and its relationship with the government I would encourage the company to provide that information and I think the company's response to this whole case has been revealing they have said well you know we'll fight this in court we abide by relevant laws so this also has to do with the Chinese government respond which has in some ways been much more forceful and in some ways much more revealing than the corporate response if the Chinese government wants companies to Sewall way as a neutral actor it should consider you know how the arrest detention of two Canadians on vague security charges is playing internationally and you know the impact that that's had among you know the West broadly and other allies including Japan on on the willingness to do business with these companies yeah actually Emily do you have any other insights into what sort of the everyday Canadian thinks about Huawei now I mean was while we really on the radar of Canadians until this extradition request it was a little bit on the radar because they sponsor Hockey Night in Canada which is our most popular television broadcast ever historically and currently so they've really made this this very successful frankly pushed into Canada certainly relative to other markets including the United States Huawei has made investments research partnerships with Canadian universities you know they sponsor hockey if you're walking around Toronto you see ads for Huawei phones I don't think the average Canadian before this played out other than a large number of you know Canadians of Chinese ancestry or with ties to China really knew about their products didn't know much about their phones so their first real introduction to this question is you know the detention of these two Canadians on the ground in China and what is widely seen as retaliation for mungs arrest in Vancouver and prior to this whole incident the Canadian government had said we're coming in and we're going to engage with China we shouldn't be afraid of China we want to do more trade with China and now therefore they're being forced by public opinion to walk that back and you know if that's not a lesson for you know companies like this and for the Chinese government I'm not sure what is although they don't show any sign of wanting to back down on this case yeah it's definitely a unique PR strategy so Rob if I could just follow up on something you mentioned earlier you mentioned Nokia and Ericsson and the fact that the US doesn't have really an equivalent to wall way I'm wondering what countries what what alternatives countries actually have if they don't want to use Huawei I mean are these two Nordic companies going to just supply the entire world's 5g I mean how does that actually realistically work I should also mention Samsung is an emerging player in the 5g marketplace and they're investing a lot and have you know very really seem like good offerings as well so I don't absolutely Ericsson Nokia Samsung there's no reason they couldn't supply the world market with with 5g they just they just build more factories it's not hard to do I think the question I think is much more about we appear and by the way this isn't just about telecom equipment as the other speakers alluded to it's about e-commerce search a wide variety of new ICT business models and generally the US and Europe have not been very aggressive in that space and in that region they really have sort of let Wow and these other companies go out there and just take it I mean why ways an incredibly sophisticated company when they go to these places Kazakhstan or these other countries they they they go there they build relationships they they even have like dollarz ships for high school kids or college kids to come to Beijing I mean they're very sophisticated and and I don't see American and European companies with the same level of response and so at one level we're getting what we deserve because we're not doing it and secondly I think our foreign aid policies and in particularly Europe but also the US where are we I mean you know you can say that the Chinese are putting you know unfair amounts of money in there but they are putting a lot of money into that and where are we what why isn't a ID or OPEC or the European Development Bank why aren't they putting a massive massive effort in there and then secondly tying it to a commercial advantage I mean I know you're not supposed to say that in washing because we're all supposed to be totally altruistic and helping them and nothing for ourselves I don't think that world is real anymore the Chinese have shown that's not real and so if we're gonna give them aid for Telecom they need to buy our equipment and we don't seem to be doing that so at one level I'm not surprised that Wow AZT and these other companies are making such important advances because they're they're sort of pushing against an open door and that's a really good point I guess we can give while we maybe a little break for a second and I have a question about another aspect of the Digital Silk Road which is actually the very popular messaging app WeChat and I wanted to ask you Emily what role does this app play in the in the broader Digital Silk Road plan and also what do you make of reports that the Chinese government is actually able to censor WeChat well beyond China's borders thanks I think understanding WeChat is really important both in terms of you know the day-to-day use of the internet and also this broader question of strategy and multipolarity and and how we think about the internet going forward we chatted I'm sure most folks in this room know is the Chinese messaging app but it sort of evolved into an entire online ecosystem and it's hard to overstate just how popular it is whereas in the United States lots of people are using a variety of different apps in the United Soccer almost everyone is using WeChat from little kids to you know I've interviewed 79 year olds who are doing all their online shopping on WeChat and when we used to think about the China's internet going back to 2009-2010 even further along we used to think okay well China's now developing an intranet in 2009 the government sort of famously turned off the internet in the northwest after unrest and that was sort of the framework we're using to understand the internet in China what we chats sort of worldwide popularity among Chinese speakers and the Chinese diaspora and others has taught us is that the walls of this sort of new Chinese online commercial social cultural ecosystem are much more blurry to give one example recently in a Canadian political race in British Columbia on the west coast candidate was sort of forced to resign from the race after posting a Chinese language comment on WeChat and that a lot of people thought was sort of racially divisive and so this idea of different conversations happening in different online ecosystems I think is really critical to understanding another example I've been reporting on the crackdown and mass internment of ethnic Turkic Muslims in China's Xinjiang province and when we interview families of people who are currently in those camps one of the most common things they say is that there are WeChat messages to their loved ones are either being intercepted completely centered censored and/or they are getting threatening messages on WeChat so in really practical ways and sort of really big picture ways it's changing how we understand China's online environment thank you very much I wanted to know if any of the other panelists wanted to flag any other companies or specific technologies that are important for us to sort of keep an eye on as we're assessing the digital Silk Road plans and if I could throw that to you bill please yeah well sure they're the BDS navigation system is problematic particularly when China has already demonstrated a willingness to to militarized space this sensor is the enhanced guidance that dual use of this in addition to everything that's doing in the in the cyber domain is problematic I think anything that enhances if you will I don't know this is correct framework or not but you know allowing China to have digital sovereignty in a region is problematic I think we have to look at what enables that and say why is that is that good for all of us we have yet to see but the promise of as of I have a i5g AI I'm concerned about when the infrastructures in place and you see the introduction of Internet application platforms and digital services that that kind of soft penetration so I I think that it's it's what all happens downstream and how does this modernize how does the modernization further enhance the grip of China in in certain regions and across the globe and my fundamental premise is that China is unfit to own large chunks of the world's communication infrastructure and given his extensive surveillance given its censorship given the fact that it has for years been stealing in property intellectual property you know just it's it's just wholly problematic so you know I I start with an inherent distrust of this actor and and I questioned the motivations behind all of its modernization because of this you know thing that I'd you know just think that they have demonstrated that they are they are willing to use this for the betterment of China and not necessarily when it's not convenient for them to look at how this really impacts access to the global Commons so I think I would agree with general said I think 5g is going to be probably the most important one I think there's a lot of sort of unwarranted paranoia about this that you know whether they do well in 5g or not doesn't mean that we're not going to have 5g in the u.s. we will have 5g in the u.s. no matter what the benefits of 5g are in the application space and so we can buy Eric's and Samsung or Cisco equipment it doesn't really matter and we'll do well in 5g so when everybody says China's winning the 5g raise I think they're missing part of the point the point of 5g is just we're gonna have a better Network and I'm highly unlikely it's going to be a Chinese network at this point in time I think in other areas biometrics so the Chinese are going great guns in biometrics particularly facial recognition you can say what you want about facial recognition but I believe facial recognition is going to be a very important technology going forward it's going to make our lives a lot easier and better but it's a complicated and expensive technology to develop and the Chinese could gain global market share and that and really you know be the sort of default provider in that space and then lastly ai ai one of the key things that AI depends upon is data and the Chinese are no compunctions about enabling large amounts of data to be collected so I think you know some of the big things I do want to argue though that I think we tend to again don't overly panic about some of this when China goes and uses the digital Silk Road and there are incentives and other packages to convince some country in Southeast Asia to buy their equipment or to buy their cameras or whatever they buy it's important to recognize that the country that has the cameras or equipment is setting the rules and setting the law it's not like China's saying we'll only will only sell you why way telecom equipment but you have to agree to spy on your citizens China fundamentally doesn't care about that they once want to sell the stuff I mean it's just it's a commercial transaction they spy on their citizens at home but they're gonna leave those decisions about surveillance and privacy and all those other things those really are left up to the countries that are buying this stuff and I saw as I can tell there doesn't appear to be any sort of arm-twisting based upon that we're giving you money and so you have to do that what I think is more problematic is that countries are looking at China and going like that model I get to control my citizens I'm going to do that too but you have to remember that's different than China sort of imposing that model in them it's a the problem is I think that China is just something that a lot of countries now emulate largely because I think of a failure of us to push back adequately to say that our system is better and gets you better innovation but so I think it's you know those countries are still in play in my way of looking at it and we can't influence them and we should try to just a quick follow-up so you mentioned that you think there's a lot of undue panic and that you know countries who are using Huawei equipment are able to sort of set their own rules I think that is a controversial view there's certainly some out there who believe that Huawei has backdoor access to its equipment so I was wondering what you think about that do you think that's just fear mongering or is that a legitimate concern well that's a different issue whether they do or whether they don't I don't know but that's not setting the rules they're not you know let's say let's just say for the sake of argument that they have a backdoor in the government that they're selling this to or the country they're selling it to might have rules that say you cannot use backdoors you cannot spy you kill so they're not forcing the country to change the rules if they have a backdoor that's something they would be doing surreptitiously not in direct partnership with with the government of a country necessarily I think I broadly agree but this question of the long arm of the Chinese state I think I agree that they're not saying by our telecommunications equipment and and then you have to spy on your citizens but this sort of broader use of defining China's National State Security across borders I think is really significant in recent years you know I covered the case of a Swedish national abducted from his vacation house in Thailand and renditioned mysteriously to China that he shows up and says you know I I kidnapped myself and took myself to China I'm paraphrasing but and I think we're gonna see this kind of this kind of action in the digital space and we we already are seeing it in real ways among diaspora communities and among critics of the Chinese government um so I think that's to me that's where that plays in but I agree broadly with what you said one other point I wanted to make was that in the United States the response to all this is really being led by the security and intelligence community which is very important because I think it's very clear that there are real security and intelligence considerations here but when we're talking about something as broad and as personal as the Internet and how we interact online from a strategic perspective the United States and its allies need to think about how and why people use the Internet I'll use myself as an embarrassing example I know that we chat is surveilled and censored I've you know showed up in small Chinese villages and had people waiting for me there because I discussed plans on WeChat I know it's dangerous I know it's not secure and yet it's still on my phone I do have a phone without it for the record but what is the United States what our other allies offering as product-wise as a sort of alternative to this if Huawei's telecommunication networks work really well and they're affordable if their internet ecosystem if Alibaba if we chat are really great Internet experiences people are going to use them especially at a time when faith in us technology is that like negative ten billion when I say to people oh you know what about WeChat it's you know it's surveilled and they're like I'm on Facebook whether that's fair or not that the current perception is that there's on some levels of an equivalence when it comes to using the internet and I think strategically one consideration is what is the response to that so it's not equivalent and the idea that people think it's equivalent I know you're not saying they think that but the fact that anybody in the US could think they're equivalent tells you they don't know what they're thinking about Facebook does not sell its data to advertisers when you advertise on Facebook you don't get to know that it was you that saw my ad I get to know all I get to know and I'm not defending Facebook per se but there's so much mythology that's gotten in the last year of this tech lash and this demonization the business model is to match customers to ads anonymously secondly Facebook and every American Internet company does everything possible to resist the US federal government from getting into their networks now they obey the law and it worse comes to worse you know push comes to shove they will do it if there's a legitimate court order but every single one of those companies has a big legal department and all they do is they push back against the US government trying to get inside there you know with court orders to get inside their network because they want to protect that that was that whole Apple case we think with encryption Chinese companies do not do that anytime a Chinese company were to raise one little iota of complaint they would be completely taken down I always remember this meeting I had and I won't say which company was a pretty major Chinese Internet company in Beijing and we're in there's a group of us and I asked this guy a question and you know some question about the government let me go well I'm really not allowed to answer that let me turn it over to the Communist Party official for him to answer can you imagine going up to Microsoft and saying hey what do you what do you guys think about the federal privacy rules thing I'm sorry we can't answer that let me turn it over to the Department of Justice official you know so it really is completely different and part of that I think this is the other point I think we're really really making we're gonna look back on this in ten years and go what in God's name were we thinking because the Chinese government is not attacking its tech champions it's doing the opposite it's doing everything possible to prop up its tech champions what are we doing we're demonizing these companies we're bringing bogus privacy cases against them sometimes not all the time we're threatening antitrust cases against them the Chinese government knows that the way they're gonna win this is not by breaking up their platforms and their and their dominant players it's to build them up and we're going in the exact opposite direction I would argue and it's going to make it harder for us to protect our soft power throughout the world when if we do that you have a couple of thoughts on that I struggle to understand despite China's economic growth this one-party system how it survives promoting multinational capitalism I I struggle to understand that I think it's it there's an impending catastrophe between the state and the state's economy unmet expectations of its middle class global competition unable to provide alternatives to the free trade system developed by democratic nations and if it has when that moment comes laid the infrastructure in place and it goes unchecked I think we find ourselves in a very difficult position to project power to provide an alternate response the difficulty we have here is is cyber in general has enabled new forms of power principally economic and political power and we haven't yet come to terms of that when we to the extent that it has application in terms of the traditional forms of military power what we're really finding is that given the that cyber today doesn't really generate anything more than temporal and and and limited concessions that's what it's able to produce from military there's no knockout punch it really means for the defense that for military you're on the defense and and what we have right now strategically is because of new forms of political and in principally economic power and a way in which other nations in China in particular can compete with the current world order below the threshold of what would trigger a more serious response and we're not we aren't in that space the first briefer I thought did a great job and the number of folks that don't have banking accounts in the world I think it's like the number of my head is like 2.2 billion people today don't have banking accounts and it could be off on that what have we done to contributor that well just look at our de-risking operations as a result of four Patriot Act and and war on terror and you find today is because of anti-money laundering regimes in the CFT requirements and know your customer requirements and the penalties after the fact to the institutions that allowed a breach to happen has put a dampening effect on the financial markets and we're not penetrating and we are this this area we're not finding the United States we're not praying to penetrating in in in the in the global markets and so what we do is we seed Human Terrain to these alternate choices so yes it is true that China is out there and and others are out there but we are doing things in the physical world that made sense the time that we developed them that I think we have to rethink and ask ourselves going forward does this really how do we need to adjust these various regimes so that we don't necessarily create new unintended problems okay thanks I wanted to move on to the topic of data localization sounds boring but it's actually very interesting and Rob I was wondering if you could tell us how you think China's requirement that companies stored data within its border fits into this digital Silk Road plan well you know data localization is a big big deal my colleague Nigel quarry is here is leads our work at ITIL on that if you interested in sort of looking at the best work I'd encourage you to look at Nigel's work at i2f dot org we just issued a report last Monday and called it was the 10 worst innovation mercantilist practices of 2018 really riveting but this year China was what two or three Nigel to so two of the worst practices were from China and they're both related to this so the Chinese have this this policy that says you have to store data any data generated in China has to be stored in date in China and they use this essentially bogus argument that if somehow data leaves China it's not private well first of all they really don't have a privacy regime anyway so it's probably more private but it goes to another country because they have better privacy but the point being it's just it's it's a bogus excuse to essentially do data protectionism and the reason they do that is they want to have data centers and cloud computing and other kinds of and other kinds of technologies they want them to be in China they don't want them to be out of China so for example when you look at a company like Amazon Web Services which is the largest cloud computing provider in the world Amazon is now a lot not allowed under Chinese rules to go in and open up a cloud computing business yet Alibaba is allowed to come in to the US and open up a cloud computing business Amazon can't do AWS can't do that and they have to partner with a company a Chinese company they have to have the servers in the center in that servers in there and they have to give them proprietary technology so I don't as I said I think that the Chinese this is to me a completely unfair trade practice we should bring WTO case against it and we should force them to stop I also courage by Prime Minister hobbies leadership in this Japan now is really a us is not the leader as much as we should be but Japan has emerged as the leader now and in trying to craft a new trade regime around open and cross-border data flows which i think is going to be very critical going forward China is going to be the big opponent of that recently they they said they wanted to be part of that agreement which is I think a mistake initially because it's they're not going to live up to it and then the last part I'll just make on that is I think that they're not they're not imposing us as that's regime when they go into these countries they're not saying if you want to buy our equipment and get our aid you have to have data localization but they're encouraging it they they go to these countries like Indonesia I mean Indonesia is close to being as bad as China when it comes to data localization they have two new policies I believe in that space and they're looking and going hmm we want to grow our tech economy and we want to have all these companies we want to have data centers let's just do what China did and so again I think we are doing not doing a very good job of articulating why the what the costs are on that we wrote a report last year where we looked at what the costs are economically did data center localization to domestic companies that have to live under that regime and they're quite significant but we don't really promulgate that information adequately enough and go engage our allies and other partners to let them know that but did anyone else have comments on that or should we move to our final question no okay and so right I think we'll just do one last question for all the panelists to respond to and then we'll move into the audience Q&A so please get your questions ready so I guess my final question for you guys is broadly how do you think the US and its allies should respond to China's Digital Silk Road plan and just a sort of prediction question where do you see all the shaking out in the next 10 years I think you already said you know we're going to be kicking ourselves but if you want to expand on that well I look at the world in a pretty manichaean way or zero-sum way I guess it's somebody gains market share or we gain market share it's not like the pie is fixed I means I like the pie the pie is fixed and the Chinese either get it or we get it or the Japanese get her the Chinese get it so I think we should fight for every scrap of global market share in advanced technology industries so when people say oh Google shouldn't go into China because they censor fine we'll let we'll let the Chinese companies have all that market share and get none of that revenue coming back to the u.s. to support US companies I think that's a major major mistake I mean this to me this is largely about commercial competition because if we lose that competition innovation industries are different they're not like a call center if you lose all your call centers you want to bring them back you can open them up in a couple of days just throw a bunch of servers in a bunch of headphones and train people on how to read a script but if you lose your AI if you lose your telecom equipment if you lose advanced industries you just don't get them back and the only way to ever get them is to do what China did which is steal the technology and massively subsidized it so I think that's really the main lesson is we should just fight for every scrap of that and that means I am cry I agree with what we just did recently where we put more money into OPEC I think that was a good idea but we still don't have an Exim Bank it's functioning the way it should function we don't have aids that are anywhere near sizeable enough we don't tie them to these kinds of things so an awful lot we could do I don't think I don't think in ten years it's a default that the Chinese are going to dominate that region from a digital perspective but I think if we don't change course then yes I believe they will dominate I think certainly the security response and the what's happening in US courts right now is an important part of this whole issue as someone mentioned earlier the United States right now is very focused on this being strictly a legal matter and not a matter of great power competition I understand why they're saying that I think it very clearly is a matter of strategic competition and spheres of influence and so the thinking within policy communities needs to reflect that also I touched on this earlier but the best response from the US and allies is to offer alternatives that are excellent people don't use the internet based on who provides their network services people choose the Internet based on what is fun and useful and speedy and the best thing that US tech could do right now is you know clean its own act up and tell its own story better so that people are going to want to see going to want to choose to use products that are made here or elsewhere as opposed to Chinese products and the fact is China's internet right now is awesome like there's so much happening there's so many apps that are amazing the online experience is amazing and this the whole vibrancy of this market is lost in the in the u.s. conversation about this so so I think going forward US and allies really need to work on providing a alternative that people want to use yeah very much agree with Robin Emily just said I in terms of economic I think we need to have a meet and compete we have great products we have better products our system of business is underwritten by laws that the international community agree with so an investment in a partnership with us is one that is dependable for you should you have challenges down the road I just think that we need to deploy that but I also think we need to think and you know innovatively here about how we want to protect our market advantage and for those you know as Rob said earlier China goes into into new areas and does you know wonderful things such as offering scholarships and work with the community that they also do bribes there they also work in the various ways and they work outside the norms to maintain a foothold and then to exploit a competitive advantage and I think that needs to be called out through tariffs and subsidies and in import quotas and whatever it's going to take to to to address that so as we are deploying our products and our and enabling the reach of our economic reach I think likewise we have to be attuned to to where China exercises things that fall outside you know international norms and clearly in violation of the way in which we would like all nations including ourselves to behave and we need to put pressure on that I also would ask that that we I think another area that we need and this is tangential to extending the reach the economic reach of the West is we need to go back and look at the the political how cyber in this this this environment has enabled new forms of political power and I don't think we in the West have done a very good job of challenging as a way of policy if you will political warfare in the sense that you know there's a lot that we could be doing to market our capabilities to identify and make known where there are rules breakers where and and to provide feedback to countries that don't that that block that so so that you know in addition to extending the reach of the economic arm we are also using the political arm to help create expectations of behavior and use that as a way to put pressure for those that seek to mainly China and others that seek to do something that I think it deserves the the global community Thanks I would like to add one serious deficiency with the Chinese internet those people can't read our stories which I know you who you very well know um so thank you so much to all the panelists for your comments and I think we'd like to move to the Q&A now please wait for the microphone to get to you and then please identify ourselves before speaking and then ask a question as opposed to making a statement if possible thank you sorry where are the mics actually over there okay I'm sorry uh this this woman in red please that's a good idea to wear red to a panel thank you very much Mariam back from inside cyber security my question is for the retired lieutenant general there's a couple not a preamble but just a couple of notes so you mentioned the defensive position you inherently defensive position we find ourselves and given the sort of intangible nature of the cyber realm and then you also mentioned that our fate is sort of tied to the practices of private industry I wonder how you feel about requiring private companies to institute best those cyber best practices versus like voluntary you know best having having it be on a voluntary basis actually crafting regulations for patching or other sorts of best practices like that and let me assure him saying the question the idea would that we would raise the standards of performance to me baseline cyber security requirements [Music] yes you use a tricky word standard because that standard is sometimes seen as something that people can do but shouldn't don't have to do I'm speaking specifically about regulations but if you're saying that regulations might equal a raising of the standard that would be noteworthy yeah I let me start it and Rob if I could ask you to help me with this I you know I think I understand which is look I do think there needs to be standards and I do think that we need to as part of our if anything not to bring greater assurances to the the trust envelope that I think is often lacking and I think to the extent that we can promote that with partners and allies and in the international community and and in partnership with the business community in the and and the various verticals that are already in the space I think that's a good thing I think that would be that's a that's an example of where I think we can lead that's the sort of thing that I think is exactly what you do I think there's a leadership component to that and well I think one place to start there's been a number of stories in the last few months about how the Chinese have gotten virtually all of the data and plans and IP for major weapon systems including submarines and fighter jets and they got them not from the OEMs but they got them from the suppliers and I read something I'm not going to get the number right but a significant share of DoD suppliers are not using state-of-the-art cyber security practices and why DoD allows this to happen I maybe there are reasons for that but you got to me if I was running DoD I'd say you got you know six months to fix it or else and we're gonna buy from some other supplier I mean these are pretty vulnerable systems and it's not rocket science I mean you can make systems that are pretty secure or you can do stupid things like have your password be password on that point there was a GAO report that came out in October of 18 that said that it found that DoD's weapon system acquisition program for future weapon systems about a 1.7 trillion dollar portfolio let's Dean buy them to be a significant rest two cyber threats and the reason it was for years and decades services who state make the requirements and and manufacture in an our Dean Rd T and II worked and the part of of businesses were not failed to heed the warning and to and to bake in those requirements and so today if you're to believe the report and I think there's I think DoD would would respond that it's not exactly that bad but somewhere in the middle if you were to look at that and you say well why is it because we just didn't have stated centers in the acquisition process process that you must build to and they can't they can't be debated you either do it or you don't do it and if you don't do it you don't get the contract we don't have those sorts of things in place and and I'm confident will redress all the problems that were identified in the report but it's going to cost us more than it costs to the current program right now and that's that's that's not right okay can we get the mics to this gentleman in in this block here with the purple shirt Thanks hi my name is dr. Ricardo Malik I'm a Fulbright Scholar coke currently at the Seeger Center Elliot school I'm gonna follow on from what Emily said it right at the end when you're doing the session and talking about the strategic power play between the US and China and the rise of China in that respect I'm writing about this so I'm particularly interesting this so given that if we look at the Chinese perception of the way the world is I mean that's how you're going to be able to really fathom about how they're rising what they're doing why they're blocking everything that we can significantly say that Chinese companies are a strategic threat then and because China's blocking access into their market space especially in the digital realm would we ever be doing that in the West I mean I'm a Brit so I've gotta consider that part but in the US as well and given that that's the case over the last couple of decades but especially in the last 15 years the u.s. particularly has lost a lot of access to future technology resources for example rare earth minerals Afghanistan being one of those which occupy for a long time and it's still doing so sir and the defined in rare earth minerals there to be exploited which the Chinese are actively seeking access to so given that this is a scenario of the next few years in the decades to come and this is a significant power play by the Chinese and this is just one aspect of that to compete in the strategic Rome what are the consequences or the potentially potential likelihood of blocking complete access to Chinese companies in in the US as well will that actually occur or not because you're not going to get it the other way that make sense well look it's a little bit like somebody's punching me in the face and you say jeez if I punch you in the face I've started the fight I mean you look at for example and I'm gonna get the name of the company wrong but it's the the semiconductor comes it's basically a DRAM company and memory company in China has bankrolled completely by the Chinese integrated circuit fund a hundred billion dollar fund got about three you're talking about chin-hua chin-hua Fujian Jinhua thank you so they got like three billion or three and a half billion dollars to build this ginormous DRAM Factory and the way they were the way they got their technology was they stole it they they bribed people who in in Taiwan to steal micron technology luckily they were caught and the Trump administration did this very clever thing it was like one of the best things they've had done in my view in this space is they basically cut off their ability to buy the equipment that you need to make these things these chips which because we have we have enough that's an area where we do have enough market power we can do that and and the company announced two weeks ago they were going bankrupt it was gonna go bankrupt and closed in April's like I mean quote I had in the paper was it proves that crime doesn't pay so when in my view when the Chinese when you have pretty clear evidence that the Chinese are doing that we should we should block our markets when you have clearance there's a case in the paper last week about a company I don't remember their name would they make essentially push-to-talk radios that the police use and other first responders pretty clear evidence that they stole that technology from Motorola and we blocked sort of the phone we blocked like the 2.0 phone that stole it but we're letting in the 3.0 phone I mean it's like look in my view if you if it's pretty clear evidence you know beyond the preponderance of a doubt that you have stolen American technology you should not get access to our markets and eventually the Chinese companies will figure out that there's a price to pay for this kind of behavior this kind of behavior by the way is rampant I mean it's it's not just like an occasional thing somebody would quote today by somebody it doesn't matter that they stole tapi the thing for Teemo the little finger thing sure if that's all it is but it's not it's much much more sophisticated so I I'm not worried about that I think at some point you have to send the Chinese a message that says crime does not pay and and you're gonna have to pay the price for it and the Europeans and the Japanese to me have to align with us to do that as well um just clarify sir are you also talking about you know would the u.s. block Chinese companies from like coming into the US and selling their products there was that also part of your question because if so I just wanted to say that I think we have seen that in some cases with sophia's the Committee on foreign investment in the US where they've moved to block certain attempts by Chinese entities to expand their business operations here due to national security reasons and one of those companies is certainly a key player in this digital Silk Road which is ant financial you know part of Alibaba when they tried to buy MoneyGram that transaction was stopped due to these types of concerns so I mean it wasn't the type of blocking of market access that I think we're seeing China engage in but it was I guess the u.s. form of that sorry well we'll go can we go to this gentleman and the very friend here something that I thought I heard Robert say 15 minutes ago which i think was all trade is a zero-sum game I want to start from a sustainability goals perspective of you know progress for the human lot as far as I'm concerned all progress for the human lot from the sort of bottom up it's potentially win-win so I've studied Bangladesh up in over there 15 times and if for example women who forty years ago had no life because they were dying at 35 because the health was so bad and everything are you know now surviving to 65 and then building last mile health from village up that's a win-win-win for everyone so III think there's a really big problem that if you looked only at GDPs you're not looking at education or you're not looking at intergenerational things which multiply value which are relevant to all the sustainability goals at their deepest and that's that's the thing I'd like some clarity on because it seems to me if we only look at things from the top down and say everything is a zero-sum game then okay you know we're never going to achieve any sustainability progress and no one is going to trust anyone who uses only those models well just to be clear I didn't say everything is a zero-sum game I said global competition and technology industries is largely a zero-sum game nor do I believe that the sort of Silk Road digital Silk Road efforts are you know probably pretty good I mean these countries need these technologies and then and and and the Chinese are providing them my complaint with the Chinese is not really about digital Silk Road it's about this set of unfair mercantilist practices that underlie that or underpin that I will say one last thing on sustainability if you look at the UN's 2020 to sustainable development goals growing GDP and productivity is not one of them I'll tell you the most important thing for somebody in India it's more money you know Indian GDP per capita is abysmal it's super super low it's about 12% of 13% of u.s. GDP the single most important thing we could do to help India we need to help them to grow their GDP so I think it's I get that there are other things that are also important but sort of dismissing GDP growth when you're super poor I think is just consigning people to poverty so I actually would argue that GDP growth is probably the most important thing we do in the emerging markets to help them get a better life okay so we're coming up on the last sort of 10 to 15 minutes so maybe we can take three questions at once and then the panelists can sort of respond that way so how about this gentleman here this gentleman here and oh no there's so many more people and I guess this gentleman here in the purple tie I'm trying to like geographically distributed I think I would like to thank all the panelists for all your insights two very short questions one is to follow up on case earlier remark on cepheus which is both in the syph expansion and then last year's and the e use position to come up with a framework for investments screening both mentioned that national security grounds for blocking or reviewing certain transactions emergencies acquisitions my question is in the age when conventional manufacturing is increasingly integrated into the digital space how do we define national security and is our governments at best agents to actually define and make this definition instead of leaving it to the market to sort out and the second question is I think earlier last month Deutsche Telekom come out with a paper basically cautioning governments in Europe that disallowing and banning while we equipment from the 5g network in Europe is going to severely hinder the ability of a European company to roll out 5g technologies across a continent and in turn would hinder the progress of digital technology on the entire continent so my question is if you know we have decided collectively that Huawei is such a security sweat as threat that we we are bending it from the whole market what other alternatives you know should government's take the lead and how should it be done is it a government driven effort or should it be public-private partnership or something like that okay thanks and then the the second question oh right sorry can you have a microphone here gallon here sorry thank you for choosing me even though I'm wearing all black today but my name is Michael R Mayo and I run a market risk analysis firm and my question in the commercial sense dovetails and two comments one that I've heard from general Mayville and one that I heard from dr. Atkinson with respect to some systemic issues that US and European companies run into and selling their wares in the digital Silk Road area for example dealing with companies who euphemistically say well US companies don't want to sell to us which basically means they don't want to pay underneath the table so most US executives don't want to go to jail for violating Foreign Corrupt Practices Act certain number of European companies most companies have an equivalent the British do I know so with that being said you have then dr. atkinson's comment about taking Chinese companies to the WTO with the current administration's disdain for the WTO as exemplified by for example not even wanting to name judges to the Appellate Division what wood panels take beyond dealing with these systemic issues and the current political environment for us to be able to represent companies in that area thank you okay thanks and the third question please thank you thank you and thank you for calling on bipartisan purple on State of the Union Day I'm bill Harriman from the University of Pennsylvania I was wondering if we could talk a moment about China's Silk Road etc in in Venezuela it seems like this is a place where we're going to have some of the these practices move from theory to problems really quickly I'd just be interested in insights on that thank you those are all great questions maybe Emily can I start with you and if you if there's one you want to respond to or we can throw it to thee so well so the first question is about should countries be in charge of determining national security priorities or should that be left to the private sector and I think sort of inherently given its national security it would have to be determined by the government but I'm sure companies would love it if that weren't the case because they could probably make a lot more money and yeah anything else want to add on that I'll just say briefly um you know do I think government's do a good job of abusing the term national security absolutely China does it the United States has done it but in terms of leaving it to the market I'll come back to an earlier point I made earlier which is people including and particularly me are really stupid and we all when it comes to tech make lazy decisions and often act against our best interests particularly our security and privacy interests so as imperfect as it is I don't I don't see market as the best mediator of security because we've seen all the time that people make very very poor decisions but of course government's going to be used national security and and that's something that is a really key issue for both sides here and then we the two other main questions are about the WTO and Venezuela so did either of you want to respond to those so I can do the WTO I don't know anything about Venezuela I think I don't think the administration is as down on the WTO as you might think I mean Dennis Shea is the US ambassador the WTO is doing a really excellent job like Heiser signed on at least one case as part of the I think maybe two couple so I wouldn't say it's not an avenue in our view it should be a stronger Avenue and I think I think the administration should push along with our European allies for serious WTO reform the administration is right that the WTO really doesn't work right there's a really good paper by Mark Wu who used to be at USTR and now is Harvard Business School I have a heart block on the failure of the WTO when it comes to China I think he's absolutely right but you don't want to throw away the bathwater I don't know enough about about Foreign Corrupt Practices law to say whether that could be something under the WTO jurisdiction if you were to reform the WTO it's an intriguing idea that I think we all look at but I will say that you know we are competing with one hand tied behind our back when one other when our competitors can put a big bribe under the table a lot easier for them to get the contract than us and you know I don't know what to do about that but I think it's naive for us to say we're going to be the beacon of light and goodness and enough somehow that's going to accrue to our commercial advantage there are lots of cases where it's not going to accrue it's going to accrue to our competitors you don't have to live by those rules so whether you can figure out a way to get more of a global regime on the head and get these countries part of it I don't know I don't know the answer to that but it seems like an area we should move forward on did you want to talk about Venezuela I'll try because it's a great question it's it happening in our backyard right now and we have been for too long knowing this these these issues and in particular Venezuela so here's it let me be a little bit of a futurist with with where I think we could be going as a government so let's think about the human catastrophe that is Venezuela we will no doubt we should lead the effort to address and redress the humanitarian crisis that that is there now but then on the heels of that why don't we looking at the development differently instead of it in the way that I remember it when my days in Iraq and Afghanistan why aren't we looking at how we can partner with industry to promote local entrepreneur ISM why aren't we exploring ways in which we could for example create fiat base global chains tokenize things locally there's ways to do that you get an anchor bank you get a you you get a blockchain online banking system you deploy it the way you would deploy the way you say USAID would deploy aid you think about it strategically but now what you're trying to do is to foster an intimate auriol spirit and you empower that by extending this technology I stretched a little bit but that's the sort of creative things that I think we we have to think about deploying in the future so I it's it's like clumsily address Venezuela but I I tried on Sofia so I absolutely believe it is the role and responsibility of government to to be a leader here I think no other force can do that and I think this is precisely what government is supposed to be doing I do accept however the observation that today the technology moves too fast for policy to govern and that it's very very difficult to assess the risk forward but none of those two reasons aren't justification to find some alternative system and I think we are caught flat-footed here I think there are new partnerships there's a way to inform that process but I think it's absolutely something that government should do thanks in just one last quick super quick thing on Venezuela I assume that you may have been referring to the blockbuster Reuters report last year about how ZTE was working with Venezuela to track its own citizens and that really is such a fantastic story that if you're interested in this issue you know you've probably read it or if you haven't I would recommend it and I was heartened to see that there were requests from senators here for the u.s. government to probe that issue because I think as you pointed out that really is sort of an example of some of the worst fears that people have about China exporting this model of digitization around the world so thank you for flagging that and thank you everyone for coming to this event and I hope you have a great lunch and I release you thanks bye [Applause] [Music]

Channel: Center for Strategic & International Studies

Views: 19,466

Rating: 4.0456853 out of 5

Keywords: Tags, go, here!

Id: k51nXmGnhfs

Length: 113min 45sec (6825 seconds)

Published: Tue Feb 05 2019