Obama Gave China’s President Xi a Free Pass on Cyber Theft

Obama Gave China’s President Xi a Free Pass on Cyber Theft

REUTERS/Kacper Pempel/Files

President Obama’s cup runneth over. Not only did Pope Francis give his blessing to the president’s climate crusade, but Chinese President Xi Jinping chimed in, promising to roll out a nationwide cap-and-trade program by 2017.

In return, the nationalistic leader was given a pass on cyber intrusions, China’s military build-up in the South China Sea, its provocative buzzing of U.S. planes, what Human Rights Watch calls “an extraordinary assault on basic human rights and their defenders with a ferocity unseen in recent years,” its strong-arming of U.S. tech companies to make private data available to authorities, and so much more. Given that China’s cyber thefts have cost this country hundreds of billions of dollars and compromised our security, Americans might want reassurance that the deal struck on climate change was worthwhile, and represented real concessions from China’s leadership. No such luck.

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Xi Jinping’s promise to expand regional cap-and-trade efforts -- underway (with modest results) in China since 2013 -- is entirely self-serving. It is similar to last year’s pledge that emissions “might” peak in 2030 – a promise that cost China nothing and that took into account the country’s slowing economy and shift away from manufacturing. The vague promise won Mr. Xi and other Chinese leaders accolades from environmentalists, but in fact was a desperate effort to tamp down outrage at home.

Protests over China’s environmental destruction have increased in number and intensity, sparking alarms from the government’s Institute of Environmental Planning, which reported earlier this year that “There is a huge gap between how fast the environment is being improved and the how fast the public is demanding it to be improved, and environmental problems could easily become a tipping point that leads to social risks.”

In China, “social risks” means threats to the ruling party, and are not to be tolerated. 

Americans cannot imagine China’s air pollution. While most cities in the U.S. are smog-free, you cannot see across the street in Beijing on a bad day and quite frequently, the airport is shut down because of poor visibility. The Guardian reported one day last winter that the “concentration of PM 2.5 particles – those small enough to penetrate deep into the lungs and enter the bloodstream – hit 505 micrograms per cubic meter on Tuesday night. The World Health Organization recommends a safe level of .25.” The Shanghai Academy of Social Sciences has described Beijing’s air as making the city almost "uninhabitable for human beings.” The air in Beijing is so toxic that according to another recent study, breathing it is as damaging as smoking 40 cigarettes a day.

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Not just China’s capital city has a problem. In 2014, only eight of 74 cities monitored by China’s Ministry of Environmental Protection met the government’s air quality standards. More alarming, Chinese scientists have likened the country's air pollution to a nuclear winter, which could slow photosynthesis in plants and damage the country’s agricultural output.  

Within this context, Mr. Xi’s vow to roll out a national marketplace aimed at limiting carbon emissions by 2017 is politically essential; that it also alleviated pressure from President Obama to address other controversies, like cyber theft, was icing on the cake.

Meanwhile, the cap-and-trade plan faces substantial challenges. Overlaying a market-based cap-and-trade program on an economy with substantial non-market features is problematic, as the regional effort has shown. Also, verifying and assessing China’s emissions program will be all but impossible. We know about as much about China’s carbon footprint today as we know about the country’s economic growth – not much.      

Even in the EU, the only region where cap-and-trade has been implemented, the system has failed. The program’s shortcomings were evident from the beginning as governments attempted to lighten the burden on companies and industries by granting widespread exemptions. The failure became undeniable in 2013 when member countries voted down a last-gasp measure aimed at propping up emissions prices, which collapsed.

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Emissions have declined in the EU, as they did in the U.S., mainly because of the recession – not because of the trading scheme. With state-owned enterprises still playing a key role in China’s economy, with the attendant political jousting and inefficiencies, the same competition for exclusions will prevail. Even as it is announced, some sectors of the economy, such as the large transport sector, are not included.

In return for a politically welcome commitment on cap-and-trade, President Obama extracted little of consequence from Mr. Xi on China’s blatant cyber intrusions of U.S. institutions and industries. Mr. Obama announced an agreement that “neither country’s government will conduct or knowingly support cyber-enabled theft of intellectual property, including trade secrets or other confidential business information, with the intent of providing competitive advantages to companies or commercial sectors.”  

This statement contains as many holes as a box of Cheerios. It does not ban state-owned companies from engaging in such activities, and does not address espionage. There is no enforcement mechanism, and no accountability. It would not, for example, have forbidden China’s giant theft of classified and potentially highly damaging information from the Office of Personnel Management. Mr. Xi focused on cybercrime instead, a less important concern to the United States.

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On China’s increasing military aggression, Obama again came up empty. Xi Jinping was unapologetic about the build-up of artificial islands in the South China Sea and flatly denied that the project served any military purpose. Despite Obama pressing the issue, saying that the U.S. wants to “make sure that the rules of the road are upheld” in the region, Mr. Xi didn’t budge an inch, claiming “lawful and legitimate maritime rights” in the disputes area.

Mr. Obama was also stonewalled by his Chinese counterpart on human rights.

Efforts to clean up China’s foul air and water are to be celebrated. The country now produces twice as much carbon emissions as the U.S. How aggressively they tackle the problem will depend on whether unemployment or pollution becomes more threatening to the Communist party. The way forward will be dictated by China’s self-interest, not by lectures from Mr. Obama.