Tags: China | Russia | US | trade

US-China Spy War Becoming a Trade War, Too

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Wednesday, 28 May 2014 08:49 AM Current | Bio | Archive

The Obama administration's ability to make a bad situation worse never ceases to amaze me. Barely a year after Edward Snowden exposed the National Security Agency (NSA)'s quest to end privacy rights, Attorney General Eric Holder attacked China for commercial spying.

I don't doubt that the five Chinese army officers indicted last week spied on U.S. companies. What I doubt is the administration's ability to protect American interests without provoking an even more harmful reaction. Obama and Holder are starting another fight they can't win.

As the administration's own experts no doubt warned, China wasted no time retaliating for the indictments. The Financial Times reported over the weekend that Beijing had forbidden government agencies from buying Microsoft's Windows 8 software and ordered state-owned enterprises to stop employing U.S. consulting firms like McKinsey.

Monday brought news that Chinese banking authorities are asking banks to remove IBM server hardware and replace it with locally made equipment. The People's Bank of China said relying on U.S. gear could "potentially compromise the nation's financial security," according to Bloomberg.

More such moves are coming. China's Ministry of Finance is considering a separate plan that would stop foreign accounting firms from working with mainland Chinese companies unless they have a local "partner."

Would the Chinese government have done some of this anyway? Probably, but Holder still handed Beijing a golden propaganda opportunity. The rest of the world once again sees the U.S. government's top attorney as a hypocrite, attacking China for the same acts he justifies when the NSA is behind them.

My prediction last week that U.S. Tech Stocks are Toast is coming true even faster than expected. Faced with photographic proof the NSA was tampering with his company's products, Cisco Systems CEO John Chambers sent the president an open letter saying, "We simply cannot operate this way."

Chambers is right. Cisco's global growth plan just went up in smoke and the rest of his industry is not far behind. Chinese companies can make networking gear just as capable as Cisco's, and that is increasingly what they will do.

Worse, the same week all this happened, Chinese President Xi Jinping and Russian President Vladimir Putin signed a huge 30-year gas supply deal worth $400 billion. Russia now has a new customer to replace sanction-happy Europe, while China will buy less U.S. and Canadian fuel.

Lost in the energy news were other equally important trade agreements. China will invest some of its enormous currency reserves in Russian industry and infrastructure projects, while Russia will help China develop sophisticated military hardware.

Just to make sure no one misses the point, the Russian and Chinese navies held joint maneuvers in the Pacific. The U.S. Navy still reigns supreme, but the competition is learning.

This is how trade wars begin. We may look back at 2014 as the year Obama launched this one. Future historians will describe how painfully it ends.

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PatrickWatson
The Obama administration's ability to make a bad situation worse never ceases to amaze me. Barely a year after Edward Snowden exposed the National Security Agency (NSA)'s quest to end privacy rights, Attorney General Eric Holder attacked China for commercial spying.
China, Russia, US, trade
482
2014-49-28
Wednesday, 28 May 2014 08:49 AM
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