Calculating the cost (and benefit) of collaborating with China on innovation
The meeting came after months of escalating media coverage about Chinese hacking of US companies. But much of this reporting exposes the lack of clarity and real evidence on the issue. Would the time have been better spent discussing how to push forward collaboration on some of the massive challenges both countries face?
When asked by a journalist on Friday about China's role in hacking, Xi said that increasing news coverage of hacking "might give people the sense or feeling that cybersecurity as a threat mainly comes from China". This perception is strengthened by statistics about the cost of IP theft, which have sometimes been used rather loosely in both media and government reports. Last week both the New York Times and the BBC quoted the US Commission on the Theft of American Intellectual Property which said in May 2013 that "technology theft amounted to a loss of more than $300 billion a year". Both of these articles seemed to imply that China is responsible for the entirety of this $300bn annual loss.
But it turns out that the Commission got this figure from the head of the National Security Agency, who was in turn quoting an 11 year old report from the Office of the National Counterintelligence Executive. What the original report actually said was: "Calculating US losses from the technology outflow is difficult. Private estimates put the combined costs of foreign and domestic economic espionage, including the theft of intellectual property, as high as $300 billion per year and rising".
Similarly, a report by the security consultancy Detica for the Cabinet Office in 2011 estimated the cost to the UK of IP theft from all sources at £9.2bn/year. This report subsequently received much criticism from cyber security experts for its methodology and exaggeration. The truth is that when it comes to estimating the costs of Chinese IP theft, as Professor Paul Cornish of the University of Exeter argues "the evidence is at its most incomplete and flawed and the debate at its most speculative and contentious".
It's easy to fall back on the adage that there's no smoke without fire. But if we're going to have a reasoned discussion with China about IP theft then we need a much better evidence base. We need to better understand, not hype the risks coming from China, and spend a bit more time clarifying the opportunities for collaboration that China's growth presents, and how we can make the most of them.