YOMIURI SHIMBUN

Take 5: How Nations Protect High-Tech Assets

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Vital viral protection
Anna Akage

It's part trade war, part cyber defense — and the rumblings of conflict grow louder as countries (and companies alike) maneuver to protect their high-tech assets. Prime Minister Shinzo Abe recently announced that Japan would tighten export controls for advanced technologies in response to new U.S. trade restrictions aimed at China, writes the Yomiuri Shimbun daily. Both business interests and geopolitics are setting off such chain reactions; for while most Western economists tend to side with the free market, politicians increasingly see the issue as a reason to protect national interests — and put virtual firewalls.

One of the most closely watched cases to spark national security concerns in the U.S., and afterward in several countries in the EU, was the case of Huawei. In 2012, a U.S. congressional committee warned that Chinese telecom giant, together with ZTE, another leading Chinese company, could pose a security threat as the hardware and mobile infrastructure equipment can be used for spying for the Chinese government. The companies denied all allegations, but in 2018 the U.S. passed a bill restricting government bodies from doing business with Huawei, ZTE and several Chinese companies due to security concerns.

U.S. government officials have said that China could order its manufacturers to create backdoors for spying inside their devices. The evolving showdown has also included the high-profile arrest in Canada of Meng Wanzhou, Huawei's Chief Financial Officer and daughter of the company's founder. But the bigger questions go beyond any single case, as nations ask how (and how far to go) to protect sensitive technology beyond its own borders. Here's how the issue looks in five countries around the world:

CHINA

The stakes: In just a generation, China's economy has gone from being driven by gluing sneakers to competing for the most advanced technological innovations. Jeanine Daou, a tax specialist at PwC, put it this way, in an interview with Nikkei Asian Review: "China ... appears to be implementing a longer-term strategy that recognizes its competitive advantage in manufacturing, while building towards competing for control over the real value in the modern supply chain — intellectual property."

Photo: Rishi Deep

Current security measures:

  • The export of military items is exclusively allowed for state-authorized trading companies, and dual-use items can only be exported by companies in possession of an export control license.
  • According to the new protocols, a foreign-manufactured item can be subject to Chinese export control if the content of that item is of controlled Chinese origin. Yet, the same protocols already run in the U.S. and China seems to be following a good example.

Takeaway: The country is now set to introduce a new Export Control Law, following the first draft released in 2017. The new law will block the transfer of controlled items from China to a foreign country or region, which includes Hong Kong, Macao and Taiwan. The analysis of the draft suggests that the new law will strengthen the government's authority to regulate the export of military, nuclear, biological, chemical and dual-use items.


U.S.

The stakes: China's technological ambitions have run head-on into President Donald Trump's protectionism. When making the list of "emerging technologies' the Commerce Department's Bureau of Industry and Security listed those related to sectors identified in the Made in China 2025 strategy. Also in February, Trump called artificial intelligence potential of "paramount importance to maintaining the economic and national security" and launched the American Artificial Intelligence Initiative. Still, the leading U.S.-based developers in robotics, biotechnology and AI, are powerful multinational private companies that benefit from open global trade.

China-U.S. trade talks on Feb. 21 — Photo: White House/Tia Dufour

Key security measures:

  • The U.S. Commerce Department restricts the release of sensitive technologies outside the country or by the non-U.S. persons, including those within the corporation.
  • New Export Control Reform Act was signed to impose export controls on emerging technologies, such as biotechnology, AI, position, navigation, and timing technology, microprocessor technology, advanced computing technology, data analytics technology, robotics and many-many others.

Takeaway: The Information Technology and Innovation Foundation (ITIF) warns in a recent report that the U.S. government that new restrictions would harm the country's interest. Additionally, it can also slow product development processes and limit the ability of U.S. companies to attract international talent. ITIF also counted the damage: U.S. firms could lose $14.1 to $56.3 billion in export sales over five years, with missed export opportunities threatening 18,000 to 74,000 jobs.


SWITZERLAND

The stakes: With its export and finance-driven economy and tradition of neutrality, Switzerland has a vital interest in preventing protectionist trade measures and limiting cyber theft. Pointedly, last year, the Swiss government launched a World Trade Organization's dispute against import adjustment measures imposed by the United States, which is ongoing.

Key security measures:

  • Export controls of industrial dual-use products and specific military goods are regulated by a set of international agreements such as the Wassenaar Arrangement.
  • According to the latest WTO report, Switzerland has no specific anti-dumping, countervailing or safeguard legislation, and have never applied such measures.
  • The list of goods subject to import prohibitions is relatively limited: endangered species, nuclear, chemical, and biological weapons, certain toxic and environmentally hazardous chemical substances, certain carbon-zinc batteries and (very suddenly!) potatoes and potato plants from non-European countries.

Takeaway: Switzerland is working on establishing an international institute on cybersecurity. It aims to promote positive and responsible behavior in cyberspace, in particular by furthering compliance with international laws and rules.


RUSSIA

The stakes: Russia's IT market has grown into one of the world's largest, with activities in artificial intelligence, internet of things, virtual reality, telemedicine, according to the International Trade Administration. The country's overall economy has begun to recover from a long slump in part on demand for IT services, with Russian developers able to compete largely based on lower costs. Its fastest-growing segments are hosting, software maintenance and administration, consulting, software customization and information security services. In 2007 Russian President Vladimir Putin announced that the development of industries that have become an important part of the innovation economy will be carried out on the basis of public corporations. By creating the appropriate institutions and defining a web for developing advanced technologies, the country committed to a strategy of competing for advanced technologies in the open market.

Photo: David Werbrouck

Current security measures: Insignificant.

Takeaway: Russia is currently more concerned with fighting sanctions than restricting its own exports. Yet the country is closely watching Chinese and American moves on the matter, and no doubt ready to react.


UK

The stakes: "If you trade any goods or services with the EU you'll need to get ready for Brexit..." Such is the warning written on the official website of the UK government. The withdrawal deadline is Oct. 31 and the possibility of a no-deal is very much alive.

Key security measures:

  • In 2018, sanctions regimes were strengthened, with further restrictions on dual-use items (goods which have both a civilian and military use) to Myanmar, and renewed sanctions on Russia.
  • UK government also took measures to ensure that export controls will continue to work after the UK leaves the European Union. Those include the Dual-Use Items and Firearms etc Regulations and the Export Control Regulations, both adopted at the beginning of 2019.

Takeaway: In July 2018, then Prime Minister Theresa May introduced The National Security and Investment White Paper, proposing that any trade deal which raises potential national security concerns, regardless of its size, should notify the government. The office of Boris Johnson will have to decide the fate of the white paper. But his move to liberalize the immigration regime for overseas students was seen by many as a sign of a more open economy even if Brexit goes bad, the Financial Times writes.

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Green

In Argentina, A Visit To World's Highest Solar Energy Park

With loans and solar panels from China, the massive solar park has been opened a year and is already powering the surrounding areas. Now the Chinese supplier is pushing for an expansion.

960,000 solar panels have been installed at the Cauchari park

Silvia Naishtat

CAUCHARI — Driving across the border with Chile into the northwest Argentine department of Susques, you may spot what looks like a black mass in the distance. Arriving at a 4,000-meter altitude in the municipality of Cauchari, what comes into view instead is an assembly of 960,000 solar panels. It is the world's highest photovoltaic (PV) park, which is also the second biggest solar energy facility in Latin America, after Mexico's Aguascalientes plant.

Spread over 800 hectares in an arid landscape, the Cauchari park has been operating for a year, and has so far turned sunshine into 315 megawatts of electricity, enough to power the local provincial capital of Jujuy through the national grid.


It has also generated some $50 million for the province, which Governor Gerardo Morales has allocated to building 239 schools.

Abundant sunshine, low temperatures

The physicist Martín Albornoz says Cauchari, which means "link to the sun," is exposed to the best solar radiation anywhere. The area has 260 days of sunshine, with no smog and relatively low temperatures, which helps keep the panels in optimal conditions.

Its construction began with a loan of more than $331 million from China's Eximbank, which allowed the purchase of panels made in Shanghai. They arrived in Buenos Aires in 2,500 containers and were later trucked a considerable distance to the site in Cauchari . This was a titanic project that required 1,200 builders and 10-ton cranes, but will save some 780,000 tons of CO2 emissions a year.

It is now run by 60 technicians. Its panels, with a 25-year guarantee, follow the sun's path and are cleaned twice a year. The plant is expected to have a service life of 40 years. Its choice of location was based on power lines traced in the 1990s to export power to Chile, now fed by the park.

Chinese engineers working in an office at the Cauchari park

Xinhua/ZUMA

Chinese want to expand

The plant belongs to the public-sector firm Jemse (Jujuy Energía y Minería), created in 2011 by the province's then governor Eduardo Fellner. Jemse's president, Felipe Albornoz, says that once Chinese credits are repaid in 20 years, Cauchari will earn the province $600 million.

The Argentine Energy ministry must now decide on the park's proposed expansion. The Chinese would pay in $200 million, which will help install 400,000 additional panels and generate enough power for the entire province of Jujuy.

The park's CEO, Guillermo Hoerth, observes that state policies are key to turning Jujuy into a green province. "We must change the production model. The world is rapidly cutting fossil fuel emissions. This is a great opportunity," Hoerth says.

The province's energy chief, Mario Pizarro, says in turn that Susques and three other provincial districts are already self-sufficient with clean energy, and three other districts would soon follow.

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