from Net Politics and Digital and Cyberspace Policy Program

Cyber Week in Review: November 2, 2018

An employee walks past an engine at the Airbus factory in Tianjin, China, August 12, 2015. Damir Sagolj/Reuters

This week: another indictment against Chinese actors for cyber-enabled theft of intellectual property, a new U.S. government task force to combat Chinese IP theft, the UK wants to tax Google, and internet freedom on the decline. 

November 2, 2018

An employee walks past an engine at the Airbus factory in Tianjin, China, August 12, 2015. Damir Sagolj/Reuters
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Here is a quick round-up of this week’s technology headlines and related stories you may have missed:

1. So about that Obama-Xi no hacking deal. The Department of Justice charged several Chinese individuals with conspiring to steal the intellectual property behind a turbofan engine used in commercial airliners. This is the third indictment that involves attempts to steal IP from U.S. aerospace companies by officers of the Ministry of State Security (MSS), China’s counterintelligence and foreign espionage agency. According to the most recent indictment, hackers associated with the MSS infiltrated the corporate computer systems of an unnamed French manufacturer and American company (suspected to be Safran and General Electric), which co-develop and produce turbofan engines. The MSS officers also groomed employees at the French company, who infected its computers with malware, kept them attuned to the success of hackers’ cyber operations, and tipped them off when law enforcement warned the company of the malware on its systems. China’s only domestically made commercial airliner, the Commercial Aircraft Corporation of China (COMAC) C919, currently uses a Safran-GE turbofan engine—though China is aggressively attempting to develop domestic alternatives.

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2. In related news. A few days after the indictment against the MSS officers was made public, the Department of Justice announced a China Initiative headed by senior FBI and DOJ officials to fight Chinese economic espionage. The initiative will dedicate resources to prosecuting trade-secret theft cases, addressing telecommunications supply-chain threats, identifying influence efforts on university campuses, and countering China’s efforts to “co-opt” researchers in universities, labs, and the defense industry “into transferring technology” to China. The creation of the initiative, along with the imposition of increased tariffs and the recent charges brought against Chinese actors and companies for intellectual property theft, is representative of the aggressive strategy the Donald J. Trump administration has taken towards the threat China poses to U.S. economic and technological interests.

3. The tax man cometh. The UK government announced a plan to impose a 2 percent tax on the UK income of tech and digital service companies that have global revenues exceeding £500 million ($641 million) by 2020. The tax, which will target revenue from online marketplaces, social media platforms, and search engines that operate in the country, is estimated to eventually raise about £400 million ($518 million) a year, according to UK Chancellor of the Exchequer Philip Hammond. Given the global nature of the digital services industry, countries have struggled to effectively collect taxes from giants like Facebook, Google, and others, who use creative accounting to shuffle their profits to low-tax jurisdictions. U.S. tech companies took issue with the UK proposal, with one industry group arguing that the tax would hinder job creation and investment. For its part, the U.S. Treasury Department issued a statement, noting that the challenge of taxing digital services is being studied at the Organization for Economic Cooperation and Development (OECD) and individual states should not "take unilateral action in this area." 

4. These annual reports get increasingly depressing. For the eighth consecutive year, global internet freedom has declined, according to a new report by Freedom House. Of the sixty-five countries studied, twenty-six experienced a decrease in internet freedom and only nineteen saw improvements. The United States was among those that declined, due in part to the repeal of the FCC's net neutrality rules, the spread of online disinformation, and the reauthorization of section 702 of the FISA Amendment Act, which governs the domestic interception of foreigners’ communications but which critics argue has been used to collect data from U.S. persons without a warrant. The decline around the world is attributed to increased government demands to control personal data, the use of “fake news” as a pretext to suppress dissent, and the spread of China’s model of surveillance to other countries. Over half of the countries assessed had participated in trainings offered by Chinese officials on “new media or information management,” and eighteen countries are being provided with AI and facial recognition surveillance systems trained to identify “threats to ‘public order’” by Chinese companies such as Yitu and CloudWalk. In a call with reporters, Michael Abramowitz, president of Freedom House, said that “the clear emergent theme of this report is the growing recognition that the internet, once seen as a liberating technology, is increasingly being used to disrupt democracies as opposed to destabilizing dictatorships.”

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