Friday, 7 June 2013

Can you be too open?

Often on this blog you will read of our firm commitment to Ricardian trade principles. In effect, all trade is good and the more open the borders the better for you, with little truck for protectionism. The immortal phrase was put well by the economist Bastiat:

that others throw rocks in their harbours is no reason for us to throw rocks in our own

However, a long history of trade can show this to be an imperfect view of the world. There are many ways to manipulate trade beyond pure trade barriers of old. The one that has me and most of the spooks in the US worried of late is the emergence of cybertheft. China is the undoubted king of this, with it being allegedly officially sanctioned and backed the the People's Army.

President Xi Ping is meeting with President Obama in California today (so they are not Bildebergers eh!) and this is one of the top concerns of the US, the pure theft of IP and the huge amount of cyber attacks on US firms. Given that Western Countries are increasingly relying on service industries that generate IP over physical manufacturing this theft is critical.

Yet in the UK we are remarkably unmoved by the new cyber threat. The case in point has hit the news again today in the case of Huawei. This is a Chinese telecoms firm which again the US bans from working in the Country due to its strong ties to cyberwarfare. Whereas in the UK, we have allowed Huawei to deal with BT and expand as a major telecoms provider.

Of course, the arguments trotted out are that we should be open to business from China. but there is business and there is spying and the line for Huawei is compromised. Huawei has grown to become the second largest telecoms firm in the world and its integration into our key national infrastructure is now too late to reverse. But really at the time it should have been crossed off the tender list, it is no as if there are not a myriad of other suppliers that could have been used. Huwawei offered good prices, offers of jobs etc, clearly buying its way to the work; questions should have been raised.

It's a challenge which I can see the UK and Europe failing in, which is a shame as we are trying so hard to build an IP based economy. And you just thought we were bad a bank regulation!

17 comments:

Jan said...

If I were a terrorist (I'm not I hasten to add)or a superpower wanting to engage in cyberwarfare (IT is not my strong point)I would look to infiltrate the power network and switch it off. That would cripple us good and proper without a shot being fired.

Graeme said...

Perhaps wetsern firm might not find it such a good idea to outsource their IT development (and therefore de facto IP) to China .. ah well 10/15 years too late. But at least the CTO's bonus got paid ...

Blue Eyes said...

I don't buy this excitement over Huawei at all. Let's say that we banned them from operating because of the supposed threat. Do we think that someone else wouldn't be able to supply gear that had the same potential flaws? There is nothing to stop a determined snooper/hacker/terrorist/rogue state/whatever putting back doors into good quality patriotic British telecoms kit.

SumoKing said...

I think when number 10 is as close to Google as it is possible to be and where we have an IP office openly hostile to the protection of IP and where copyright was broadly abolished back in May then it's easy to see why the UK is not overly fussed by the Chinese nicking stuff.

Roger said...

Well, I would say Real Experts on this are very thin on the ground - but here is my 3 penn'th.

Hacking a corporate network for business secrets does not require any knowledge of or backdoors inside telecoms infrastructure routers, just an in-depth knowledge of networks and software.

As for telecoms infrastructure this is where the big money is and Huawei would be very stupid even to try jiggery pokery - too easy to be found out, BT does have a few Real Experts. The US majors compete with Huawei and screaming 'securidy' is the sort of tripe that politicos will swallow when dishing out pork barrel projects.

The problem is assymetry, we have IP and China etc want it. Western IT training and pay focusses on the flim-flam end of the business. China and the Eastern bloc train at the nut n bolts end of the business. To learn computer security in depth (in the West) takes too long and does not pay the mortgage. Until that changes IP will continue to leak.

Budgie said...

Well, it's nice to see you trending in my direction, CU, (I think). If Bastiat said: "that others throw rocks in their harbours ... etc" then he was torturing the English language.

The flaw in nice cuddly global free trade is the same intellectual flaw as in unilateral disarmament: we might sincerely abide by the rules but there is no guarantee that everyone else (or even, anyone else) will.

Global free trade is a nice theory which won't work until there is one world government, one legal system, one culture, no ethnicity, no tribal or regional affiliations and no nations. In other words never in our lifetimes.


ivan said...

I agree with Blue Eyes and Roger most, if not all, of this nonsense from the US looks to be a coverup for the NSA phone details grab and PRISM plus the fact that the NSA couldn't mandate that Huawei put the necessary backdoors in like they can with US firms like Cisco.

Sackerson said...

It's not the cyber warfare that threatens us, I think - two can play at that game - but the IP question, which I touched on in 2007:

http://theylaughedatnoah.blogspot.co.uk/2007/05/china-and-intellectual-property-rights.html

http://theylaughedatnoah.blogspot.co.uk/2007/05/more-on-intellectual-property-rights-in.html

and 2009:

http://broadoakblog.blogspot.co.uk/2009/12/straw-in-wind-reveals-changing.html

If we can't compete on manufacturing costs and can't derive a secure income stream from inventions, we will end up as a producer of organic agricultural products exported to the rising East, a string of gated and guarded fastnesses for wealthy foreign expatriates, and a countrywide museum of our lost glories.

Anonymous said...

You say "we should be open to business from China". But we should be open to business TO China. If we see a threat around every corner, no wonder we are second division when it comes to developing business in these areas.

CityUnslicker said...

Nice comments today...

I don;t buy its all a US fit up though. Because they don't have this problem with Alcatel or Siemens or TCS or Sony etc; so it is only ONE country (OK, North Korea is not trying ot export and nor Iran...)

They even trust Israeli software houses. Plus there is plenty of evidence that they have nicked IP and defence secrets from Lockheed and Boeing.


Anon - Business too China... have you heard of Mulberry per chance? Worrying about security is not a second division issue when our exports are IP based.

Roger said...

Sackerson raises a good point - it's not really about cybersecurity.

Just suppose we did hack another country's national industries etc and grab their secrets - could we make money out of it? Probably not. Which raises a question about the nature of capitalism - normally markets settle into two or three big players and a slew of specialists and minors - pleasant enough if you are a major but we have just made a transition and it is not pleasant - how did that happen?

Then consider successful IP companies like ARM or Rolls Royce, if you were to startup one of these today where would you start? Not to worry though, Rifkind is on the case - which may be a clue......

andrew said...

to point out the obvious, ricardian principles only work as long as
(a) you are bigger than the other side
(b) you cannot wait as long as the other side

solar panels are a perfect example - the Chinese were bigger and prepared to wait longer.

the question is - will they make any money out of doing this, and that depends on barriers to (re) entry and advances in technology

Electro-Kevin said...

A purely free market works where it is not minded that large sections of your own population are impoverished.

They hybrid welfare/free market system we operate within the UK is economically unsustainable as we are finding out.

This is what government, borders, navies, armies are all about. Securing 'unfair' advantage for one's own people.

I'm not sure that very many who visit this blog are beyond needing 'unfair' advantage either.

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i agree with the person who says that "" Hacking a corporate network for business secrets does not require any knowledge of or backdoors inside telecoms infrastructure routers, just an in-depth knowledge of networks and software.

As for telecoms infrastructure this is where the big money is and Huawei would be very stupid even to try jiggery pokery - too easy to be found out, BT does have a few Real Experts. The US majors compete with Huawei and screaming 'securidy' is the sort of tripe that politicos will swallow when dishing out pork barrel projects.

The problem is assymetry, we have IP and China etc want it. Western IT training and pay focusses on the flim-flam end of the business. China and the Eastern bloc train at the nut n bolts end of the business. To learn computer security in depth (in the West) takes too long and does not pay the mortgage. Until that changes IP will continue to leak. ""