Tag Archives: Cisco

NSA Files and US Firms in China

CIsco UCS.  Imge from wikipedia

Foreign  companies love to complain about doing business in China. The rules of the game are rigged against them, they grouse, the locals are corrupt and the government is always turning the thumbscrews on them. Amid such moans it is worth remembering that, for all the barriers that foreign multinationals face in China, it has welcomed them with open arms compared with the protectionism imposed by Japan and South Korea at comparable stages in their economic development. Nevertheless, the recent spate of high-profile crackdowns on international firms, and people associated with them, has prompted worries about a generalised anti-foreigner backlash.

This week police in Shanghai formally arrested a British fraud investigator, Peter Humphrey, whom they had detained for six weeks as part of an inquiry into alleged bribery of doctors by foreign drug firms, along with his wife, also an investigator. Mr Humphrey had done work for GlaxoSmithKline (GSK), a British drugs firm, four of whose Chinese managers were arrested last month. Since these arrests other foreign drugmakers have come under investigation, including Sanofi and Eli Lilly.

Now foreign technology firms are worried that they may be next. Chinese nationalists were outraged when Huawei, a local telecoms-equipment giant, was blacklisted last year by American politicians on unsubstantiated allegations of spying. But they grew apoplectic when Edward Snowden earlier this year revealed the extent of American spying on China. Official media outlets have since been calling for the expulsion of Cisco and other leading American technology firms, dubbed the “eight guardian warriors”….

As for the foreign technology firms, and the fear that a nationalist backlash will drive them away, it is true that some in officialdom and in the online Weibo-sphere are eager to see their departure. And there is some evidence of such firms losing a contract here or there. However, it will be bizarre if China were to chase away these firms in the same way that America has seen off Huawei. American technology firms are the world’s best. America does not need Chinese technology, whereas China most certainly needs access to American inventions.

Excerpt, Multinationals in China Guardian warriors and golden eggs, Economist, Aug. 24, 2013, at 59

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“At the end of June, the state-backed China Economic Weekly ran a cover story calling eight US companies – Cisco, IBM, Google, Qualcomm, Intel, Apple, Oracle and Microsoft – “guardian warriors” that had “seamlessly penetrated” Chinese society. The Weekly called Cisco “the most horrible”, given its significant – more than 50% – market share in China’s information infrastructure in financial, military, government and transportation sectors. The magazine also ran a long list of ‘the Eight’s’ projects within China, including Cisco’s upgrades of the People’s Bank of China’s Intranet, IBM’s facilitation in building the Yunnan province police bureau’s database, and Microsoft’s improvements to China Eastern Air’s information technology”. Excerpt from http://rhg.com/notes/eight-guardian-warriors-prism-and-its-implications-for-us-businesses-in-china-2

Global Online Freedom Law, how states and tech companies restrict internet freedom

In May and June [2011] human-rights lawyers in America filed two suits alleging that executives at Cisco Systems, a California-based tech firm, sold China’s government equipment customised to help track dissenters online. Only one of the plaintiffs is an American citizen; more than a dozen are Chinese. Cisco denies all wrongdoing.

Such jurisdictional jiggery-pokery is made possible in part by the Alien Tort Claims Act (ATCA), which lets foreigners bring alleged violations of international law before American courts. Oil companies, mining firms and banks have all been subject to ATCA litigation since the ancient law was unburied in the 1980s. But only in recent years has the act been used to target tech firms whose products, or user data, might have been used to trap activists. In the best-known case, in 2007, Yahoo! reached a settlement with representatives of two Chinese democracy campaigners who said the firm had given authorities information that had led to their arrest. Daniel Ward, a lawyer leading one of the suits against Cisco, thinks that similar cases could be brought against other firms.

The issue is getting hotter as Sino-American internet business expands, in both directions. American tech firms covet China’s huge market. On July 4th Microsoft confirmed that its Bing search engine will soon be powering English-language results for local users of Baidu, China’s censored search giant. Even firms with more modest horizons may find themselves dealing with regimes that closely control the internet. More and more governments are moving to restrict the flow of information online, according to Freedom House, a lobby group.

Meanwhile, the global reach of China’s own internet firms, many of them listed on American stock exchanges, is drawing legal challenges. Campaigners in New York have started a suit against Baidu, saying its censored search results violate their constitutional rights. The plaintiffs’ lawyer, Stephen Preziosi, insists the case be heard in an American court—Baidu sells advertising to American firms and aggressively protects its American trademark, he says.

Still, suits against Cisco or other high-tech players face an uncertain legal path. Last year an appeals court hearing another ATCA case said the statute could not be used to prosecute firms, creating a division among judges that only the Supreme Court can settle. Lawyers retort that even if ATCA use against firms is curbed, individual executives could still be targeted.

Some American politicians think clearer legislation would help. One long-mooted bill, the Global Online Freedom Act, would make the government keep a list of internet-restricting states. Under its latest revision, advanced in April by Chris Smith, a Republican congressman, firms would need to seek the approval of American authorities before passing user information to one of these regimes [or should it be to any regime?]; search engines would have to reveal details of any content they are asked to block. Export controls on web-blocking technologies would also be reviewed.

The bill has struggled to gain support since it was floated in 2006. But it could be helpful to American firms, argues Cindy Cohn of the Electronic Frontier Foundation, a lobby group, because clear legislation at home would give ammunition to executives negotiating business terms with foreign authorities. “They could all point to the same rules,” she says.

Internet freedom: Tort and technology, Economist, July 23, 2011, at 57