The Complex

EXCLUSIVE: U.S. Manufacturer Wants Commerce Dept. to Penalize China for Cyberattack

A U.S. solar panel manufacturer whose business secrets were allegedly stolen by Chinese computer hackers has asked the U.S. government to investigate the matter, setting in motion a process that could see the United States impose trade penalties for the first time in response to state-sponsored cyber-espionage against an American company.

In a filing with the Commerce Department on Tuesday, July 1, the U.S. subsidiary of German company SolarWorld, which builds solar panels and equipment, asked officials to investigate allegations contained in a recent criminal indictment accusing five members of the People's Liberation Army with hacking the company's computers and stealing proprietary information. Prosecutors say that the hackers took SolarWorld's price lists, product designs, and communications between the company and its lawyers in a series of computer incursions that began in 2012.

"The [government of China's] theft of SolarWorld's trade and financial information has inflicted, and will likely continue to inflict significant and, as yet, unquantified harm on SolarWorld," the company told the Commerce Department. But the hackers weren't just after SolarWorld's product information. They also allegedly stole information about a trade case that SolarWorld has been pressing against Chinese solar panel manufacturers, which it accuses of unfairly dumping their cheap products in the U.S. market. The compromised information could give Chinese officials a peek at the evidence the company planned to use in its trade case.

"As the indictment makes clear, the focus of much of the cyber theft was related to SolarWorld's trade remedy cases against Chinese solar manufacturers," the company said. This suggests that the hacking has a "direct bearing" on the Commerce Department's investigation of Chinese dumping, which has been occurring for years.

SolarWorld's case appears to be the first time that a U.S. company has brought allegations of cyberhacking into a trade dispute. Under long-standing agreements, China is required to respond to questions from the United States as part of any investigation of unfair practices alleged by U.S. companies.

"We think it's extremely important for the Commerce Department to immediately investigate what occurred and what information was taken and to make clear that it will not tolerate cyberhacking of U.S. companies that file trade cases," Tim Brightbill, the lead counsel for SolarWorld and a partner at Wiley Rein LLP, said in an interview. "There's a need to have a strong precedent here."

SolarWorld wants Commerce Department officials to question Chinese officials and request documents about Beijing's alleged cyberspying. The company wants any documents or communications that the hackers stole from SolarWorld, as well as any information that links the intruders, and by extension the Chinese military, to Chinese solar panel manufacturers. It's also asking for any agreements or consulting contracts between the People's Liberation Army (PLA) and Chinese solar companies. The criminal indictment against the five alleged Chinese hackers accuses them of passing information from the PLA to particular Chinese firms. In all, the indictment names six victims in the United States, four of which were companies in the midst of trade disputes with China when they were allegedly hacked.

Despite the voluminous evidence contained in the indictment, it's all but certain that the Chinese government will deny the hacking claims, as it has done consistently for years. If the Commerce Department deems China's response lacking, it could impose cripplingly high tariffs and import duties against Chinese solar goods, effectively blocking them from the U.S. market.

U.S. intelligence officials and corporate executives have long known that American companies are relentlessly hacked by spies working for the Chinese government. They steal all manner of proprietary data, including trade secrets and product designs, in order to give their firms a leg up on American competitors or to manufacture cheaper knockoffs. If the United States imposes stiff penalties as a result of SolarWorld's complaint, it would mark the first time that the United States has imposed an economic penalty for activity stemming from cyber-espionage.

"Companies here and in Europe have been hesitant to take any legal or political action in response to cyber-espionage for fear of annoying the Chinese," said Joel Brenner, who served as the top counterintelligence official in the U.S. government and was among the first to issue public warnings about Chinese cyberspying against American companies. "But state-sponsored espionage directed at the private sector has become so pervasive," Brenner said, "I think we're on the edge of a tipping point."

SolarWorld's request puts the Commerce Department in the unusual position of weighing whether state-sponsored economic espionage harms trade and free markets. Since unveiling its indictments against the five alleged Chinese military hackers, Justice Department officials have taken great pains to distinguish spying on foreign officials, which they say is essential to protecting U.S. national security, from governments spying on corporations for economic gain, which they consider forbidden. A Commerce Department finding that Chinese cyber-espionage gives companies an unfair advantage would bolster the Obama administration's contention that governments shouldn't spy on foreign corporations to benefit their domestic industries.

"It is imperative ... that the Department further investigate the effects of the espionage on this proceeding and determine the extent of harm to SolarWorld's competitive position," the company's complaint states.

SolarWorld has been battling its Chinese competitors since 2011, when it first filed a complaint of unfair business practices. Chinese solar companies receive large subsidies from the Chinese government, which allows the companies to sell their products for less than it costs to make them, SolarWorld alleges. American solar panel makers cannot match Chinese companies' prices, forcing them to shutter factories and lay off thousands of workers, SolarWorld claims. The company has convincing data to back up that allegation. Imports of Chinese solar panels and cells skyrocketed from less than $100 million in 2006 to nearly $1.2 billion in 2010. U.S. manufacturers slashed their prices between 30 and 40 percent that year.

SolarWorld considers the hacking retaliation for the initial trade complaint, which it eventually won this year. Although the United States imposed duties averaging 31 percent on certain Chinese solar-materials manufacturers at the time, it could have gone much higher. But the duties did little to blunt Chinese dumping. Chinese producers "seized a loophole," SolarWorld alleges, and used a third country to carry out part of its solar panel production in order to evade the high duties. That led SolarWorld to open a new case, which is pending.  


The Complex

New Film Explores Drone Wars From Pilots' Point of View

"The colonel tells you who to take out, and you do it. Just don't think too much." That's the advice drone operator Jack Bowles has for his new partner, Air Force pilot Sue Lawson, on her first day flying an armed Predator over remote Afghanistan. And it's the moral dilemma at the heart of a new film that follows the pair as they agonize over whether to kill a man who may or may not be one of the most-wanted terrorists in America.

Drones, which is available through iTunes and On Demand beginning June 27, may be the first feature film to explore this new frontier of warfare from inside the darkened trailers stationed in a Nevada desert, where pilots stare at video screens hunting prey who will never have a chance to shoot back at them. In the film, Lawson and Bowles think they've spotted a fugitive terrorist who's high on the U.S. kill list but miss their chance to take him out as he's driving alone in his car. When the man pulls up to a house -- presumably his -- and is surrounded by adoring children and relatives, the drone pilots have to decide whether the life of one wanted man is worth the death of his family too.

The mission gets more complicated as the drone runs low on fuel and Lawson finds reason to doubt that the man in her sights really is an al Qaeda terrorist. The pilots are faced with a seemingly impossible choice: ignore what their eyes and consciences are saying or disobey a direct order.

Drones eschews the explosions and effects that are standard for most modern military action films, instead drawing its tension from the basic uncertainties that underlie every drone mission. How accurate is the intelligence? Is killing one man worth taking other, innocent lives? And what does the act of killing do to the pilots? They may be firing their weapons by remote control but they see the damage they cause close up. Director Rick Rosenthal spoke with Foreign Policy about making the film and about how the experience shaped his own views on the efficacy and morality of drones. (A lightly edited transcript follows.)

Foreign Policy: Why did you want to make a movie about drones and drone pilots?

Rick Rosenthal: The screenwriter, Matt Witten, and I had worked on a project about 15 years ago about the FBI and corrupt politicians but we never got it off the ground. Then about two years ago, he called and said he'd just finished writing a play and that he thought there was an indie film in it. He sent it over and I emailed him back and said, "Not only do I think there's a terrific independent film to be made here, but I'd like to make it."

I'd made a film in 1987 called Distant Thunder, about Vietnam War veterans dealing with post-traumatic stress disorder. In a way, Drones revisits that set of circumstances because the level of PTSD is extremely high in these pilots. This is the first time that I'm aware of that the pilots operating their weapons stick around to survey the damage that their weapons have caused, in detail. That's a change. And the other thing that's radically changed is that in every war up until now, there's been a lot of risk for soldiers and airmen and suddenly -- I'm not saying this is a riskless war -- there are people who are now operating drones who are not taking the same kinds of risks. They're not facing weapons aimed at them. And to that degree, it changes the decision-making on a lot of levels. You might not make the same kinds of decisions when you're life isn't at risk.

FP: What kind of research did you do before making the film?

RR: We couldn't get clearance from the Air Force to go to a drone base. But we got clearance from the Department of Homeland Security to go to a base in Arizona. I told my team, "Let's not be Hollywood assholes. Let's go down there and listen." And we spent about four hours one day just watching and talking and listening to pilots.

It also turned out a filmmaker we were working with on another project had gone to high school with a guy who was a drone pilot in the Air Force. He read the script and then he came in to talk to the actors. And we were able to ask him, "Does the set look authentic? How does it feel to you?" The screenwriter doesn't have a military background. But he'd done research and then by working with a drone pilot, we could ask him questions. One of the first that popped up, in Arizona, was that the first trailer we went into was a three-man trailer. [The script had been written for a two-person team.] But they told us that the third position is a radar operator and for a lot of missions they don't need them. We were like,"Phew!"

FP: When you finished the film, how did you think differently about drones?

RR: I came out feeling like it's a little bit of déjà vu all over again. When I was in college during Vietnam, I was caught in this dilemma that when war is necessary, you shouldn't go to war not fighting to win. And then the question is, should you be in the war or not? To the extent that drones provide a superior weapons system and save American lives, then I'm obviously pro-drone. To the extent that it's really hard to gather 100 percent accurate intelligence and collateral damage occurs, and sometimes horrific mistakes are made, I wish there were a better way of doing it.

FP: Are you using drones in your filmmaking?

RR: We just did a film called 7 Minutes, shot in the state of Washington, and we used something called the Octocopter, a small drone with eight rotors. The shots that we were able to produce from that are breathtaking. It's more maneuverable than a helicopter. It's very quiet. We had a two-man crew, used it for one day. It wasn't a lot of money. And in shooting Drones, we used a small remote-controlled helicopter, maybe six feet long, along with a 100-foot crane to simulate the overhead shots from the drone. I have a lot of interest in where all of this technology is going to go.

FP: Do you think people in Hollywood want to make more movies and TV shows about drones?

RR: I think the idea of drones now is starting to permeate the creative collective consciousness. This season of 24 is all about a drone being co-opted. You have drone-like machines appearing in Edge of Tomorrow. There's a tremendous pressure on Hollywood, always, to come up with the newest, edgiest concepts. And drones have the feel of science fiction, particularly as they become sleeker and stealthier. And certainly Hollywood's hungry to try to find ways to engage an even younger audience that's grown up with new technologies.

FP: The characters in Drones are fairly young. Was it important to you to convey that familiarity with technology, as if to them flying a drone was like playing a video game?

RR: Yes. And in the movie, Bowles chides Lawson for not playing enough video games [as part of her training]. I don't really have a stand on whether violent video games beget violence or not. But I do think that experiencing violence firsthand is very different than through a video game.

FP: But you make the point in the movie that drone strikes aren't a video game; and the characters know that too.

RR: Yes; but it is confusing to people. And the point has been made that the more training you do on a video game, the more the mission resembles a game, the less morality is called into play. Cynically, people will say that's the military's way of dealing with morality and collateral damage. I go back to how complicated I think the moral issues with drones are. Saving lives is a very positive aspect of the drones and killing people is a very negative aspect. In the end, I think the film is anti-war. But war appears to be a necessary evil.

Whitewater Films