American technology firms should get rich from doing business in China but must do their part to counter the national security dangers posed by a Communist nation, Secretary of State Mike Pompeo said in a speech Monday.
Speaking in the heart of Silicon Valley, Mr. Pompeo said the amazing advances produced in the region are a direct result of American freedom and democracy.
“In this system, our idea of capitalism and free markets has produced the greatest wealth and prosperity that the world has ever seen, and technology has played a huge role in that,” he said. “It is very clear that only in America could the titans of tech have risen from the garages and dorms of Palo Alto and Mountain View and made and continue to make American freedoms possible.”
However, tech executives needs to “honestly confront tough questions about the national security consequences of doing business in a country controlled by the Chinese Communist Party,” Mr. Pompeo said.
The secretary of state made the remarks to the Silicon Valley Leadership Group just days before U.S. and Chinese officials are set to sign a “Phase One” trade agreement at the White House after years of trade tensions.
Mr. Pompeo declined to comment on the deal other than to say “I have seen the Phase 1 deal it is real progress, it is good stuff.”
He praised President Trump for convincing the Chinese government that resolving trade issues “wasn’t just something we should talk about for the next 50 years, but rather had to be dealt with in real-time.”
“There were those that critiqued that path forward and his use of tariffs,” he said, “but I think it ultimately has gotten us to a place where we will have a better set of trade relationships come this Wednesday than we had before that with a lot of work still in front of us.”
Critics say Chinese companies engage illicit practices that include hacking of corporate secrets, massive theft of intellectual property, and the pilfering of manufacturing know-how that is then used by the Chinese to sue American rivals out of business.
“China’s rampant theft of intellectual property is real and that it’s not just a problem for the particular company affected because that capacity to invest and create and protect those property rights underpins the entire innovation economy that we have here in the United States,” Mr. Pompeo said.
About 1,000 FBI cases related to Chinese intellectual property theft are currently open, he said.
“But as you know it is the application of that property that is just as troubling,” Mr. Pompeo added.
The secretary of state noted the example of one Chinese hacker group he identified as APT 10, or “advanced persistent threat 10,” who is working with the Ministry of State Security, the civilian intelligence service that U.S. officials say is engaged in widespread hacking operations against American firms.
“Under [President] Xi Jinping, the CCP has prioritized something called military-civil fusion — many of you will know this. It is a technical term but a very simple idea.”
A major worry are government rules requiring all Chinese companies and researchers to share technology with the Chinese military.
“The goal is to ensure that the People’s Liberation Army has military dominance and the PLA’s core mission is to sustain the Chinese Communist Party’s grip on power, that same Chinese Communist Party that has led China in increasingly authoritarian direction and one that is increasingly repressive as well,” Mr. Pompeo said.
China’s dictatorial system is completely contrary to the American views of tolerance, he said.
“So even if the Chinese Communist Party gives assurances about your technology being confined to peaceful uses, you should know there is enormous risk, risk to America’s national security as well,” he said.
“This is a real problem, given that many of our most innovative companies have formed partnerships with the Chinese government and companies that are linked to it.”
Former Joint Chiefs Chairman Gen. Joseph Dunford noted in testimony to Congress last year that Web search giant Google is one U.S. firm assisting the Chinese military. “The work that Google is doing in China is indirectly benefiting the Chinese military,” he said.
“I know your job is to make money for your shareholders. The Trump administration is all for it,” Mr. Pompeo said. “Invent new things, change the world, I get that.”
However, Mr. Pompeo urged Silicon Valley leaders that the United States is increasingly at risk from Chinese actions that could undermine American freedom.
“This is not to be alarmist, it is not to be threatening, it is for all of us to be aware of,” he said.
American companies rallied to support the war effort in World War II and financial institutions in New York helped authorities identify the terrorists behind the September 11 attacks. Similar efforts are needed by the tech industry today in dealing with China, Mr. Pompeo said.
“We need to make sure American technology doesn’t empower a truly Orwellian surveillance state. We need to make sure American principles aren’t sacrificed for prosperity,” he said.
The Trump administration is taking action to confront China over what U.S. officials say are its theft of technology and predatory economic practices.
The Phase 1 trade deal to be signed Wednesday is one example.
Another is imposing export controls on equipment and parts used by China for its nationwide surveillance systems, Mr. Pompeo said, citing a U.S. pressure campaign to convince allies not to use Chinese high-tech giant Huawei in their next-generation communications networks.
“We have applied much greater scrutiny to technology exports that could have military use,” Mr. Pompeo said. “Our government agencies are cooperating in new ways to stop the Chinese military from using our own innovation against us and we are putting our allies and partners on notice about the massive security and privacy risk connected to letting Huawei construct their 5G networks inside of their country.”
Mr. Pompeo concluded by noting that defending freedom and national security is not solely the role of government. The private sector must do its part.
National security questions posed by China do not have easy answers and Mr. Pompeo said he is not seeking to tell technology leaders what the answers are.
“Every company is different,” he said. “I know you all will figure it out.”
On a lighter note, Mr. Pompeo noted that one of the region’s “earthshaking innovations” was Twitter.
“I know I watch one Twitter account, in particular, each and every day,” he said — referring to President Trump’s frequent use of the social media platform.