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  • China is our enemy.

    Posted by Michael Kennedy on October 4th, 2018 (All posts by )

    UPDATE: Richard Fernandez has has a new column that bears on this issue.

    He describes a new article about what was called “The Third Way,” a political movement that was to replace the Democrats after 1988.

    The Third Way, the political movement that crested at the end of the 20thcentury and the beginning of the 21st, represented the most recent effort to reimagine the centre-left in the face of massive economic and social changes.

    At its apogee, when it dominated the politics of United States, the UK, and Germany, it was thought to provide a stable template for governance well into the new century. Confidence ran high that the business cycle had been tamed and that the forces of globalisation and technology could be managed for the good of average citizens as well as meritocratic elites.

    You could almost call it “The Deep State” and it has lost its way.

    China, in the meantime, has moved into a lead.

    As events proved, the unipolar world did not remain the only game in town. “Russia regressed to autocracy; radical Islamism went to war against the West; China became far more prosperous without becoming a whit more democratic, confuting decades of modernization theories,” Galston wrote. Entrepreneurship declined, middle class incomes stagnated and a revolt against unlimited immigration began. Most of all new decentralized technological possibilities arose within the West. In a word, the power of the elites at the center was challenged as never before. All this came to an unexpected head in 2016.

    Now all enemies are near enemies, as the supply chain problem and the “collusion” allegations in every Western country illustrate. We are engulfed in a civil war because in a globalized world that’s the only kind there is. Yet in retrospect Brexit and the election of Donald Trump should not have been the shocks they were. They were only surprises because the media refused to see the growing storm.

    There has been quite a bit lately about the China trade deficit. Trump has proposed tariffs on Chinese imports until China treats US products fairly. The recent trade talks with Mexico and Canada are based on the knowledge that much of this NAFTA trade is really with China that send products like steel to Mexico and Canada, which is then incorporated into products imported by the US as north American manufactures.

    Now we have evidence that China is more than a trade rival.

    But that’s just what U.S. investigators found: The chips had been inserted during the manufacturing process, two officials say, by operatives from a unit of the People’s Liberation Army. In Supermicro, China’s spies appear to have found a perfect conduit for what U.S. officials now describe as the most significant supply chain attack known to have been carried out against American companies.
    One official says investigators found that it eventually affected almost 30 companies, including a major bank, government contractors, and the world’s most valuable company, Apple Inc. Apple was an important Supermicro customer and had planned to order more than 30,000 of its servers in two years for a new global network of data centers. Three senior insiders at Apple say that in the summer of 2015, it, too, found malicious chips on Supermicro motherboards.

    This was an espionage act that infiltrated US Defense computer systems.

    I have been convinced for some time that Russia is a stalking horse form Democrat politicians, like the Clintons, who have been bought and paid for by China.

    One government official says China’s goal was long-term access to high-value corporate secrets and sensitive government networks. No consumer data is known to have been stolen.
    The ramifications of the attack continue to play out. The Trump administration has made computer and networking hardware, including motherboards, a focus of its latest round of trade sanctions against China, and White House officials have made it clear they think companies will begin shifting their supply chains to other countries as a result. Such a shift might assuage officials who have been warning for years about the security of the supply chain—even though they’ve never disclosed a major reason for their concerns.

    I do sometimes wonder at the violent opposition to the Trump China initiatives.

    America’s leading business lobbies, which represent every sector of our economy, have declared all out war against President Trump’s trade tariffs.
    Manufacturers, corporations of every size and shape, retail businesses, agricultural industries, and consumer groups — 45 associations in all — have joined forces to defeat the president’s plans to impose higher trade taxes on our long-standing trading partners and most loyal allies.
    The largest of these organizations, the U.S. Chamber of Commerce, which represents more than 3 million businesses nationwide, is launching an unprecedented campaign against the tariffs.

    Is this ignorance or what ?

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    30 Responses to “China is our enemy.”

    1. Anonymous Says:

      You should look at Apple, Amazon and SuperMicro’s responses:

      https://www.bloomberg.com/news/articles/2018-10-04/the-big-hack-amazon-apple-supermicro-and-beijing-respond

      It does appear to be much ado about nothing. When I finally discovered the chip’s purpose was to allow changes to operating systems, nothing you need a chip for, I became less convinced.

      Not that it really relates to this, but I used to do compression on the fly on my servers, way back when.

    2. PenGun Says:

      That’s me.

    3. Mrs. Davis Says:

      Loral.

    4. Gavin Longmuir Says:

      This is a fascinating allegation about Chinese government slipping an extra chip onto motherboards used in servers.

      First, since China makes these kinds of motherboards for most servers in the world, this suggests the Chinese extra chip also sits on servers in the EU, Russia, Japan, India as well as the US. If the worst fears are confirmed, this would give China the opportunity to disrupt every server in any nation at any time — very useful in the hours & minutes ahead of a military attack, if China should ever decide to go that way.

      Second, if this turns out to be true and China has done this to motherboards, it raises the question of what China might have implanted in all those bird-whacking windmills and environment-changing solar panels that the environmentalists insist on subsidizing. Could those sources of electric power all “die” at the worst possible moment?

      Third, if this turns out to be true and demonstrates that China has contemplated using its manufacturing pre-eminence to gain the ability to exercise control over other countries, those other countries are likely to become less willing to depend on China for technology, regardless of price. This could stimulate re-shoring of high technology manufacturing (and lower technology manufacturing too) to the US, EU, and Russia — creating a much more competitive global manufacturing environment and costing China jobs & GNP. The economic implications for China could be severe.

      Fourth, can we now please stop talking about “Trump’s Trade War”? It seems that the war has been going on for decades, as the poor bastards who lost their industries and jobs can testify. But since the Political Class was not affected (apart from sometimes benefitting from indirect Chinese campaign contributions), the best people pretended China’s trade war against the rest of the world did not exist.

    5. PenGun Says:

      Indeed. The lore is being expanded to include China. The entire ‘Russia Hacked The Election’ meme has worked so amazingly well, that it is now used as canon, and is being spread to include China.

      Not like this is new, but this one does not seem to be well done. ;)

      Now I don’t deny everyone hacks everyone. I ran servers and the constant attempts to hack into your machine are right there in the access log. This has gone on for several decades.

    6. David Foster Says:

      “can we now please stop talking about “Trump’s Trade War”?”

      Indeed, a lot of people are talking as if the idea of tariffs was a Trump invention. Actually, tariffs were the source of the majority of Federal Government revenue from 1792 to 1860, and more than 25% of revenue until 1918. These were years of considerable economic growth and industrialization.

      https://en.wikipedia.org/wiki/Tariff_in_United_States_history

    7. Mike K Says:

      I know that was PenGun’s statement with out his help..Did you do the compression on your garbage truck ?

      Asking for a friend.

    8. Mike K Says:

      Actually, tariffs were the source of the majority of Federal Government revenue from 1792 to 1860, and more than 25% of revenue until 1918.

      I am listening to Karl Rove's biography of McKinley in the car. He was a very impressive guy.

      Nobody knows him except as the president who was assassinated to make Teddy Roosevelt president.

    9. James the lesser Says:

      There is another take on the claim at https://www.servethehome.com/bloomberg-reports-china-infiltrated-the-supermicro-supply-chain-we-investigate/, but folks who know more about board layouts than I do.

    10. Gavin Longmuir Says:

      Thanks for the link to that article, James the Lesser. Very interesting — although hardly reassuring.

      Whether we go with the “Deadly Chinese Hack” or the “Just Another Vulnerability” version of the story, it does raise the issue of whether it was smart to offshore the manufacturing of so much high tech computer equipment to China. Prior to World War I, the dyestuff used in British khaki uniforms came from Germany. Having a dye crisis in wartime is obviously survivable — having all your servers remotely switched off at a critical time may not be so easily shrugged off. Fortunately, all the best people assure us that only the US is a vile military threat to world peace, while the Chinese just want to buy us all a coke.

      With increasing automation, it would seem that the labor content of motherboards has probably been reduced to a low level, which Could make re-shoring of their manufacture economically feasible — if only the Political Class could get their runaway over-regulation machine under control.

    11. Anonymous Says:

      “Did you do the compression on your garbage truck ?”

      I built a server for an outfit called videopostcards.net and we took in videos people shot and made them available online. This was when 28.8 and 56.6 modems ruled the world, long before youtube.

      I created a set of perl scripts that massaged the video on mencoder, a Linux command line video editor, into a nice avi I could display on my server. Really my scripts uncompressed, then recompressed, these videos into my final form, but hey.

      You did ask. ;)

    12. Bill Brandt Says:

      What amazes me is both the outright theft of our technology – and the willingness of our companies to bow to Chinese demands and give them the technology in return for access to the Chinese market.

      Lenin’s observation that ““The Capitalists will sell us the rope with which we will hang them.” comes to mind.

    13. Mike K Says:

      More on the Big Hack that Pengun doesn’t believe

      Pennie, do you speak Mandarin ?

      The companies’ denials are countered by six current and former senior national security officials, who — in conversations that began during the Obama administration and continued under the Trump administration — detailed the discovery of the chips and the government’s investigation. One of those officials and two people inside AWS provided extensive information on how the attack played out at Elemental and Amazon; the official and one of the insiders also described Amazon’s cooperation with the government investigation. In addition to the three Apple insiders, four of the six U.S. officials confirmed that Apple was a victim.

    14. Anonymous Says:

      Is trade association opposition to Trump’s threats to raise tariffs ignorance?

      I don’t believe it is. The long standing imbalance in tariffs has been accommodated in the distribution of production globally. The multinationals have used these barriers to free trade as a basis for their business plans and huge capital investments overseas. They similarly use regulation as a barrier to entry for new start-ups. By playing the political systems they protect their plans and markets.

      If Trump successfully uses threats or actual tariff increases or embargos to force a net reduction of trade restrictions (which notably have stunted manufacturing in the US), the world distribution of production will begin to significantly change. There will be a move toward more efficient use of world resources (including those of the US). The net result will be greater competition and more output from the same inputs.

      The trade associations and their paying members are not particularly interested in such a macro result. They are largely interested in reducing uncertainly for them and amortizing the huge investments they have made overseas based on the artificial cost differences resulting from the imbalance of tariffs and trade restriction that have been fairly stable.

      Theoretically the members of the trade associations who prefer the status quo are fewer than those who stand to benefit from the increased output and employment (both in quantity and quality). The issue of course hinges on the specific versus the defused interests and a short term versus long term perspective on the results.

      The power of specialization and trade in accordance with natural comparative advantage is the engine of economic growth and material standard of living. When government becomes powerful, the temptation to cater to the specific, short term desire for status quo yields significant rent seeking, political corruption and growing economic inefficiency (misuse of productive resources and dead weight losses).

      They are protecting their advantages within the status quo.

      Death6

    15. Gavin Longmuir Says:

      “They are protecting their advantages within the status quo.”

      It has always been thus — and always with the same unfortunate result. Mancur Olson’s 1982 book “The Rise & Decline of Nations” dwells on this topic. The Medieval Guilds which restricted entry and discouraged innovation are a good example. It is hardly surprising that the winners under an existing system want to preserve their advantages; it is sad they do not realize the harm they are inflicting on their fellow human beings and (eventually) themselves. It is even more sad that today’s “elites” are incapable of recognizing the repeated lessons of history.

    16. PenGun Says:

      Mike its basically the same as the IME Intel puts on all its boards. Your intelligence community is not something I believe.

    17. Brian Says:

      Joke/serious response 1: Well, the charge is credible, and that’s all that matters…

      Joke/serious response 2: Not sure why China should bother to spy this way, when they can just let the US government spy on us, and steal the results…

    18. MikeK Says:

      The trade associations and their paying members are not particularly interested in such a macro result. They are largely interested in reducing uncertainly for them and amortizing the huge investments they have made overseas based on the artificial cost differences resulting from the imbalance of tariffs and trade restriction that have been fairly stable.

      John Sherman, Senator, Secretary of the Treasury and brother of General William T Sherman write the Sherman Antitrust Act of 1890 to deal with monopolies in the US.

      Alan Greenspan opposed it more recently.

      Greenspan at that time was a disciple and friend of Ayn Rand, and he first published Antitrust in Rand’s monthly publication The Objectivist Newsletter. Rand, who described herself as “a radical for capitalism,”[32] opposed antitrust law not only on economic grounds but also morally, as a violation of property rights, asserting that the “meaning and purpose” of antitrust law is “the penalizing of ability for being ability, the penalizing of success for being success, and the sacrifice of productive genius to the demands of envious mediocrity.“[

      That, in fact is not what the Act says.

      The purpose of the [Sherman] Act is not to protect businesses from the working of the market; it is to protect the public from the failure of the market. The law directs itself not against conduct which is competitive, even severely so, but against conduct which unfairly tends to destroy competition itself.[4] ”
      According to its authors, it was not intended to impact market gains obtained by honest means, by benefiting the consumers more than the competitors. Senator George Hoar of Massachusetts, another author of the Sherman Act, said the following:

      “ … [a person] who merely by superior skill and intelligence…got the whole business because nobody could do it as well as he could was not a monopolist..(but was if) it involved something like the use of means which made it impossible for other persons to engage in fair competition.”[5]

      I think we are dealing with this now. I am reading Karl Rove’s biography of McKinley, who was an impressive man almost forgotten now.

      There were reasons at the time for protection and they are back today.

    19. Grurray Says:

      China just kidnapped the head of Interpol. He was also their vice minister of state security, or at least he used to be. This is another good reason to be cautious before participating with nations like China in international organizations. Especially security and law enforcement.

    20. MCS Says:

      The longer I think about it the less I buy the story as presented. The device described is too small to have more than 2 or maybe 4 contacts, this is a limitation on the board. I can’t believe that it’s possible to put all of the functionality in a chip that small. Memory, logic, line drivers and the rest take up some space and especially power, therefore generating heat that put a limit on package size.

      If it’s true, there will be plenty of evidence soon.

    21. Gavin Longmuir Says:

      MCS — forget all the mutterings about espionage. The only functionality required on that small chip would be a remote kill switch for the server. Just imagine the leverage that would give the government which knows how to activate the kill switch.

    22. MCS Says:

      I find the functionality attributed to such a small device in the article implausible. Something like you suggest might be possible.

      A device as small as that posited in the article could act as a switch that would disable the system on any number of ways. disrupting the CPU power supply could fry it in a fraction of a second. The challenge would be to devise a way to trigger it. There would have to be other parts compromised to allow outside communication.

      If you had the access necessary to install this small an extra chip you would have the access to simply alter the programming of any of the various chips that are microprocessors in their own right. Especially the ethernet controller. The last step in programming these is to blow some internal fuses that make it impossible to read out the firmware. I choose the ethernet controller because it has direct access to the network stream. Chips that can be reprogrammed in the field will still have a permanent firmware to control the process and usually the firmware upgrade is encrypted to protect intellectual property.

      In order to hit a particular target, there would need to be hundreds or thousands of compromised boards. They don’t march through the factory labeled “U.S. GOV.”. Right now, I’d guess, a lot of people that know more about it than I do are looking. If there is anything to find, there will soon be lots of evidence outside of government control.

    23. PenGun Says:

      And your government agrees with me:

      https://www.dhs.gov/news/2018/10/06/statement-dhs-press-secretary-recent-media-reports-potential-supply-chain-compromise

    24. Gavin Longmuir Says:

      Pengun, read again the DHS statement: “… at this time we have no reason to doubt the statements from the companies named in the story.”

      That is pretty close to damning with faint praise. There is no statement here saying that the Omnipotent Government has done any independent investigation which proves that the motherboards were manufactured exactly as designed, with no extra chip. Instead, DHS merely points at the companies and shrugs — while keeping open the option to change their statement later. Hence the “at this time” weasel words.

      Let’s not kid ourselves — the Chinese have no need to go to extreme lengths to spy on the US, not in a world in which Hillary! Clinton can have confidential data on an unsecure server in her bathroom, and Nancy Pelosi can have a Chinese spy on her payroll for 20 years, and dodgy Pakistanis run the House data systems. (All without any significant legal consequence, strangely enough). All the Chinese might need for future use would be a credible basis for very quietly making a believable threat to fry the servers in whatever country they happened to want to control. Outside of the top leadership, no-one in the target country would ever know the threat had been made.

    25. PenGun Says:

      Believe whatever you please. Your government lies, perhaps more than any other source I know of, but when they say AWS and Apple probably have this, they are probably right. ;)

    26. Mike K Says:

      PenGun isn’t it time for you to go pester somebody else ?

    27. Anonymous Says:

      Mike, I will rarely be wrong on technical issues, I’m sorry you don’t like that. ;/

    28. Mike K Says:

      It looks like Homeland Security is pushing back on the Bloomberg story.

      The Department of Homeland Security is aware of the media reports of a technology supply chain compromise. Like our partners in the UK, the National Cyber Security Centre, at this time we have no reason to doubt the statements from the companies named in the story.

      We’ll see. The trouble is that some of these stories will never be verifiable one way or the other. Still, ‘Eternal Vigilance is the Price of Liberty.”

    29. Mike K Says:

      Complaints about Chinese cyber espionage from Europe.

      The U.S. struck a deal with China in 2015. But intelligence officials have complained that Chinese counterparts have failed to abide by the terms of the agreement. On Wednesday, the Department of Homeland Security warned industry that the Beijing-linked “Cloudhopper” hacking group is again launching a widespread campaign on technology service providers to hack and steal industrial secrets.

      The PwC study recommends that the European Union, as well as member countries, engage in talks similar to the U.S.-China dialogue. It also says that the EU could broaden its requirement to report cyber incidents to companies outside of critical infrastructure sectors. It adds that 60 percent of respondents that agree with the need for notifications said that such a notification system should be made mandatory across the EU.

    30. Mike K Says:

      More on the confrontation with China.

      The Trump administration’s China policy swam into view, and it’s a humdinger. Vice President Mike Pence gave a guide to the approach in a speech last week at the Hudson Institute (where I am a fellow). Denouncing what he called China’s “whole of government” approach to its rivalry with the U.S., Mr. Pence vowed the Trump administration will respond in kind. He denounced China’s suppression of the Tibetans and Uighurs, its “Made in China 2025” plan for tech dominance, and its “debt diplomacy” through the Belt and Road initiative. The speech sounded like something Ronald Reagan could have delivered against the Soviet Union: Mr. Xi, tear down this wall! Mr. Pence also detailed an integrated, cross-government strategy to counter what the administration considers Chinese military, economic, political and ideological aggression.

      How this will affect the North Korea talks is to be determined.

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