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Beheading, torture and violation as a means of conferring legitimacy in Mujahideen Shura Council succession


Thoughts on the early data on the appalling death suffered by two abducted US soldiers:

The manner in which the attack was carried out on a small US unit manning a traffic checkpoint, separating them into yet two smaller bite-sized elements, suggests excellent surveillance and a feint to draw off troops and isolate the trio for capture. It may be coincident but I believe that this attack was a specific, planned response to the killing of Abu Mus'ab al-Zarqawi.

The soldiers' cause of death was not directly related to combat wounds sustained in their capture but rather post-capture treatment that apparently transcended prior levels of torture and decapitation, i.e., the mistreatment of the bodies was extreme, a new high watermark.

If it is true that Abu Ayyub al-Masri, aka Abu Hamza al-Muhajir, the "successor to slain terror leader Abu Musab al-Zarqawi" had "slaughtered" the two soldiers (the word used, "nahr," was consistent with beheading), it strikes me as an interesting, albeit gruesome, gambit to capture legitimacy for al-Masri while reinvigorating the masses. (The pair's capture is already being heralded as a "weakness of U.S. intelligence.")

Whoever did the killings, or orchestrated them, may not be al-Masri, based upon traffic from Islamic extremist Internet message boards and chat rooms. In what could be an excellent disinformation campaign, "No one appears to know who this guy (al-Muhajir) is." Continuing the idea that Mujahideen Shura Council followers do not need to know his name, it is likely enough that the individual picks up the reins from Zarqawi, thus the killings still convey prestige. (The Mujahideen Shura Council is composed of eight insurgency groups in Iraq: al-Qaeda in Iraq, Victorious Army Group, the Army of al-Sunnah Wal Jama’a, Jama’a al-Murabiteen, Ansar al-Tawhid Brigades, Islamic Jihad Brigades, the Strangers Brigades, and the Horrors Brigades.)

While no one has mentioned the possibility of the beheading/mutilations being filmed, I would be surprised only if they had not been filmed - which begs the issue of when and how those filrms are released. Zarqawi took responsibility for the beheadings of US national Nicholas Berg and Korean Kim Sun-il, and was said to have carried out the decapitations. Filming al-Masri or whomever assumes command would place him in the same pantheon as Zarqawi.

If the filming assumption is true, then are the insurgents hoping for a secondary goal of a US overreaction with subsequent fallout from Iraqi/Sunni populace when the films are released? (I am remembering the Marine response at the Tenaru River on Guadalcanal. Had there been embeds at the  time, there might have been a different response.)

The manner in which the bodies were made relatively visible for discovery, but with IEDs placed on the road leading to the bodies as well as around/near the body, showed great planning to extract maximum damage from the recovery teams intent on retrieving fallen comrades.

Overall, the attack on the traffic unit appears to be a thoughtfully planned operation. I am surprised that so few US personnel have been kidnapped and executed to date. This form of fatal kidnapping could emerge as a new escalation in insurgent technique. Major General William Caldwell noted that "the U.S. military was studying the techniques that insurgents use in capturing and holding U.S. soldiers":

"A great many coalition security personnel continue to study the different kidnapping techniques that are being utilized by these different anti-Iraqi elements and tactics and techniques that they use as they continue to do this," he said. "We are all very much aware of the atrocities that they commit, not only by the foreign fighters [but also by] some of the indigenous groups with their victims that they take into their custody. It pains us to realize what fellow service members may go through and other American citizens."

U.S. Says 2 Bodies Retrieved in Iraq Were Brutalized
New York Times
June 21, 2006

The Mujahideen Shura Council Announces the Execution of the Captured Russian Diplomats
By SITE Institute
June 21, 2006

Confusion swirls over Zarqawi successor
By Shaun Waterman
Monsters and Critics
United Press International
Jun 20, 2006, 10:05 GMT

Iraq: Abducted U.S. Soldiers' Bodies Believed Found
RFL/RL (compiled from agency reports)
June 20, 2006

Al-Qaeda Group Claims It Abducted U.S. Soldiers In Iraq
June 19, 2006

Iraq: Is Al-Qaeda Trying To Assert Control Over Insurgency?
By Andrew Tully
June 16, 2006

'Beginning Of The End' For Al-Qaeda In Iraq
AFP (Reuters, AFP, AP)
June 15, 2006

Iraq: What Does Al-Zarqawi's Death Mean?
June 8, 2006

Iraq: Sunni Insurgents Turning Against Al-Zarqawi
By Kathleen Ridolfo
January 26, 2006

Middle East: Extremists Opting For Beheading As Weapon Of Choice In Terror War
By Charles Recknagel
24 June 2004

Iraq: Beheading Of U.S. Civilian Stokes Image War
By Charles Recknagel
May 12, 2004

Terrorists Kill Hostage In Revenge For Iraqi Prisoners
May 11, 2004

Gordon Housworth

InfoT Public  Terrorism Public  


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Double edged sword of optimizing China-based and US/EU-based supply chains


Bleeding our China-monitoring interests over to logistics, I highly recommend two articles by George Stalk at BCG on the trade-offs between China-based and North American-based supply chains. The first is the HTML article from Supply Chain Management Review, Surviving the China Riptide, and the more developed PDF article from BCG, The China Rip Tide: Threat or Opportunity?

Stalk portrays the scope of the problem in trying to improve China-based chains as reaching epidemic proportions (Quotes below are from the HTML version):

[The] surface freight situation in North America and Europe is seriously challenged. Backlogs at ports and on railroads are at all-time highs. With freight volumes increasing faster than the ports can handle them, the situation will only worsen. Some Asian ships are too big to go through the Panama Canal to less busy ports on the Atlantic coast. Even some of those that can fit through the canal must offload and reload containers to meet the canal's pilot-visibility rules. The offloaded containers are sent by rail across the isthmus to be reloaded on the other side, adding even more transit time. And while shifting to East Coast ports might improve the predictability of shipping times, it certainly won't shorten them. Because of the problems on the North American West Coast and in Europe, the cycle times of the China supply chains are going up, not down... The cycle times of surface shipments (from China to Chicago, for example) are not only increasing - they are also becoming more variable. About 50 percent of the containers at one shipping company are offloaded within two weeks of their scheduled dates, and these are considered to be on time. The other 50 percent are even less predictable!

George was working on what became time-based competition (TBC) in the mid 80s, and released his seminal Time-The Next Source of Competitive Advantage in 1988. I had the opportunity to design integrated marketing and development programs around TBC as did a colleague at DEC. We can testify that TBC works. It's my opinion that Stalk has long had a subtle feel for the impact of timing and bullwhip effects, and it is evident here.

I submit that the 'Riptide pair' form the kernel of a "graduate survey course" for commercial supply chain and logistics managers. For those with chains in place, remedial protective measures are in order; for those designing chains, these mechanics should be factored into sourcing/siting decisions. Some of this has been known at the grassroots level, for example, while smaller part production left Mexico for Asia, assembly of "things larger than a breadbasket" stayed put. That feature will multiply if Ford goes ahead with leaked plans to site a new assembly plan in Mexico. (I admit to wondering if it was not leaked intentionally. The leak, if it was one, softened what could be an implied threat to nationalistic voters in the upcoming July Mexican presidential election as well as advising the UAW to 'roll over and play dead' in terms of its labor negotiations with the OEM.)

In their rush to source from China, many companies are blindly walking into a strategic trap. The trap is thinking that sourcing from China will result in lower product costs when, in reality, the supply chain dynamics will drive up overall costs and reduce profitability - thereby creating an opening for a competitor. Their only salvation is if all their competitors make the same mistake... The first company to see and correct the strategic error of sourcing from China without an appropriate investment in supply chain dynamics to minimize costs will seal the fate of its competitors.

There are many traps in going to China; the one that concerns us is Intellectual Property (IP) loss now at a hemorrhage level; in the automotive sector, the OEMs are comissive in stampeding their Tier Base to China based purely on piece part cost, a shortsighted practice that will come back to haunt both OEM and supplier. For those chains that can be retained here, the supply base has the opportunity - but not the guarantee (as an asset is at risk wherever it appears at any tier in the global supply chain) - of less predation upon strategic IP.

SwizStick at Third Paty Logistics captures Stalk's double edged sword, i.e., that US/EU suppliers can and should reoptimize their chains on total cost but that Chinese firms can again win the advantage by optimizing their chains with a built-in lower Unit Product Cost (UPC):

[Stalk analyzes] the hidden costs of a product that arise from fluctuations and challenges in the supply chain. His analysis is very technical and lengthy but is an excellent example of how companies who optimize their supply chain, integrating information flows and cutting cycle times, will have the advantage over their competitors. What I found extremely interesting and illuminating was the results of the analysis comparing a domestic supply chain to a China-based supply chain, clearly illustrating that a domestic supply chain that could optimize their information flows and cycle times would have a substantial operating margin advantage over the China-based supply chain. The author readily concedes that "...the competitive dynamic might continue with the China-based chain becoming integrated and also cutting its cycle time in half. In that case, the advantage returns to the China-based chain because of its lower UPC."

In a similar vein, Brian Sommer stated that Stalk had illuminated:

the true costs of using local, global and a mix of suppliers. The article takes the reader through a series of cost analyses assuming different combinations of US or China manufacturers and whether they possess non-integrated, semi-integrated or fully integrated supply chains. Stalk's analysis helps to understand why some firms:

  • move/keep much of their sourcing in-country
  • develop their own transportation solutions
  • rethink how much of each part should be made by country location
  • why some firms are re-routing offshore shipments to different, less congested ports
  • etc.

But more important, Stalk's analysis is great at understanding how Chinese firms may try to enter and win in the US market. His suggestions for US manufacturers/assemblers on how to win this competitive battle are a must read.

US/EU firms should investigate the implications of Stalk's analysis in concert with a realistic assessment of the financial impact of lost IP. The combination of the two would significantly modify existing supply chains. The institution of actionable and effective IP retention processes would then offer the suppliers

Rather than blindly bringing chains home or adding capacity to as yet uncongested ports, Stalk recommends that firms "need to be very aggressive in managing their China-based supply chains, looking for ways to squeeze time from them that competitors haven't identified. For companies that haven't yet sourced from China, [Stalk recommends] the following steps":

  • Reduce minimum-production-order quantities and reduce cycle times as quickly and as much as possible.
  • Don't source or manufacture in China until management fully understands the dynamics of the supply chains.
  • Create an integrated or a semi-integrated information flow within the company's existing supply chain.
  • Conduct in-depth examinations of buying practices and supplier relationships management at all levels of the supply chain. Then identify and prevent potential hidden costs.
  • Segment the demand chain on the basis of order predictability and demand volatility so that components with the highest gross margins and the most volatile demand get the fastest handling.
  • If a company does decide to source from or manufacture in China, it should explore alternatives that will minimize adverse supply chain effects. These alternatives may include options that appear costly but actually result in overall lower costs. For example:

  • Using air freight for products with the highest margins and volatility.
  • Insisting on point-to-point ocean shipping. To reduce costs, shipping companies build larger and larger container carriers, which must then be scheduled to call on multiple ports. Shipping products on a vessel that has your destination as its last port of call can add weeks - and great variability - to transit times.
  • Developing better relationships with transportation providers. This could mean paying the shipping company for preferential treatment. In "hot hatching," for example, you offer a premium to a shipping company that will load your goods onto its vessel last and unload them first. Another option is to work with the few shipping companies able to offload containers directly onto rail cars that are then expressed east - cutting days and sometimes weeks out of the supply chain.

Add IP risk mediation to this mix and firms operating in, or contemplating operations in, China would be well served; firms performing competitive analysis of potential Chinese competitors would have a new calculus for designing a competitive response.

Recommended read. While China is an especially difficult example of supply chain constraint, these guidelines can be generalized to any global supply chain.

"Surviving the China riptide."
by SwizStick @ 4:46 pm.
Third Paty Logistics
June 15, 2006

Ford to invest billions in Mexico: report
June 14, 2006 01:17 PM ET

The China Riptide / Risky Supply Chains
Brian Sommer
Spend Matters
Posted At : June 6, 2006 1:13 PM

The China Rip Tide: Threat or Opportunity?
Profiting from the Growing Supply-Chain Bottleneck
By George Stalk Jr. and Kevin Waddell
Boston Consulting Group
June 2006

Surviving the China Riptide
By George Stalk Jr.
Supply Chain Management Review
May 1, 2006

The 10 Lives of George Stalk
By Jennifer Reingold
Fast Company
Issue 91, February 2005

It Is The Relative Speed That Counts
Roshni Jayakar
Interview with George Stalk
Business Today
July 1999

Time-The Next Source of Competitive Advantage
George Stalk, Jr
Harvard Business Review
66, July-August 1988
Full text mirror
HBR purchase link

Gordon Housworth

InfoT Public  Intellectual Property Theft Public  Risk Containment and Pricing Public  Strategic Risk Public  


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Physicians, heal thyselves: The Big Four accountancies are setting up as targets for Intellectual Property (IP) theft


If the Big Four are, as I believe, headed in the direction of becoming a lost cause, what is a corporate SEC-regulated IP-dependent client to do in the age of Sarbanes Oxley? Even when clients are independently building up a credible IP protection program, where do you draw the line on Big Four access to the IP upon which future revenue depends? There may be a remarkable opportunity for second tier accountancies not yet compromised, such as an IP-focused exposure or assessment program (which implies that they will per force have to have their own means of protection in place). With all of that in place, however, they could go in and assess Big Four clients, establish IP-driven carve-outs for business critical valuations and position themselves in a new market space. Even knowing what has been compromised, although painful for boards to face, can staunch an IP hemorrhage as well as evolve into a tool for the allocation of suitably-valued IP protective measures.

RSM McGladrey, Grant Thornton, and BDO Seidman, this is your moment. Where in the market are you?

Previous: Persistent limitations and deficiencies among the 'guardian class' of business advisors charged with protecting their clients' interests in China

And he said unto them, Ye will surely say unto me this proverb, Physician, heal thyself: whatsoever we have heard done in Capernaum, do also here in thy country. Luke 4.23

What was good for a small walled village in ancient Galilee, not to mention for Euripides, Aeschylus, Homer and Ovid, is good for businesses today, especially those who aspire to shepherd businesses for clients.

We predict that the Big Four accountancies, PricewaterhouseCoopers, Deloitte Touche Tohmatsu, Ernst & Young and KPMG are now, and will continue to be, sustained targets for Intellectual Property (IP) harvesting by Chinese aspirants to this coveted market space - and they will be targets not just within the confines of China.

If a reader is taken aback, the questions he or she might ask are, "How can it not be?" "How could the highly profitable, strategic services sector be impervious to what is occurring in the manufacturing and R&D sectors?" By now, a client should be asking, "What happens to all the client data above and beyond the business processes of a Big Four member?" We suspect not.

The realization crystallized as three items crossed our desks, two from the FT's Barney Jopson, China to promote rivals to ‘big four’ and Big four firms plan boost to China staff, and China Business Services flagging the former FT item along with circulating an anti-monopoly draft, Draft Anti-Monopoly Law Approved. Frankly, we should have seen it sooner but coming on the heels of a renewed investigation of Intellectual Property (IP) threats, the implications leapt off the page.

Having previously discussed the difficulties that firms such as management consultancies and accountancies have in preventing IP loss under the best of circumstances, we then dug deeper into their lack of actionable processes for IP protective measures for their clients. I remembered earlier comments by partners at these firms over the near impossibility of rolling out a uniform policy to each office and partner. (The subject was not IP, just the generic process of gaining partner-wide agreement to promulgate a process, design it, approve it and test for compliance across a dispersed network.)

I realized that a historical advantage that many of these decentralized firms in what we may call the "guardian community" becomes a disadvantage in exercising a commitment to a global process rollout and, in fact, leaves them in a far worse condition than their commercial clients who have a more conventional hierarchical structure. Many accountancies, management services firms and multinational professional firms employ a Swiss Verein (or association) model of organization through which independent offices have limited liability in relation to the others. An advantage of the Verein structure is that local offices are "only bound by regulators in their country" and so have great sway over the practices that they elect to employ. Add to that the undeniable profit motive of each office to do 'what sells,' and you have a tenuous ability to roll out a globally effective IP protection plan.

I believe that the Chinese perceive finance and accounting as a strategic asset, at least on par with, say, automotive manufacturing. Just as in automotive, China is "determined also to promote the development of powerful domestic companies in strategic industries, ranging from manufacturing to finance, telling the local champions they should seek to "go global" as soon as they are strong enough."

The Big Four have commenced what amounts to unofficial, uncontrolled joint ventures with the Chinese state. The experience of US and EU automotive OEMs that pursued a far more controlled JV path is well known:

The big four have sought to curry favor with officials by providing consulting and training, and seconding people to bodies such as the finance ministry and the China Securities Regulatory Commission.

Just as in the automotive JVs, these de facto strategic advisory JVs will see virtually everything in the Big Four's inventory voluntarily surrendered without accountability. This is an Intellectual Property nightmare that will only be perceived after the damage is done. Given this state of affairs, I would as a Big Four client have to consider everything transferred to China, or made accessible in China, as compromised.

Substitute electronics, sensors, chip design, automotive and aircraft production for pharmaceuticals and accounting, then consider the following:

  • The big four "are proceeding with ambitious expansion plans in China" boosting "their staff in China by more than 20 pct this year" in the face of "official discomfort over the fact that China’s biggest companies depend on the services of foreign accountants to raise capital
  • The Chinese state is encouraging the rise of ‘national champions’ in accounting "to reduce the country’s reliance on the big four international firms that monopolise the auditing of Chinese companies listed overseas"
  • Domestic Chinese accounting firms "resent the kudos and influence" of the Big Four and service what amounts to financial table scraps of the listed Hong Kong firms
  • The Ministry of Finance has begun to "call for consolidation among China’s 5,600-odd accounting firms"
  • The Ministry of Finance has called for several national champions "able to prepare and certify accounts for such large flotations" as the IPO of Bank of China (BOC), which incidentally is now audited by PricewaterhouseCoopers

In Persistent limitations and deficiencies, I noted that "firms driven offshore in [a] "flight condition" are generally destabilized, plunged into a "catch-up mode" at any cost" and tend to be irrationally hopeful about, or at least inattentive, to their exposure to IP collection efforts. "They usually quickly become an easily harvestable asset." The "frantic China hirings" by the Big Four and the go-go atmosphere, problems with corruption notwithstanding, create just such an opened condition where the only focus is market position and profit. In such an environment, active collection efforts will not be noticed.

We depart from Jopson over comments that simply do not stand given Chinese practice and performance to date in other industries:

But the chances of a credible big-four rival emerging from present-day China look remote, as the country lacks experience of international disclosure requirements, accounting rules and audit procedures… the government would not give domestic firms "special privileges or preferential treatment" and stressed it was up to companies to decide which auditors they hired. Lack of direct government support could make it more difficult for local accounting firms to compete internationally.

Christopher Cassidy's Chinese Law: Smoke and Mirrors and Dan Harris' Chinese Law: Smoke And Mirrors And Who Really Wields The Influence. are far closer to reality on the ground. Reading them is recommended. Cassidy also noted that the "vice director of the Institute of Intellectual Property Law at China University of Politics and Law [could only point] to the pragmatism of Party leaders as the driving force behind what he hopes will be an effective system for IPR protection." That is not my definition of a transparent, legal framework for IP protection.

If the Big Four are, as I believe, headed in the direction of becoming a lost cause, what is a corporate SEC-regulated IP-dependent client to do in the age of Sarbanes Oxley? Even when clients are independently building up a credible IP protection program, where do you draw the line on Big Four access to the IP upon which future revenue depends? There may be a remarkable opportunity for second tier accountancies not yet compromised, such as an IP-focused exposure or assessment program (which implies that they will per force have to have their own means of protection in place). With all of that in place, however, they could go in and assess Big Four clients, establish IP-driven carve-outs for business critical valuations and position themselves in a new market space. (Even knowing what has been compromised, although painful, can staunch an IP hemorrhage as well as evolve into a tool for the allocation of suitably-valued IP protective measures.)

RSM McGladrey, Grant Thornton, and BDO Seidman, this is your moment. Where in the market are you?

Chinese Law: Smoke And Mirrors And Who Really Wields The Influence.
Posted by Dan Harris
China Law Blog
June 13, 2006 at 04:03 PM

China set for investment revolution
Sundeep Tucker, London
The Australian - FT Business
June 13, 2006

Chinese Law: Smoke and Mirrors
by Christopher Cassidy at 8:10 PM
Asia Business Law
June 09, 2006

The Nexus of IPR and Culture in China
posted by Christopher Cassidy at 3:07 PM
Asia Business Law
June 09, 2006

China to promote rivals to ‘big four’
By Barney Jopson in Beijing
Financial Times
Published: June 8 2006 01:25 | Last updated: June 8 2006 01:25

Draft Anti-Monopoly Law Approved
China Business Services
June 8, 2006

China approves draft anti-monopoly law
June 7, 2006 · Last updated 10:52 p.m. PT

China's bank corruption doesn't faze investors
The multi-million-dollar scandals are a footnote in the floats
Tom Mitchell and Justine Lau
The Australian-FT Business
June 05, 2006

Accounting firms plan to boost China staff by over 20 pct - report
AFX News Limited/Forbes
06.04.2006, 08:34 PM

Big four firms plan boost to China staff
By Barney Jopson in Shanghai
Financial Times
Published: June 4 2006 22:04 | Last updated: June 5 2006 05:19
Mirrored as
Big four accountants in frantic China hirings at The Australian - FT Business, June 06, 2006
Mirrored at China Daily/Foreign Media on China

Biggest law firm in China seeks help
By Clare Cheung
Bloomberg News/IHT
MAY 31, 2006

Around Asia's Markets: Bad loans dim ardor for China banks
By Michele Batchelor
Bloomberg News
APRIL 25, 2006

China, and the Story of the Malicious Foreign Takeovers
China Business Services
March 15, 2006

Gordon Housworth

InfoT Public  Intellectual Property Theft Public  Risk Containment and Pricing Public  Strategic Risk Public  


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Persistent limitations and deficiencies among the 'guardian class' of business advisors charged with protecting their clients' interests in China


Previous: Low cost is not low risk: realities of IP Loss

Low cost is not low risk describes a global IP risk to both domestic and offshore facilities of both established industrial firms and venture capitalist (VC) startups in which:

  • Most firms do not know that they are at risk and, if they do become aware, do not know where to turn for valid assistance
  • Becoming aware of their target status but deprived of competent advice, firms employ non-solutions that lull themselves into a false sense of security
  • Firms silently surrender, fearful of negative consequences to business continuity or souring relationships with a host government (Too often a target firm mistakenly presumes that mitigation of IP loss demands a Rambo-style response.)
  • A firm's management may not confront a threat despite their awareness and even the periodic presence of internal champions for improved protection

We are now seeing firms that have prided themselves on US manufacturing being driven to China by simultaneous margin pressure and the recognition of rising Chinese reverse engineering of their products. Early indications are that these firms, not having sound guidance to the contrary, are operating under the odd assumption that it is better to "do something in China rather than to lose all" to reverse engineering.) Once in Asia, unprotected, more of the firm's assets can be at risk. (Experience has shown that firms driven offshore in such a "flight condition" are generally destabilized, plunged into a "catch-up mode" at any cost and inattentive to IP collection efforts; they usually quickly become an easily harvestable asset.)

How do firms, especially those global firms with broad skill sets, get into such a fix? Who are their advisors? Are they omissive? Answers differ between nascent Venture Capitalist (VC) funded firms and established firms. Venture Capitalist firms are usually small groups of former operators and entrepreneurs whose only external advisors are law firms and investment bankers (for the initial public offering. Established industrial firms are larger, employing tiers of professional managers that contract a broad spectrum of advisory agents, notably management consultancies, IT consultancies, banks, investment houses and law firms. We see three common characteristics among these advisory groups:

  1. Proper (actionable) IP protection guidelines are absent; in their place are ineffectual guidelines that confer a false sense of security among clients
  2. IP is frequently missing among the key characteristics that clients are urged to address when going offshore
  3. Fear of reprisal by a host government refusing them business restrains the level of advice offered to clients

The first two points are understandable as realistic IP protection practices, vulnerability assessments and mitigation practices are poorly understood by client and advisor alike. The third point is more troubling but I would prefer readers to understand it as the inevitable condition of a globally distributed services firm that has regional revenue targets independent of activities or events elsewhere in its network and is frequently beholden to one or more host governments for its ability to operate within their borders rather than a felonious act.

Proper (actionable) IP protection guidelines are absent:

While management consultancies often report what clients are doing as opposed to what the consultancy specifically recommends, their readership takes the implied leap that the related practices are recommended. As it is so infrequently reported, we should first state what does comprise competent threat analysis, what is "at the core of an interdiction process regardless of whether it is counterterrorism (CT) or Intellectual Property (IP) theft." From The danger of confusing terrorist interdiction with the consequences of terrorist action:

Defenders must be able to define a coherent view of their risk tolerance before they can craft a response strategy, a function the defense sector calls a Design Basis Threat (see simple overview.) For a more complex example, see Building Design for Homeland Security and look at the units: Asset Value Assessment, Threat/Hazard Assessment, Vulnerability Assessment, and Risk Assessment/Risk Management.

Unfortunately, the few that get this far attempt to solve the problem using scenario analysis which can never end, often results in analysis paralysis, and usually misses the scenario that delivers the payload or compromises the asset under protection:

Scenario-based responses are dangerously omissive. Witness the events now unfolding in London where the UK has had a thirty year history of dealing with a variety of terrorist attacks and bombings. The "scenario" and "lessons learned" of bombing mass transit (see Atocha’s Impact) in Madrid, Spain, was recent and well know yet it did the English little good in interdicting the London attack.

Moreover, scenario-spinning has no end since it has no scope-like business risk statement to bound it, and so efforts continue without end, usually crippling most well-intended protective efforts (paralysis by analysis)… The net is that the scenarios are very useful for estimating consequences (direct and indirect costs) should a similar event occur but that they are virtually ineffective for interdicting the adversary's preparation, surveillance and actual attack.

As noted in Acting upon knowledge is different from its gathering:

The alternative to scenario planning is to understand the key actors and processes at play, how they might interact (without locking into "the" prediction), especially in a region and culture so different from our own and one in which our own cultural assumptions could lead to under or overrating events, good and bad.

Some recommendations are astonishing. Peter Yu's From Pirates to Partners offers a good history and magnitude of the IP theft problem but then descends into a failed Twelve-Step Action Plan that is nothing short of an apologia for continuation of the current condition; Step 10, Be Patient with China During the Transitional Period, caught our eye. (We can support the first step, Abandon the Coercive Policy, only because US inaction has effectively made realistic enforcement moot. Individual firms must attend to the protection of their IP and that of critical suppliers in their development and manufacturing supply chain.)

McKinsey's Protecting intellectual property in China is slightly better than most in that it discredited reliance upon legal remedies:

Many multinational companies in China are losing the battle to protect their intellectual property, largely because they rely too heavily on legal tactics and fail to factor IP properly into their strategic and operational decisions. When we studied the Chinese operations of ten multinationals competing in IP-sensitive industries... we found that many executives think of protecting IP solely in legal termsand sometimes only after property has been stolen. The most successful companies, however, take strategic and operational action to protect their IP before that happens, thus lowering their litigation costs and improving the odds that their IP will remain safe...

In our experience, some executives are so caught up in the rush to reach the Chinese market that they share technological and business secrets too readily with partners, which subsequently use the information to become competitors.

Complete agreement on these comments but then the advisory dissolves into ineffectual remedies. Consider the implications of In a Scientist's Fall, China Feels Robbed of Glory, Atomised and Chip fraud in China becomes embarrassing setback, then review McKinsey's recommendations for "use of surveillance equipment or firewalls, to prevent large file transfers," "screen all job candidates for high ethical standards," "prefers employees with international work and educational experience, which it hopes will foster a healthy respect for IP," and "requiring non-compete clauses… in employment contracts for all positions." The article concludes with a "Pyramid of IP Protection" from "Must have" to "Nice to have" that is not in the correct order, and although desirable is not achievable with the tools on offer.

IP is missing key characteristic among client offshore guidelines:

No one firm was singled out for the following samples of IP omission; they were close to hand and our experience has shown them to be typical. It becomes easy to understand how otherwise competent suppliers can reach a vulnerable IP posture.

Booz Allen's The China Syndrome (and an earlier China's Gold Rush: Should You Make the Journey East?) cites "Five Factors to Examine": manufacturing cost, transportation efficiency, lead time and scheduling stability, product design and technical capabilities, concluding that:

By analyzing these five critical dimensions for each unique procurement initiative, companies can better understand their geographic sourcing options - which products are candidates to be sourced from low-cost countries and which need to be purchased from more developed markets.

IP is conspicuously absent.

Accenture's The Secrets of Successful Low-Cost-Country Sourcing states that "It’s absolutely essential that LCCS [low-cost-country sourcing] be made a core part of the overall corporate strategy" [but] successful LCCS is not a straightforward proposition [as it] involves a careful balancing of often competing interests within a company and demands great flexibility."

IP is apparently not part of this equation. It is certainly not sufficient to laud a client's "40-strong, largely Chinese procurement team in China. What’s more, the sourcing manager is a strong believer in working with local staff. It’s not just a question of culture and language, he explains: "These are people with a strong local network who are in tune with local market conditions.""

Ariba's Supply Base Localization: A Different Look at Low-cost Country Sourcing states that "Capturing the sourcing savings in a low-cost manufacturing strategy means weighing the risks and understanding total cost" but fails to mention IP. It's section When China Is Not the Answer is devoted solely to total cost piece part analysis: "As sourcing teams [are] getting a better handle on true total cost of ownership, a number of commodities are revealing themselves to be more costly when sourced from Asia versus from supply bases closer to home."

The Supply Chain Resource Consortium's Do Organizations Consider Strategic Cost Management When They Outsource To China? does not cite IP in its value equation nor does it mention IP in its 6-part China Series save for a brief mention of "laws to protect intellectual property."

I was surprised closer to home by an otherwise fine regional accounting and management firm, Plante & Moran, and its partner in the Strategic Planning and Global Services practice, Craig Fitzgerald. Having systematically tracked Fitzgerald's public materials since 2004, especially those having to do with China-related investments, I approached him in March 2006 about the seeming omission of Intellectual Property (IP) protection: "In comparison to your analyses of supplier tiers and recommendations for action, IP gets only a mention. A mantra around our shop for both outsourcing and offshoring is "Low cost is not low risk.""

I was saddened by his voicemail of 23 March, 2006:

I did get your voicemail and email messages, thank you very much. The nature of my consultation doesn't deal with IP protection whatsoever, so I really think us having a conversation would not be productive for you or for my clients as this is an area that I do not get into. I deal specifically with Customer relationship management and Enterprise strategy for auto suppliers. I do not go far afield or get into the tactics… [transcription of retained voicemail]

While Fitzgerald was very polite, all those who listened to his message agreed with my opinion that he closed with a second kind, but firm, attempt to convince me to not call again, all this from a fellow that states that he deals specifically with "Customer relationship management" and "Enterprise strategy for auto suppliers."

Fitzgerald is not alone. In dealings with a US tier one with Chinese operations, their headquarters staff were surprised to hear a key "advisor from Japan" shy away from any discussion of IP protection. I asked if the advisor was Japanese (yes) and if the individual was a long term contractor to this firm and other clients (yes). I noted that Chinese are not fond of Japanese on the best of days (decades ago my Chinese clients wanted, and paid for, tech support out of the US rather than rely on our Japanese distributor) and that the advisor could not raise sensitive issues lest it prejudice his ongoing consulting. Such an individual was not going to offer the US supplier any guidance beyond the mechanics of production and logistics.

Fear of reprisal by a host government:

While I've previously noted that the "established guardian community - major management consultancies, banks, investment houses and law firms - is restrained by fear of reprisal by a host government refusing them business in a designated country," few examples outshine the recent hasty scramble by a Big Four accounting firm, Ernst & Young, to grovelingly withdraw a and refreshingly frank May 3, 2006, assessment of Chinese bank non-performing loan (NPL) exposure. E&Y estimated total Chinese bank NPL at USD $911 billion with the NPL for the four major state-owned banks (the Big Four) spun off from the People's Bank of China (PBOC) in 1983-84 (Bank of China (BOC), Industrial and Commercial Bank of China (ICBC), China Construction Bank (CCB), and Agricultural Bank of China (ABC)) at USD$358 billion - a figure three times greater than China's official estimate of USD$133 billion. More interestingly, E&Y audits ICBC, which is shortly to list).

China Business Services noted that E&Y's retraction "stated that the report "contained errors" requiring retraction of the study in toto. In doing so, E&Y has bowed lower than any western firm one can remember in recent times, offering in addition to the public shame of retraction, its profuse apology as well as sincere regrets.

Definitely read McGregor's China's banks still bedevilled by bad debts in which McGregor shows that E&Y's reporting was similar to that of PwC and McKinsey, and cited the frank comments of a managing director at E&Y, Jack Rodman:

AT first glance, Beijing would appear to have tackled head-on the mountain of bad debt in its state banking system - debt which has built up in the years since China began opening the economy in the late 1970s. In 1999, the Government established bad-debt disposal companies to sell off sour loans, used bank profits to wipe out more, and also pumped in cash from its foreign exchange reserves to recapitalise the institutions.

 In other words, US balance of payment debt paid, and continues to pay, down Chinese bad loans.

In all, China cleared about $US560 billion ($730 billion) of bad debts in a flurry, an amount equal to about half the country's gross domestic product at the time the funds were deployed. So after a period during which China enjoyed boisterous economic growth rates, it is surprising that a series of new reports say non-performing loans (NPLs) remain stubbornly high and may be getting worse.

A report issued on Wednesday by Ernst & Young, the accountancy firm, puts China's total liabilities for NPLs at just over $US900 billion, even higher than its $US875 billion stack of foreign reserves, the largest in the world. E&Y's findings are broadly in line with a report by professional services firm PwC issued last week, and similar in tone to another lengthy report released this week from McKinsey, the consultancy, on China's financial system.

"I think the numbers will be a big surprise because China has been giving the impression (with its banks listing overseas) that the problem is behind us," said Jack Rodman, a managing director with E&Y. "China has not really resolved the issue - they have just moved it from one state enterprise to another."

The three reports say the original stock of bad loans has not been dealt with and that a huge stack of new NPLs has been created. "While there have been improvements in the banking sectors, and the Government has sought to address NPLs, the core causes for the build-up have not been fully dealt with," said the McKinsey report.

"Until these problems are addressed, the problem is likely to persist, and the banking system will remain vulnerable to potential liquidity shocks." The "problems" are familiar - a lack of commercial mindset among banks and skills to assess credit risk, and a sprawling nationwide branch system over which the head office in Beijing has little control.

In other words, the Chinese banking system is insolvent, and investors may never see their money back, much less a profit.

Three of the big four state banks, which have either listed overseas or are preparing to, have an even better record, with their NPL ratio by December last year under 5 per cent, according to PwC. The fall was not due to NPL resolutions, but transfers to the bad debt disposal agencies, and a surge in new lending which made existing bad loans a smaller part of the expanding pie of banking assets.

"So while NPL ratios appear to be decreasing, in number NPLs are probably increasing," says Mike Harris, the PwC report's author. The bad debt disposal agencies, known as asset management companies (AMCs), have taken on $US330 billion in sour loans since 1999, but have only resolved about $US100 billion.

In other words, no substantive change has occurred in Chinese lending and banking practice.

Read Luo Jun's Bank of China's $9.9 Billion IPO Plan Vexed by Bad Loan Legacy for more on the mechanics. I recommend readers to Richard Kuslan's Asia Business Intelligence, Dan Harris' posts at China Law Blog, and byzantine_ruins' The Epic of the Fall:

Readers are referred to the many additional links on Chinese banking revelation are in the bibliography below. In lieu of the E&Y withdrawal, I recommend two reports by the IMF's Richard Podpiera. Read Does Compliance with Basel Core Principles Bring Any Measurable Benefits?, November 2004, for general banking sector performance and Progress in China’s Banking Sector Reform: Has Bank Behavior Changed?, March 2006, for analysis of Chinese lending growth, credit pricing, and regional lending patterns in search of "evidence of changing behavior of the large state-owned commercial banks (SCBs)." All the items by Minxin Pei offer readers a sound view of the structural issues contributing to China's economic and societal pressure.

This reprisal segment closes with the conflicts of interest facing investment bankers Lehman Brothers, Morgan Stanley and Goldman Sachs during the 2005 attempt of China's CNOOC to acquire Unocal:

Lehman Brothers, which has been aggressively wooing Chinese clients, also happens to be the banker for Chevron in the battle for control of Unocal, the American oil company. Chevron's strategy in seeking public support for a deal with Unocal has included denouncing Cnooc's offer not just on its economic merits, but also as a Chinese government-sponsored bid that threatens America's national security. Chevron's lobbying campaign in Washington all but compares China to Russia during the cold war. This has made for some awkward moments for Lehman Brothers in China. "Pitching business there at the moment is not the easiest thing to do," lamented a Lehman banker who just completed a trip to Hong Kong that he called "unsuccessful."...  

Morgan Stanley, which is also trying to create a franchise in China, is representing Unocal. Relying in part on Morgan Stanley's advice, Unocal's board has rejected Cnooc's bid - which is actually higher than Chrevron's offer - as too low, considering the political risks… "Conflict resolution is tremendously complex to start with for most big firms," said Steven Koch, co-chairman of global mergers and acquisitions at Credit Suisse First Boston. "It gets even more complicated when the client is associated with a country's national interests."…

Goldman Sachs… has spent the last several years zealously courting Chinese government officials… Goldman's decision to pursue working for Cnooc was a calculated one. It knew full well that Cnooc had a long shot of winning. As adviser to the losing side in the takeover fight, Goldman would make virtually no money for its months of strategizing...  

But for Goldman, it may have looked like a no-lose situation. If Cnooc won, it would be a watershed deal that would reap millions of dollars in fees for Goldman. But being on the losing side would offer rewards, too. The experience itself has already helped Goldman build deep relationships inside the Chinese government that may give it a leg up in the coming years... [S]ome people close to Cnooc have suggested that Goldman could be blamed if the Chinese company ends up losing the current takeover battle. Critics are already saying that Goldman has miscalculated the level of protectionist sentiment in Washington as well as Chevron's ability to stir up a firestorm of protest against the Chinese company.

The moral that I take from this section in particular and the full note in general is that if you are an investor in China in any fashion and are not performing your own independent, rigorous analysis from multiple sources, but rather relying on the advisory of your accountant, that you are in for a tenure marked by surprise and cost.

Next: Physicians, heal thyselves: The Big Four accountancies are setting up as targets for Intellectual Property (IP) theft

Chinese banks reap rewards of reform
(Asia Pulse/XIC)
Asia Times
Jun 7, 2006

Beijing no longer commands instant obedience from China's local authorities
The Economist
Jun 1, 2006

China finance: Investors bet on BOC
May 26th 2006
Also here

Banking on Reform
Recent reforms have helped China avoid a banking collapse. But how will its banks hold up when the sector fully opens to foreign competition?
by Stephen Thomas and Chen Ji
China Business Review
CBR May-June 2006

Bank of China's $9.9 Billion IPO Plan Vexed by Bad Loan Legacy
Luo Jun
May 16, 2006

In a Scientist's Fall, China Feels Robbed of Glory
New York Times
May 15, 2006

Chip fraud in China becomes embarrassing setback
Faked development of digital signal processors unravled
By Sumner Lemon, IDG News Service
May 15, 2006

Ernst & Young And China Banks -- Better Wrong Than Right?
Posted by Dan Harris
China Law Blog
May 15, 2006 at 09:35 AM

Non-Performing Accountants (and Loans)
China Business Services
May 15, 2006

Ernst and Young Retracts China Bad Loans Report
Posted by Richard Kuslan
Asia Business Intelligence
May 15, 2006 01:21 PM

China's Banks May Be Troubled, But Nobody Knows The Trouble Ernst & Young Has Seen
Posted by Dan Harris
China Law Blog
May 15, 2006 at 12:41 AM

Ernst & Young Bullied To Withdraw NPL Report By Chinese Authorities
By byzantine_ruins
The Epic of the Fall
May. 15th, 2006 @ 09:35 am

Ernst & Young withdraws NPL Report
E&Y Global headquarters
12 May, 2006

China central bank says report on extent of bank NPLs 'seriously distorted'
05.11.2006, 08:00 AM

China's banks still bedevilled by bad debts
They've just passed the buck, writes Richard McGregor
Richard McGregor
The Australian-FT Business
May 05, 2006

China on Borrowed Time?
David Bosco
Foreign Policy
Wed, 05/03/2006 - 1:22pm.

Troubled Loan Trail Leads To China -- Do Not Try This At Home
Posted by Dan Harris
China Law Blog
May 3, 2006 at 11:16 PM

China bad loans may reach total of $900bn
By Richard McGregor in Beijing
Financial Times
Published: May 3 2006 07:46 | Last updated: May 3 2006 07:46

China Bad Loans May Reach Total of $900bn
China Business 2.0
May 3, 2006
MIRROR of much of the McGregor/FT article

Around Asia's Markets: Bad loans dim ardor for China banks
By Michele Batchelor
Bloomberg News
APRIL 25, 2006

The Chinese Conundrum: External financial strength, Domestic financial weakness
Brad Setser
Director of Research, Roubini Global Economics
Research Associate, Global Economic Governance
Produced for CESifo Conference: "Understanding the Chinese Economy"
Programme, University College, Oxford
This draft April 15, 2006

The Dark Side of China’s Rise
By Minxin Pei
Foreign Policy
March/April 2006
Scrolled to paid archive
Mirror here:
The Dark Side of China's Rise
Minxin Pei Foreign Policy, March/April 2006
Carnegie Endowment for International Peace

Progress in China’s Banking Sector Reform: Has Bank Behavior Changed?
Richard Podpiera
International Monetary Fund Working Paper WP/06/71
Monetary and Financial Systems Department
Authorized for distribution by Abdessatar Ouanes
March 2006

Supply Base Localization: A Different Look at Low-cost Country Sourcing
By David Morgenstern
Supply & Demand Chain Executive
February/March 2006

China Is Stagnating in Its "Trapped Transition"
By Minxin Pei
Financial Times, February 24, 2006
Mirror at CEIP

Competition and trade in the U.S. auto parts sector
by Thomas H. Klier and James M. Rubenstein
Chicago Fed Letter
Research Department of the Federal Reserve Bank of Chicago
January 2006

China Is Paying the Price of Rising Social Unrest
By Minxin Pei
Financial Times, November 7, 2005
Mirror at CEIP

A Fresh Approach on China
By Minxin Pei
International Herald Tribune, September 9, 2005
Mirror at CEIP

Protecting intellectual property in China
Litigation is no substitute for strategy.
Meagan C. Dietz, Sarena Shao-Tin Lin, and Lei Yang
The McKinsey Quarterly, 2005 Number 3

There's a New China Syndrome on Wall Street
New York Times
July 24, 2005

The Secrets of Successful Low-Cost-Country Sourcing
By Kris Timmermans
Outlook Journal, June 2005

The Economic Basis for Social Unrest in China
Albert Keidel
Carnegie Endowment for International Peace
for The Third European-American Dialogue on China
The George Washington University
May 26-27, 2005

OE Auto Parts Supplier Strategy for the Next Ten Years
Marc Santucci
2 May, 2005

Banking reform to continue despite scandals: official
Xinhua English
March 10, 2005 00:57:36

Sourcing in China not a sure bet
By strategy+business
Special to CNET
February 7, 2005, 10:00 AM PST
[Recycling of content from 
China's Gold Rush: Should You Make the Journey East?]

The China Syndrome
A five-dimension analytical model for deciding when (and when not) to purchase from the East
By Michell Quint & Dermot Shorten

strategy + business

Does Compliance with Basel Core Principles Bring Any Measurable Benefits?
Richard Podpiera
International Monetary Fund Working Paper WP/04/204
Monetary and Financial Systems Department
Authorized for distribution by Abdessatar Ouanes
November 2004

China's Gold Rush: Should You Make the Journey East?
Michell Quint & Dermot Shorten
Booz Allen
November 2004

Rural Financial Sector Reform in China
Thorsten Giehler
Asia Forum on Financial Sector Reforms in China, Frankfurt
26 Oct, 2004

Do Organizations Consider Strategic Cost Management When They Outsource To China?
by Rob Handfield, SCRC
Supply Chain Resource Consortium (SCRC)

China Series by Rob Handfield, SCRC:
Global Sourcing from China: Insights from a Recent Visit - China Series #1
Planning and Controld Systems in China (PLAN) - China Series #2
Identifying and Negotiation with Chinese Suppliers (SOURCE) - China Series #3
Manufacturing in China (MAKE) - China Series # 4
Logistics in China (DELIVER) - China Series # 5
Environmental Risks in China's Supply Chain - China Series # 6

Ch 3-Finance-Sec 2: Commercial banks: The big four state-owned banks
China Hand March 2004 Main Report
Economic Intelligence Unit
March 2004

China -Threat or Opportunity? You Decide
Craig Fitzgerald
Manufacturing Consulting Services, Plante & Moran
March 2003

Strategies for entering the Chinese Market
Craig Fitzgerald
OESA China Business Report
SAE 2003 World Congress
March 3, 2003

From Pirates to Partners: Protecting Intellectual Property in China in the Twenty-First Century
Peter K. Yu
American University Law Review, Vol. 50
Date Posted: December 7, 2000
Last Revised: April 21, 2003

Gordon Housworth

InfoT Public  Intellectual Property Theft Public  Risk Containment and Pricing Public  Strategic Risk Public  


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Low cost is not low risk: realities of IP Loss


Previous: Trends in Intellectual Property IP transfer to China

This note builds upon the Intellectual Property (IP) protection series. Readers are encouraged to review:

The US supply base is undeniably concerned about IP loss in China; trade issues, protection of intellectual property and the opening of China's market to foreign products were high on the US agenda during Chinese president Hu Jintao's recent visit to North America. While certain assets are likely targets inside China, the key is to think "asset" instead of "country". Risk cannot be based on countries or "risky areas" but rather wherever a sufficiently valuable asset is accessible at any tier in any country - as the collector will move to the least defended point that contains the IP. We currently see, for example, collection efforts on the US west coast against electronics assets long before they are transferred to a presumably risky country in Asia. Commercial and dual-use technologies are high on the collection list.

The idea of trying to isolate "risky countries" with respect to IP migration remains unworkable due to the revenue loss and market share erosion that occurs when IP is withheld plus the fact that nations such as China demand that you be there in order with competent products in order to do business.

The three key areas of vulnerabilities remain the same: Pricing model compromise (supplier outsourcing, subcontracting, etc.), Data citadel attack (R&D hives and data warehouses), and Human resources (HR) churn. All three are critical, yet we find that HR too often gets scant attention even though collection effectiveness is high while risk and cost are low.

Yes, all technology migrates over time but most firms assume risk by default in (a) not identifying what is already compromised, (b) identifying what assets need to be protected and (c) the amount of dollars and effort needed to realistically protect those assets - wherever they occur in the supply chain. If a collector obtains a critical IP asset, the owner's entire ROI justification collapses along with the expected revenue stream. And when the IP asset is the core of a system or subsystem that often contains more mature, less competitive technology, the entire system revenue stream truncates.

Many of the risks to suppliers as well as OEMs were inadvertently demonstrated in a recent 2006 SAE World seminar, Lessons Learned in China: The Automotive Supplier Perspective distilled from "more than 50 interviews and surveys with executives of global automotive suppliers located in the U.S."

A firm expert in supply chain analysis and logistics, PRTM, had surveyed these global suppliers, distilling the collective supplier wisdom on attempts at IP protection as "To protect critical IP, choose components wisely, break up assemblies, select partners carefully and exploit all legal options." Unfortunately, all are ineffective in protecting IP as none of the four offer protection against even modest collection efforts. They are even less effective against an Asian style method of collection.

It validated our assessment that commercial supply bases have no effective protection whatsoever and whatever attempts that are being made at a 'solution' to IP risk are only lulling the targets into a false sense of security. Following is the text of the original PRTM IP protection slide from their survey followed by our commentary pointing out the weaknesses of each approach. (I hasten to note that PRTM was only presenting a collated supplier response, but I fear that the longer those efforts are allowed to stand without challenge, the more likely it is that PRTM will be associated with these de facto "best practices.") PRTM text is in italics and was transcribed from PRTM handouts:

Choose components wisely

  • Only source components which have reached maturity in marketplace
  • Only source basic components with little "design know-how"
  • Make IP protection a priority of your make/buy strategy
  • Or build your own plant in China

COMMENT: The market value of an asset trends downward from high value design to low value commodity. Such progressive value loss can often be mitigated if mature IP is integrated into systems led by a high value asset. It is difficult if not impossible to isolate the newer asset(s) from the older in the production of integrated systems. (In the case of electronics, for example, the asset will appear in three overlapping tiers: logic design, embedment in firmware and test.)

The damage from IP loss moves progressively up the value chain, to newer and more vital IP, in terms of future growth, because collectors are re-tasked to target and acquire more valuable IP.

Compromise of the high value asset compromises both the value of the lead asset as well as the maturing and mature technology components in the system. When there is an IP loss, it is most likely that the discovery will show that the damage to the business is not isolated and broader than anticipated.

There is no "build your own plant" option. Regardless of whether your firm moves into an existing structure or contracts its own, someone else will erect the building, install HVAC, electricals, electronics and contract the security function, guards included.

A local option that delivers protective control is feasible only with a complete IP asset protection program (including asset vulnerability assessments), and significant preparation in selecting and developing local supply chain relationships.

Break up the puzzle

  • Do not source too many components from one supplier
  • Piece out assembly to multiple suppliers in different regions - protect integration IP
  • Avoid giving unnecessary specification & drawing details

COMMENT: Location-specific IP protection is a partial approach - and too often a red herring - that rarely if ever adds much protective value for a global asset. Conversely, location-specific approaches often creates a false sense of comfort on the protective side. The accessibility of the asset to hostile IP collectors at any tier, at any location, is the key question.

Asset-specific protection, by contrast, is global, or requires a comprehensive view of asset accessibility in the supply chain. It almost always becomes optimally effective on the basis of a complete asset (value chain) exposure assessment to be effective.

Choose integrity tested partners

  • Check integrity history with current customers
  • Choose strategic partner with a vested interest in protecting your IP - heavily dependent upon both yours and his business success

COMMENT: Even under ideal conditions, partnering merely shares the risk of IP loss but does not control it. Under typical conditions, partnering is not controlled and generates additional risk. (Note the levels of IP transfer that already occur in any joint venture.)

Education and a clear delineation of joint interests is usually required, but frequently hard to affect and enforce.

Customers may not pre-disposed to cooperate with supplier IP protection efforts.

Invest in legal protection of IP

  • Ensure strong legal contract and non-disclosure agreement… but still proceed with extreme caution
  • Use Chinese lawyers to write detailed "contracts" - jointly signed in person
  • Prosecute offenders relentlessly

COMMENT: Unfortunately, legal remedies come after the economic damage is done or is underway, i.e., the ROI and revenue loss are unrecoverable.

Legal remedies are ineffective outside the US, parts of the EU and Australia, and may in fact be damaging to the litigating party.

A legal strategy may be useful for asset sales or portfolio management (disposition), and will likely be a necessary part of US-based due-diligence for Sarbanes Oxley compliance. It will have limited deterrent value at best for clandestine IP asset collectors.

Above these risks to IP, PRTM found that "the majority of North American automotive suppliers sourcing from China are not realizing great savings," that "over half the participants in [the PRTM] study achieved less than 40% of their savings goals" for their Chinese operations:

PRTM concluded that China sourcing requires a minimum savings of 20% to outweigh such negatives as costs associated with logistics, quality and intellectual property (IP) risks… [PRTM cautioned] suppliers not to get too excited about the low price of a Chinese-made component. "Premium freight is the most basic risk" [of] the hidden costs of doing business in China… [Suppliers] wishing to save money by producing in China need to factor in the cost of insurance [and] the cost of lawyers and investigative teams to enforce IP rights and allocate funds to cover quality-related risks associated with doing business with one of the country’s relatively new suppliers… Suppliers should carefully select their business partner in China by doing local research and networking, not flipping open the Yellow Pages

Given the substantive IP transfers inherent in joint ventures, it was interesting to note the ebbing of JVs:

As far as suppliers wanting to establish a China strategy, PRTM finds joint ventures are becoming a thing of the past, with 21% of respondents in a JV with a Chinese company in 2005 but just 14% expected to be in one by 2010. The growth in China sourcing will come in the form of greenfield plants [with] 28% of respondents taking this approach last year and 44% expected to in 2010. "Joint ventures are out"

Even these brief comments does not do the problem justice. We see otherwise skilled firms adopting an IP protection posture involving amateurish methods and unimplementable good intentions, often buttressed by the erroneous belief that US legal remedies are applicable on a global basis. Other firms violate the rule of "Absence of evidence is not evidence of absence." When no legitimate Vulnerability Assessment has been carried out, it is tenuous at best to claim that no penetrations have been made, or that no threats of collection exist.

Leave it to the English to be candid:

There is an almost suicidal rush now to transfer research and development operations to China lock, stock and barrel. Financial consultants have advised firms about the tax advantages of relocating R&D to China; you can hire researchers with PhDs very cheaply compared to the more advanced countries. All this raises the risk of loss and abuse of intellectual assets in a country where copycatting and intellectual property piracy have long been a national sport.

US and EU IP is being harvested at an intense rate by a hierarchy of collectors. In the case of China, Chinese firms are being pressured for increased margins while Chinese scientists and researchers are being pressured for national breakthroughs that create native Chinese advances not subject to foreign control and/or royalty payments.

Edward Tse's China's Five Surprises offers a fine structural analysis of points that most, if not a wide majority, of US and EU firms are not taking into account in planning their response to China. Even this aggressive posture as outlined by Tse is not enough to satisfy CCP goals for growth, thus the pressure on Chinese scientists to acquire foreign technology as part of their research.

In heated competitive atmospheres such as this, it is all too easy to view foreign IP as harvestable assets. Changes in Chinese law are reducing even the modest IP protection for foreign firms save for the efforts offered up to redress audio and film piracy. We have reason to believe that there is also an assumed feeling of impunity on the part of collectors in the face of feeble or ineffectual responses from targets.

We expect visibility of offshoring, outsourcing and IP theft to rise in the US 2006 and 2008 elections. It is a basic tenet of attack strategy that the attacker (collector) will step up activities in progress if they feel that a heightened security posture is imminent. What is belated good practice and awareness on the target side will be met with accelerated collection on the adversary side.

We recommend early adoption of prudent, non-adversarial business practices now to identify current exposure and to combat the forthcoming surge in collection efforts. Beware ineffectual IP protection tools and processes such as the mechanisms flagged above or IP protection pyramids that, while desirable, are fuzzy and leave the client without the tools to achieve its IP goals. We have achieved success with strategies drawn from proven Counterterrorism (CT) practices applied to Intellectual Property risk evaluation and remediation. We know from experience that these processes can be taught and that they are easy to embed as company best practices performed by its employees instead of an outside consultant. Properly done, IP protection becomes a crucial business attribute, like quality, lean manufacturing or robustness.

Next: Persistent limitations and deficiencies among the 'guardian class' of business advisors charged with protecting their clients' interests in China

Piracy in China Remains Concern For U.S. Firms
Cui Rong
Wall Street Journal
May 16, 2006

Bank of China's $9.9 Billion IPO Plan Vexed by Bad Loan Legacy
Luo Jun
May 16, 2006

In a Scientist's Fall, China Feels Robbed of Glory
New York Times
May 15, 2006

Chip fraud in China becomes embarrassing setback
Faked development of digital signal processors unravled
By Sumner Lemon
IDG News Service
May 15, 2006

Automotive Sourcing in China & Cost Savings [Title from weblog - may not be the paid subscriber title]
By Christie Schweinsberg
April 6, 2006
Mirror from
Manufacturing Forum, Practical Machinist

Study Reveals: Auto Suppliers Find No Cost Guarantee in China Sourcing
April 3, 2006
Mirror at China Supply Chain Council

Study Reveals: Auto Suppliers Find No Cost Guarantee in China Sourcing; OESA and PRTM Management Consultants' Survey: More Than Half of Companies Studied Achieved Less Than 40 Percent of China Sourcing Targets
Business Wire
April 3, 2006

Enter the Dragon? - Lessons Learned in China Sourcing
Executive summary [Handout obtained at SAE session presentation]
Andreas Mai and Stephen Pillsbury, PRTM Management Consultants
Findings from a study based on more than 50 automotive supplier executive team interviews and surveys of supplier experiences and best practices in China
Lessons Learned in China: The Automotive Supplier Perspective
SAE 2006 World Congress, Detroit, MI
April 3, 2006
NOTE: Best online summaries immediately above

Competition and trade in the U.S. auto parts sector
by Thomas H. Klier, senior economist, and James M. Rubenstein, Miami University of Ohio
Chicago Fed Letter
Research Department of the Federal Reserve Bank of Chicago
January 2006

Don't jump in without testing the water
Peter Humphrey, ChinaWhys
China-Britain Business Council (CBBC)

China’s Five Surprises
by Edward Tse
Strategy + Business
Winter 2005

GM Eyes Asia for Cost Cuts
Asian suppliers could help automaker trim costs
by Joseph Szczesny
Car Connection
Sept 12, 2005

Serial No. 109–34
MAY 17, 2005
Mildly indexable HTLM version

OE Auto Parts Supplier Strategy for the Next Ten Years
Marc Santucci
May 2, 2005

A "China Price" For Toyota
The auto giant is taking its cost-slashing drive to a new level. Can its suppliers match China's cheaper parts?
By Chester Dawson in Toyota City, with Karen Nickel Anhalt in Berlin
Business Week Online
FEBRUARY 21, 2005

Sourcing in China not a sure bet
By strategy + business
Special to CNET
February 7, 2005, 10:00 AM PST

Gordon Housworth

InfoT Public  Intellectual Property Theft Public  Risk Containment and Pricing Public  Strategic Risk Public  


  discuss this article

Trends in Intellectual Property (IP) transfer to China


Trends outlined in the 1999 Bureau of Industry and Security's U.S. Commercial Technology Transfers to the People’s Republic of China have accelerated to the present day:

China’s laws, regulations, and policies with regard to foreign investment and trade include numerous provisions and mandates for foreign technology transfer. These policies are clearly intended to support domestic reform and modernization efforts toward self-sufficiency in high-tech sectors. Furthermore, many of the provisions included in China's existing industrial policies appear to raise questions as to their consistency with international trade practices and bilateral agreements... Despite these policies, however, many foreign corporations continue to invest in China, including US high-tech companies. In doing so, these companies often must transfer commercial technology in various forms in order to accommodate Chinese foreign investment and import regulations, which have become increasingly selective in terms of the level and type of technologies allowed. Thus, it is clear that foreign firms are being coerced into transferring technology (which they probably would not otherwise do) as the price to be paid for access to China's market.

The more difficult question to answer, however, is the degree to which these transfers are "forced" [as the] degree to which US technology is being transferred to China is a combination of Chinese law and strategic decision-making on the part of US corporations. That is, technology transfer is both mandated in Chinese regulations or industrial policies (with which US companies wishing to invest in China must comply) and used as a deal-maker by US firms seeking joint venture contracts in China…

[F]oreign investors face a difficult dilemma: to invest early and accept the risks involved in doing so in hopes of minimizing potential losses while creating a market presence and goodwill in China, or to wait and see how China's market and policies develop, investing when the time is ripe and investment policies less discriminatory. The leading high-tech companies — American, European, and increasingly also the Japanese — seem to have decided on the former strategy…

[Part 1 shows that] China’s foreign investment policies have followed a clear pattern characterized by an increasingly targeted focus on hightechnology investment and imports. These policies are intended to bolster China’s modernization efforts in both the civilian and military sectors. The most significant finding of this study, however, is the degree to which US high-tech firms are collaborating on R&D with leading Chinese universities and research institutions in China, an offset agreement frequently accompanying joint venture contracts. Although there is as yet no clear cause and effect as much of the evidence is circumstantial, Part 2 of the study demonstrates that trends in Sino-US trade are worrisome in that hightechnology sector exports (such as electronics) are increasing from China to the United States and elsewhere while at the same time the US trade deficit with China is climbing.

Long past the period of sending "outdated factory equipment to China to produce older models no longer salable in the West, the 2006 landscape shows a continuing foreign competition in China:

so fierce [that] Honda is about to introduce its latest version of the Civic only several months after it went on sale in Europe, Japan and the United States. Toyota, meanwhile, is assembling its Prius gasoline-electric sedan only in Japan and China. [In 2005-6] Ford opened a second production line next door that is practically identical to one of its most advanced factories, the Saarlouis operation in southwestern Germany. The new line produces the Focus, the same small car it builds in Germany (but different from the Focus sold in the United States). And with continuing improvements to the first line, it will bring total capacity here to 200,000 cars a year by June [2006]…

American and European carmakers, including Ford, General Motors, DaimlerChrysler and Volkswagen, as well as Toyota, Honda and Nissan of Japan are introducing their best technology to their plants in China, and not only to compete against one another. They also face rapidly growing competition in the Chinese market from purely local companies like Geely, Chery and Lifan.

That technology infusion is now reversing the acquisition direction. Shanghai Automotive Industry Corporation (SAIC) "acquired a controlling stake in Korean car maker Ssangyong Motor Co." in 2004. Nanjing Automobile Corporation bested SAIC to acquire the UK's MG Rover Group in 2005, dismantling its factories for shipment to China (although SAIC gained rights to two Rover designs). Chinese suppliers such as Wanxiang continue to acquire automotive suppliers, many of whom "needed cash because Chinese manufacturers like Wanxiang were eroding their business." To solve its shortfall in efficient engine manufacture, the Lifan Group in partnership with the CCP is attempting to purchase the highly advanced Chrysler-BMW joint venture Campo Largo engine plant, which if successful, would see the plant dismantled and moved to China to seed indigenous engine manufacture. [Russian AvtoVAZ and GAZ has also evinced interest.]

SAIC is now using expertise gained from its joint ventures with GM and Volkswagen to produce its own upscale luxury sedans in 2006, occupying both partner and competitor roles to its foreign partners. Foreign OEMs have no avenue of redress:

Under Chinese regulations, to make cars in China, foreign companies must form joint ventures in which their Chinese partners own no less than 50%. The major multinationals have already teamed up with the biggest and most promising local firms. [They] have little choice but to keep making their cars and encourage their partners not to compete too directly with them.

GM and Volkswagen have no choice but to acquiesce even though they know that all the IP they contributed, and will contribute, to their joint ventures will increasingly be used against them:

In a prepared statement, GM said it "understands" Shanghai Automotive's "desire for further growth" and that it is confident "SAIC recognizes that the success of both companies in the China market is closely linked to the success of our joint ventures."

In a prepared statement, Volkswagen said, "Volkswagen and SAIC keep a close and long-lasting partnership. We understand SAIC's wish to build up an own Chinese car brand. We offered our support in the past and still do at present."

While foreign OEMs have enjoyed rapidly rising production of "family vehicles" (cars, SUVs and minivans) in China in the 2000-2005 period, indigenous Chinese manufacture has grown at much higher rate. (It is an axiom of technology maturation that each generation takes half the time of its predecessor; Japanese car manufacturers took 20 years to establish themselves in the US market, the Koreans 10 years, and short of import limitations, I expect the Chinese to half that, all at lower cost.)

SAIC's vertical integration will drive other Chinese auto firms to follow suit, thereby increasing the pressure and demands on foreign OEMs for more and better technology even as it narrows their options. Foreign OEMs will become collateral damage in the competition between Chinese OEMs and Tier One suppliers.

I predict that Chinese firms will move instead to replace foreign firms or absorb their Chinese operations when the foreign OEMs have nothing else to offer, ultimately buying into increasingly ailing foreign OEMs so as to create sales channels for Chinese vehicles.

What happens when even the current level of JV supplied technology is no longer sufficient, when the desired technology is not within the hands of foreign OEMs?

Next: Low cost is not low risk: realities of IP Loss

China's Car Sector Gears Up for Big Change
At Shanghai Auto, Foreign Partners Now Find A Rival
Wall Street Journal
April 5, 2006

AvtoVAZ Goes Brazilian To Secure New Engine Supplies
By Anna Smolchenko
The St. Petersburg Times
Issue #1154(20), March 21, 2006

Thanks to Detroit, China Is Poised to Lead
New York Times
March 12, 2006

Cutting U.S. jobs while prospering in China
A struggling U.S. auto parts maker faces a dilemma that's increasingly common as more products are made in China
By Craig Simons
Austin Statesman
March 05, 2006

China Seeking Auto Industry, Piece by Piece
New York Times
February 17, 2006

China takes aim at U.S. auto industry
By Michael Oneal
Chicago Tribune
Published January 29, 2006

GM Eyes Asia for Cost Cuts
Asian suppliers could help automaker trim costs
by Joseph Szczesny
Car Connection
Sept 12, 2005

China Investing in Rust-Belt Companies
Auto-Parts Maker Wanxiang Invests in U.S. Partners As Its Ambitions Expand
Wall Street Journal
November 26, 2004
Fee archive

U.S. Commercial Technology Transfers to the People’s Republic of China
Bureau of Industry and Security
US Department of Commerce
Key findings:

Full text by section: Part 1, Part 2, Part 3, Appendix A, Appendix B, Appendix C, Appendix D, Appendix E

Gordon Housworth

InfoT Public  Intellectual Property Theft Public  Risk Containment and Pricing Public  Strategic Risk Public  


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Dinah Shore, Chevrolet, television and Mexican immigration


From a 1996 discussion of perceived rational choices, risk assessment and process subversion, I offered:

[I] am reminded of a lecture by Herman Kahn, some thirty years ago, on cultural relativity, the punch line of which was that, "The Rockefeller's chauffeur doesn't care how many millions Rockefeller has but he gets ulcers if he hears the Vanderbilt's chauffeur is getting 50 cents an hour more," i.e., that one perceives themselves rich or poor, well off or less well, according to their peers. In contrast to the venture [capital] market of millions, I've watched professors scheme and position themselves no less intently for a minor research stipend numbering in the hundreds, or a mere trip to a convention. I am currently watching the rank and file members of a commercial client knife one another for one-up-man-ship at the expense of their overall success and their corporate mission.

No matter what the scope or "radio horizon" of the player, the player plays for everything on the table, **making the best possible judgment at the moment of decision among the choices on offer** (or they would have made a different decision). I see [a] correlation between an individual's lack of control [and] the self-interest/myopia of their decision process. There is also [a] collapse of time/scale in that the least powerful are reduced to grabbing that which is within arm's length. And the fewer the options, the more desperately they are clung thereto.

When Kahn comes to mind, it is usually for his systems thinking on fighting, winning and surviving nuclear war, his On Thermonuclear War and Thinking about the Unthinkable ,his "Tragic but Distinguishable Postwar States," for which he was the model for Dr. Strangelove in Kubrick's Dr. Strangelove, Or: How I Learned To Stop Worrying And Love The Bomb. (Kahn said that he should have received royalties.) Kahn was, however, one of many of the 1950s-60s period that studied cultural relativism, although much of it was devoted to analyzing an adversary's response posture. Perhaps Kahn's cultural relativism had left him when discussing the USSR as he appeared to mark Soviet bellicosity as perpetually high, that it could not be otherwise, that we must assume the enemy at his worst and that the enemy is always "bright, knowledgeable, and malevolent."

I can attest to his size ("prize-winning pear" is understatement) and marathon, over the top delivery. (Louis Menand's FAT MAN is good introduction to Kahn and his thinking.) I remember the Vietnamese being duly impressed when Kahn visited Saigon early in the war. Typical of protein-deficient cultures, they felt that a man that could acquire that many calories must be a great person (see Kahn in Japan). If memory serves, it was during that visit that Kahn greeted a military audience with "There are four or five ways to win this war and one way to lose it, and that’s the one you chose."

Now about Dinah Shore, one of the most well-known TV personalities of the first two decades of US television. Kahn punctuated his Rockefeller-Vanderbilt chauffer cultural relativism presentation with the example of Mexico: Impoverished Mexicans did not measurably perceive themselves worse off that their peers or see an immediate opportunity to better their condition until Dinah commenced singing the advertising trademark "See the USA in Your Chevrolet" ads (wav audio, lyrics), a song and delivery that alerted the campesinos to a much better opportunity north of the Rio Bravo. 'Arriba, muchachos!' and the rest is Taco Bell.

Out of curiosity, I'd looked the song up a few years ago as I wanted to understand when the Mexicans might have started moving (first presuming that they could see a TV). The original publisher/owner was Chevrolet Division of General Motors Corp. It turns out that while the Dinah Shore Chevy Show first aired in 1956, the jingle aired six years earlier in September 1949 on CBS Primetime, 1949 - 1950, "Inside U.S.A. With Chevrolet". Inside U.S.A. featured "a real-life husband-wife duo":

a congenial couple who sang and conducted interviews and did a few comedy skits; they sang their THEMEs, one of which was the Chevrolet jingle six years before it became associated with Dinah Shore; Big name guest stars included stars of the Broadway stage including Ethel Merman, stars of motion pictures including David Niven, Boris Karloff, and a radio actresss named Lucille Ball promoting some new show she was going to do called "I Love Lucy"

Actually an attempt to transfer a 1948 Broadway hit of the same name to television, Inside USA was expensive to produce, causing Chevrolet to discontinue sponsorship in 1950. But as television was then uncommon even in the US, the Chevy song and wider availability to US and Mexican audiences had to wait for Dinah:

Shore pioneered the prime-time color variety show when The Dinah Shore Chevy Show started in October 1956 on NBC and ran on Sunday nights until the end of the 1963 season... More than any song she sang, Dinah Shore symbolized cheery optimism and southern charm, most remembered for blowing a big kiss to viewers at the end of her 1950s variety show. As hostess, she sometimes danced and frequently participated in comedy skits, but was best loved as a smooth vocalist reminiscent of a style associated with the 1940s... Sponsored by General Motors, then the largest corporation in the world, Dinah Shore helped make the low-priced Chevrolet automobile the most widely selling car up to that point in history...

Having spent some quality time in the third world, beyond the walled compounds of the elite, I can remember TVs being present in cantinas, town meeting spaces and arranged in arrays in shop front windows long before they appeared in homes of the poor. I once had the opportunity to ask some elder Mexicans about their early memories of El Norte and their reasons for coming north. While they first cited poverty at home and opportunity up north, they did quickly acknowledge the Chevy song and Dinah Shore.

I am old enough to remember the Yellow Brick Road as rendered by Shore when the US was waxing as the preeminent victor of WWII; I remember it as compelling. I do not think it was coincidental that for years the Chevrolet was known along the northern side of the border as the "Mexican Offenhauser." I think it entirely plausible that Dinah earns the credit for effectiveness in selling Chevrolets to Americans and America to Mexicans.

Herman Kahn: The Dark Visionary of 'Unknown Unknowns'
Alex Burns counter-terrorism blog
Posted by Alex Burns on March 22, 2006 12:08 AM

Iraq: Where We are and How We Got There
The Touchstone
January 2006

Herman Kahn and the nuclear age.
New Yorker
Issue of 2005-06-27
Posted 2005-06-20

Strangelove encounters of a MAD scientist kind
Special to The Japan Times
The Japan Times
July 24, 2005
Original scrolled to archive
Cache retrieved on Feb 7, 2006 05:53:15 GMT

"No Anthropologist Aboard the Enterprise: Science Fiction and the Future in the Anthropology Classroom"
Samuel Gerald Collins
Anthropology & Education Quarterly
June 2005, Vol. 36, No. 2, pp. 182-188
Posted online on June 9, 2005

Strategic Thinking in the Information Age and the Art of Scenario Designing
Ivan Klinec
Institute for Forecasting, Slovak Academy of Sciences
The First Prague Workshop On Futures Studies Methodology
CESES, Charles University, Prague
September 16-18, 2004

The future of indigenous values: cultural relativism in the face of economic development
D. Groenfeldt
ISSN 0016-3287
Special Issue: Futures of indigenous cultures
Volume 36 - n° 9, pp. 907-916
November 2003

Too Bad We’re So Relevant: The Fundamentalism Project Projected
Martin Marty
Stated Meeting Report to the American Academy of Arts and Sciences at the conclusion of the 6-year Fundamentalism Project

Factors in Military Decision-Making
Communication and Cross-Cultural Analysis
Lieutenant Colonel Russell A. Turner II
Dr. Hamid Mowlana
Document created: 29 March 04
Air University Review, March-April 1971

See The U.S.A. In Your Chevrolet
by Leo Corday & Leon Carr
Inside U.S.A
Original Air Dates: 1949 - 1950 (CBS)

Inside U. S. A. (musical variety, starring Peter Lind Hayes and Mary Healy)
(CBS Primetime, 1949 - 1950)
[aka: "Inside U.S.A. With Chevrolet"
Classic Themes

Arthur L. Campa
The Journal of Communication
Volume 1 Page 41 - November 1951
Volume 1 Issue 2

They Don’t Do It Our Way
Ina Telberg
Courier (UNESCO), 1950, III, No. 4
The only on-line snippet of Telberg's 1950 UNESCO piece, "They don't do it our way" appears to be, interestingly enough, posted to a BDSM & alternate lifestyle listserv, Not Safe For Work (NSFW), but I have pulled the cache which allows you to go to the post without signing into the site:
It's About fuckin' TIME!!!!!
12/10/2005 8:32 pm
Original NSFW as retrieved on Jan 3, 2006 11:10:51 GMT

Gordon Housworth

InfoT Public  Strategic Risk Public  


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GeoCell: a map, a narrative and a stopwatch for acts of war, acts of god and acts of commerce


Gen. Michael Hayden's GeoCell concept is what I call a map, a narrative and a stopwatch that can be applied equally to acts of war, acts of god and acts of commerce. His "breathtaking" advance strikes me less as the promulgation of the GeoCell than his having made the bureaucratic leap of integrating not only the output but the working relationship between classified imagery and analysis assets:

  • Maps have long been one of the best means to present a large volume of data to a person
  • An appropriate narrative containing contextually relevant actionable info is always useful
  • Perishability of the event and the data pertinent to the event is an important part of relevance and info upon which to act

Richard Saul Wurman beat him to it in 1981. Wurman, architect, graphic designer and cartographer, arguably created the GeoCell concept with his ACCESS travel guides and for which he received the Kevin Lynch Award from MIT. This note will weave Wurman and Hayden.

Generically, a geocell is a 1 degree x 1 degree box, very close to a rectangle at the equator. To any Air Force officer like Hayden, the concept would be well-known from targeting analysis. While not clear from the unclass press when Hayden promoted GeoCell in earnest, a pilot was working as early as 2002. Hayden integrated satellite imagery at National Geospatial-Imagery Agency (NGA) with collection and analysis at National Security Agency (NSA). GEOINT 2004 noted:

An extremely important concept that NGA and NSA has developed is the GEOCELL: the integration of collection and analysis at the most tactical level. The objective was to get the best situational understanding to the most appropriate level, whether it was at the Division, the Regiment, the Brigade, the Company, etc., all in real-time or worst case, near real-time. A big part of enabling the GEOCELL was providing INTELLINK network access to those who needed it and moving the concept of intelligence from "The Need to Know, to The Need to Share". The GEOCELL includes personnel from NGA, NSA, other agencies and the relative vendors.

Where Multi-INT "is the collaboration of two or more intelligence disciplines," the SIGINT-GEOINT (signals and geospatial intelligence) collaboration is intended to produce Multi-INT products "directly to customers – shortening and streamlining a process that has traditionally been linear while providing more complete and accurate information. Multi-INT is all about speed, accuracy and depth of content. Information can be discerned faster through virtual collaboration, thereby shortening timelines for decision-makers. Multi-INT products are more accurate because they correlate multiple data points, and they provide important context through the integration of multiple data sources." By January 2005, GeoCell was said to have "rushed real-time tips and warnings to field operatives as well as White House officials."

Hayden's GeoCell for military and humanitarian means meets Wurman's ACCESS Guides for tourism and commerce. Wurman was "enchanted with "the simplification of things."" Creating a geographically contextual 'GeoCell' view to tourism, Wurman's Access series "was the first guidebook to adopt the neighborhood-by-neighborhood format":

Wurman devoted himself to fighting what he calls "the disease of familiarity." Trying to find a good guidebook to help him get around Los Angeles [where he moved in 1978], he realized that they were all written by people who clearly knew too much and thus could not effectively create a guide for visitors who knew nothing. From this experience came the inspiration for Access, a series of guidebooks that are organized, not categorically, but geographically, so that a person can easily find all the restaurants, cultural attractions, and landmarks within a given area...

It's important to note that the format of each Access guide presupposes that the visitor is on a walking (or perhaps bicycling) tour of the area. The guides are organized by neighborhoods and broken into five color-coded subject headings... Each neighborhood is further organized as if one were strolling the streets. In some of the books, there are descriptions of places that could only be found by walking down the avenues and lanes identified in the guides...

A page chosen at random from the Tokyo Access guide, for example, presents both practical information and cultural observations about a tiny area of the Ginza. The items flow smoothly from one to the next, as one would walk the streets of the area: first, how to get to what the author considers the best private art museum in Japan (the Bridgestone); then, a rush-hour glimpse of the waves of commuters in silent procession from the Tokyo Station nearby (with a note that the bus to Disneyland is at the Yaesu exit). Next, upstairs, is the Daimaru department store, ''the ideal store for those things you forgot to pack for the trip,'' and a suggestion that the store's ''fifth-floor putting green is a good place to kill time while waiting for a train (no charge).'' Another short walk leads to the Library of Tourism and Culture and then to the Fukuoka Mutual Finance Bank where one can see ''a door based on a design by Marcel Duchamp.'' A sobering aside: ''According to popular belief that Tokyo's earthquakes run on a 69-year cycle, the next massive tremor is due to occur in 1991.'' (This cycle formula failed to predict the earthquake of Oct. 4, 1985.) Each brief item is color coded for quick identification. Gardens and parks are described in green type. Items on museums, theaters and architecture are printed in blue; restaurants and nightlife in pink; shops in red; hotels and narrative items in black...

The updates have been written for the most part by local travel writers, giving much of the information a "locals" feel. This bias has the side effect that some of the well-known restaurants catering to tourists found in other guidebooks do not appear in these guides. Common to all guidebooks is the problem of businesses that have closed or relocated since the publication date. For that reason, anyone purchasing a guidebook of any type should always verify that the venue is still there prior to driving there the first time.

It should be noted that Wurman created TED (technology, entertainment, and design) and the TED Conferences in the mid 1980s as he saw his three areas of interest converging. His Information Anxiety and Information Architects are still benchmarks. Wurman operates in Five Rings of Information Immediacy:

  • Cultural Information: outermost ring containing "our history, philosophy, and arts… our attempts to understand our culture"
  • News Information: current events having "only a relatively minor impact on our daily lives"
  • Reference Information: information "sources including textbooks, directories, encyclopedias, maps, dictionaries, and telephone books"
  • Conversational Information: "verbal and written exchanges of information that we have with people around us," a level Wurman identifies "as a main source and the one we most easily ignore [but one] that we should focus most intensely on if we are to gain greater control over our own information spaces.
  • Internal Information: innermost ring of "cerebral messages that enables our bodies to function, e.g., pain and hunger, "information over which we have the least control but that affects us the most"

Creating a geographically contextual 'GeoCell' view of tourism, Wurman's Access series "was the first guidebook to adopt the neighborhood-by-neighborhood format." Having long since sold the venture to Harper Collins, its series editor "maintains that Access remains "the only guide that takes you street-by-street into the heart of the city neighborhood." ACCESS "is a particular boon for business travelers who tend to find themselves stuck in a neighborhood. [The] success of this format is so effective that 60 to 80 percent of first-time users of Access will buy another guide in the series, and 30 to 40 percent will purchase the volume for the city in which they live."

The attraction of the ACCESS guides was such that in 2001 Philip Agre wished for a "personal access guide," a "fantasy" personal information device patterned after Wurman's guides employing "Accessware" for various interests. A "basic Personal Access Guide platform" is loaded with open source Accessware assignable to various levels or groups for business or recreation:

When you display all this stuff, it looks exactly like an Access Guide… Newspapers will provide geographic annotations for every place they mention, including not just restaurant reviews but the places where events happen in their stories. That way, you can point someplace (or just go there) and ask the LA Times, "what has happened here?". Or the LA Times could repurpose years of its reporting into neat packages of Accessware, all quality-controlled for its continuing interest…

The Personal Access Guide that you can assemble from other people's content will be limited [so you can] market an Accessware module based on your own explorations of the city. Just capture a geocode for each place… write up a paragraph on it, answer the half-dozen questions that the Accessware framework defines… and drop it into the right folder. When it's time to issue a new release, you just write yourself a little blurb, select the right menu entry, and your guide hits the market within fifty milliseconds…

What would happen if everyone used such systems? Bad places would be driven out of business more quickly, and secrets would not remain secret as long. Good places would prosper instantly whether they could advertise or not. The general idea is that people would be matched with places more effectively… Perhaps big signs would be less important for attracting people to places, and streets might become more presentable as a result. Wireless "signs" might interact with people through their devices rather than directly.

What was posited as a "fantasy" in 2001 is now commercially viable. Imagine what Google WiFi has in mind for you PDA and cell phone. Military versions are already in hand. But attention to perfect graphics, text and timing must be constant; while the ACCESS guides are still good, they suffered after Wurman sold the business and lesser hands with sharper budgets lessened the product.

Contrast Wurman with the NSA-NGA Multi-INT:

In the area of data collection, Mutli-INT optimizes the use of sensors through coordinated tasking, tipping and cueing. Through Multi-INT collaboration, analysts from different tradecrafts gain perspective through the additional insight provided by other intelligence disciplines. Sometimes data collectors and analysts are able to tip each other to information that would have otherwise gone unnoticed. For example, communications intelligence (COMINT) might learn that an event is about to occur and automatically tip GEOINT capabilities to obtain relevant imagery.

I think that General Paul Van Riper would second Wurman's enchantment with "the simplification of things." (In the 2002 Millennium Challenge war game presaging OIF, Van Riper's Red Team adversary routed the US Blue Team "equipped with an elaborate computerized decision-making tool" called Operational Net Assessment. Malcolm Gladwell observed that at the moment of Van Riper's attack on US forces, "they were so caught up in their computers and charts and systems analysis and complex matrixes that they had lost the ability to engage in the flexible, free-wheeling, instinctive thinking that is essential in the midst of battle.")

A colleague with a gift for creating seductive Graphical User Interfaces (GUIs) noted that:

[Mapping] is very important to bringing it all together but is extraordinarily limited without data. Google local is a great example of the power when you tie a simple database of services to good mapping application. I picked up a Verizon Aircard and can surf 500kb to 1MB while driving around in the car. I’ve taken to bringing the laptop along on family trips and surfing just ahead of the car looking for alternate routes that circumvent traffic or offer more scenic passage. Last week [we] were able to identify [a restaurant] within 5 minutes of our chosen route... I think the challenge is figuring out what data represents actual actionable stuff. (Insert your lecture on Signals, Sprignals and Noise here) [Private correspondence] 

For the Signal and Sprignal (spurious signal) discussion, see The value of counter-deception and early sprignal detection in political elections and the two parts that follow. Our discussion proceeded to the difference between a "good enough" military and commercial offering. My position:

[Despite] the cubic acres of money the feds spend, both the military and commercial spheres talk in terms of "good enough," only their good enough is more than enough for we commercial plodders. I split that hair only to point out the feds are trying to be more cost effective in certain areas, if for nothing else, the number of places that they have to be to deal with today's threats are rising. As noted in one of the first items, the feds are harnessing commercial feeds for both lower cost and to insert an air gap of sorts to isolate their classified systems - which can give away info just by the multi-INT streams converging on a shooter's console. [Private correspondence]

I remember thinking at the time that a fruitful jump off point was combining commercial feeds and commercial tools to build a "good enough" implementation of some of the federal logic, e.g., using that advanced logic as a template to edge closer with short cycle time development.

The feds have spent enormous effort on locating things and integrating that knowledge into a 'supply chain' that delivers the appropriate item onto the appropriate location at the proper time. The AF targeting guide talks in terms of CEP or Circular Error Probability (CEP) in which 0.5 of the ordnance fall within a targeted radius; Total Overall Error as a combination of target location error, navigational error (GPS & Inertial), aircraft, weapon and operator; Casualty Radius (CR) and the Cumulative Collateral Damage Probability (CCDP). A good civilian application would be the location of a WiFi hotpoint where the 'casualty radius' is the connection radius or pattern formed by masking or distortion that extends beyond the locus of points describing the physical location.

I do not see commercial providers addressing location beyond mastering "driving direction" algorithms and putting geographers into the field to pick up road "geometry," verifying existing "named features" and looking for new ones. (Goggle algorithms appear to favor right turns, for example, which creates circuitous routes.) They do not do well in assessing vague locations, what I liken to locating the electron in the potential well, i.e., there is difficulty in saying precisely where the electron is at a point in time but great accuracy over a range of locations/energy states.

Increase the scale of the map or the duration of the time line sufficiently and the probability equation will collapse to a point or cluster sufficient to work for a particular location or period of time. Conversely, as one zooms in, location or time will have greater uncertainty and will require other tools/inputs for a "nav update." In dealing with textual and spatial data in a GeoCell, I think of a clustering algorithm for 1+ points that is sensitive to the range of time or position under consideration as well as to the task, e.g., striking a reinforced VC company on the move or an SS-18 silo (I date myself in both cases) requires a different sensitivity in time, location and response. I think that much advantage is to be had from applying targeting algorithms to the nascent commercial mapping field.

One can also suffer from too little pertinent data integration. Applicable to this note, Mossad's Efraim Halevy and Uzi Arad offered the CIA useful ideas, and some painful prediction. One was in terms of data integration, DoD has taken more of RMA (revolution in military affairs) to heart than had CIA. While my personal information is dated, recent unclass descriptions show little had changed such that the average DI analyst had a clumsy hodgepodge of terminals and feeds on their desk hampered by an excessive air gap to reach open source feeds. Automated Multi-INT was largely nonexistent. A recent two-hour demo of Bloomberg technology by one of their journalists showed far more on their desks in terms of integration than at Langley.

[Aside: Interestingly Bloomberg was not taking advantage of the work by their journalists, opinion makers and editors beyond delivery of the primary product, e.g., there was no tracking and analysis of what these people did, and what they looked at, in the production of their primary product. There is much secondary knowledge extraction to be had that is not being exploited. In that respect, an entertainment industry database firm, All Media Group is a step ahead; AMG's machine analysis of a historical trove of music previously rated and described by human listeners allows it use machine analysis to rate an exponentially rising volume of unrated music, yet achieve human-scale scoring. Even something as good as Bloomberg has much to gain from secondary analysis.]

How much is enough? How much distracts and dilutes focus? I think that Wurman did a superb job of implementing Van Riper's admonition to stick to the essence of task with the appropriate (minimum) level of technology needed to speed without encumbering:

We hear many terms, whether it's "transformation," "military technical revolution," "revolution of military affairs," all indicating something revolutionary has happened that's going to change warfare. Nothing has happened that's going to change the fundamental elements of war. The nature of war is immutable, though the character and form will change. The difficulty is that those who put forth this argument believe that something fundamentally has changed, and you can change very quickly without thinking your way through it. They want to apply the technology without the brainpower.

My experience has been that those who focus on the technology, the science, tend towards sloganeering. There's very little intellectual content to what they say, and they use slogans in place of this intellectual content. It does a great disservice to the American military, the American defense establishment. "Information dominance," "network-centric warfare," "focused logistics"—you could fill a book with all of these slogans. What I see are slogans masquerading as ideas. In a sense, they make war more antiseptic. They make it more like a machine. They don't understand it's a terrible, uncertain, chaotic, bloody business. So they can lead us the wrong way. They can cause people not to understand this terrible, terrible phenomenon.

Kosher Cures for the CIA
Wall Street Journal
May 9, 2006

Dodging Perils on Way to Top of Spy Game
New York Times
May 8, 2006

The science of driving directions.
New Yorker
Issue of 2006-04-24
Posted 2006-04-17

Blink Reading Guide
Malcolm Gladwell
Reading Guide Chapter 4. PAUL VAN RIPER'S BIG VICTORY

GEOINT 2005: Shattering Stovepipes, Creating Community
Nov 1, 2005

A melding of the minds increases collaboration at two spy agencies
By Bob Drogin
Los Angeles Times
January 2, 2005

Wurman Uncut
A Conversation with Richard Saul Wurman
GK VanPatter
NextD Journal
Issue SIX, Conversation 6.1

GEOINT 2004: Leveraging Technology in a new Era of Cooperation within the Intelligence Community
By Hal Reid
Oct 26, 2004

NGA Turns to Commercial Imagery To Fill Demand for Unclassified GEOINT
By Jessica Warner

The Next Big Ideas: Multi-INT and Horizontal Integration
By Michele Weslander
MAY - JUNE 2004

Horizontal Integration: Why Is It Different?
By Lon Hamann
MAY - JUNE 2004

The Immutable Nature of War
Battle Plan Under Fire

Brands That Go Places
By Patricia Tan

OGC Demonstrates Major Advances in Interoperable Geoprocessing for Military
Open GIS Consortium, Inc
March 7, 2002

The Access Guides and the Contradictions of Design
Philip E. Agre
Department of Information Studies, UCLA
16 December 2001

Wish List: Ten Inventions, Some More Serious Than Others
Philip E. Agre
Department of Information Studies, UCLA
20 October 2001

The Wurmanizer
By Gary Wolf
Issue 8.02 - Feb 2000

Information dis-ease
By Michael Fraase
Information Eclipse
Section: 01 Information 101
02 September 1999 08:16PM CST

Chapter 13
AIR FORCE PAMPHLET 14- 210 Intelligence

The Commissioner of Curiosity
David Kushner
The Pennsylvania Gazette
Last modified 12/15/97

New York Times
Published: October 20, 1985

Gordon Housworth

InfoT Public  Infrastructure Defense Public  Risk Containment and Pricing Public  Strategic Risk Public  


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Be it WatergateGate or Rove's indictment, our high street press continues to abrogate its duty


Accuracy remains to be seen but speed is certainly in Truthout's column if the latest entries in their Mr. Fitzgerald Calling series is correct, both below:

What I find disturbing about this, if it is true, is that it mimics the dual track information on the CIA/Goss/Foggo and other parties that is still passing at an austere, restrained level on the WaPo and NYT but has been running ahead for some two weeks on the blogs such as Wonkette's WatergateGate, Silverstein at Harpers (here and here), POGO (here and here), The Plank (here and here), and TPM Muckraker (here and here). It leaves me with the unsettling feeling that the governor on the mainstream media is such that breaking information has far too great a latency for my taste. Most certainly, it is not actionable as it is far too late. The question that I ask is why?

It is well past 02:00 Sunday morning and WaPo and the NYT are showing nothing, yet Truthout was reporting this Friday and Saturday. Other than Leopold, it was David Shuster that offered the best external "traffic analysis" for Rove's indictment:

  • Rove's fifth testimony before the grand jury was "the only way he could avoid indictment [that] the burden is on Rove to stop it."
  • The time lapse after the fourth testimony - 13 days - was so great that Rove would have heard by then if he was clear
  • Rove's appearance as "Official A" in the Libby indictment is consistent with Fitzgerald's indictment of anyone listed as "Official A" in his legal filings

Interestingly, by 20 April, Truthout was reporting that Fitzgerald was telling jurors that "he would soon present them with a list of criminal charges he intends to file against Rove in hopes of having the grand jury return a multi-count indictment against Rove," all this coincidental to Rove's relinquishing his policy duties which the high street press reported without any linkage.

By 26 April, Truthout was reporting that Rove had received a target letter "signaling that the Deputy White House Chief of Staff may face imminent indictment," and that it was this target letter that prompted Rove to return to the "grand jury for an unprecedented fifth time to explain why he did not previously disclose conversations he had with the media about covert CIA operative Valerie Plame and her husband, former Ambassador Joseph Wilson."

I read no such linkage in WaPo or the NYT and it is now a month passed. As my displeasure with high street media grows, I have watched Steven Colbert follow Jon Stewart in pillorying the news that should be leading the way. See:

Editor & Publisher's Greg Mitchell does a fine indictment of the press corps for their 'laugh-along with Bush43 in 2004 ("Those weapons of mass destruction have got to be somewhere") and their panning or avoidance of Colbert's piercing parody in 2006.

Our high street press has much to answer for.

See the series, Mr. Fitzgerald Calling, some of which are cited below:

Karl Rove Indicted on Charges of Perjury, Lying to Investigators
By Jason Leopold
t r u t h o u t | Report
Saturday 13 May 2006

Rove Informs White House He Will Be Indicted
By Jason Leopold
t r u t h o u t | Report
Friday 12 May 2006

Is Stephen Colbert the Last One to Know How Amazing He Was?
Arianna Huffington
The Huffington Post
11 May, 2006

Time: Nine Fingers Was a Tour Guide
By Paul Kiel
TPM Muckraker
May 10, 2006, 1:20 PM

"Nine Fingers" and the Third Man
New connections between the CIA and the Cunningham Scandal
By Ken Silverstein
Washington Babylon
Posted on Tuesday, May 9, 2006

Getting Screwed In, and By, Washington
By Doug Thompson
Capitol Hill Blue 8/5/06
Ocnus/May 9, 2006, 10:04

MSNBC's David Shuster: "I Am Convinced Karl Rove Will Be Indicted"...
Arianna Huffington
The Huffington Post
Crooks and Liars
Posted May 8, 2006 05:26 PM

The Loss of Goss
Why did the CIA’s chief resign so abruptly?
By Ken Silverstein
Washington Babylon
Posted on Monday, May 8, 2006

Wilkes and the L-Words: Lewis, Lowery and Limos
Nick Schwellenbach
May 8, 2006

Spencer Ackerman
The Plank
posted May 5, 2006, 5:37 p.m.

Jason Zengerle
The Plank
posted May 5, 2006, 4:21 p.m.

Cohen, 'Wash Post' Columnist, Says Colbert was 'Rude' and a 'Bully'
By E&P Staff
Editor & Publisher
Published: May 04, 2006 12:30 AM ET

THURSDAY'S LETTERS: More Praise for Colbert, Knocks on Bush WMD Skit, Ripping AP on Graff Firing
By E&P Staff
Editor & Publisher
Published: May 04, 2006 11:30 AM ET

GOP's Ed Rollins: Hookergate is "Big"
By Justin Rood
TPM Muckraker
May 3, 2006, 10:15 PM

Jon Stewart Defends Colbert's Dinner Speech
By E&P Staff
Editor & Publisher
Published: May 01, 2006 11:20 PM ET

When the President Joked About Not Finding WMD
By Greg Mitchell
Editor & Publisher
May 01, 2006

Colbert Does the White House Correspondents' dinner
Crooks and Liars
Saturday, April 29, 2006

Names Like "Nine Fingers" and Dusty Foggo Make Even Gov't Contracting Interesting
Jason Vest
POGO - Project On Government Oversight
April 28, 2006

Target Letter Drives Rove Back to Grand Jury
By Jason Leopold
Truthout | Report
26 April 2006

Grand Jury Hears Evidence Against Rove
By Jason Leopold
Truthout | Report
20 April 2006

Cameron falsely reported that DOJ guidelines "require" prosecutor to deliver "target letter," stated as fact that Rove "is not a target" in CIA leak investigation
Josh Kalven
Media matter for America
Oct 7, 2005 6:35pm EST

Target Letters: Terminology
TalkLeft: the politics of Crime
October 06, 2005

Gordon Houworth

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Hu is on first; the US grounds out, Part 2


Part 1

I recommend Scobell and Wortzel's CHINESE NATIONAL SECURITY DECISIONMAKING UNDER STRESS, Strategic Studies Institute, for analysis of Chinese responses to three categories of crises, fabricated, anticipated, and unanticipated. But readers of this combined geopolitical and cultural analysis must keep in mind the level of emotion evinced in the hostility that is present in China towards the US . The New Yorker's Beijing correspondent, Peter Hessler, was in-country during the Belgrade and Hainan periods:

Particularly chilling is a vivid portrait of hostility to the United States, in part due to the Belgrade bombing and the downing of an American spy plane two years later, that spilled out in the days after 9/11, when China was flooded with doctored DVD's of the wrecked twin towers and the damaged Pentagon, interspersed with clips from miscellaneous Hollywood disaster films and vignettes of American leaders uttering random, often unintelligible, pronouncements.

CSIS' China: The Balance Sheet addresses this unease in less emotional terms, but no Westerner should think that it is trivial. Overall, CSIS (Center for Strategic & International Studies) held a very informative press briefing on the eve of Hu's visit. I though that the comments of Kurt Campbell and Michael Green were especially cogent. An inside-the-beltway colleague described them as "Two very talented fellows." (Transcript here.) Following shortly thereafter CSIS held a panel discussion of the critical issues in US-China relations. (Audio here.) I recommend China: The Balance Sheet as a means to understand the state of SinoAmerican relations and to identify issues that will affect US, Chinese and global prosperity and security in the 21st century. (CSIS has kindly provided a series of one and two page "issue snapshots" that abstract the book.)
So how could we have blundered in the eyes of Hu and the Chinese elite?
  • Slighted reception: Jiang Zemin, Hu's predecessor, was extended a state visit in 1997 by Clinton. Hu had to make due with a doctored "official" visit.
  • State dinner recipients: In five years Bush43 has entertained only five heads of state, Mexico, India, Philippines, Poland and Kenya. I can barely imagine the insult that Chinese elites felt when Hu could not get the recognition accorded to Kenya.
  • Asymmetric state discussions: China's desire for peer discussions of a strategic partnership was met by US requests for China to become a "responsible stakeholder" on the world stage, namely trade deficit, domestic market access and intellectual property protection on the first tier with human rights, democracy and military competition on the second tier. Listening to Bush43's statements regarding "respecting human rights and freedoms" and "freedom to assemble, to speak freely and to worship," one would forgive Hu for thinking that the tiers were inverted.
  • Missing twined flags: China's flag was not "twined" with the US flag at Blair House or along the roadway lampposts near the White House.
  • Anthem confusion: In announcing China's national anthem, the official announcer used Taiwan's formal name, the Republic of China, instead of the People's Republic of China.
  • Falun Gong doomsday interruption: In what has to be the "audience interruption" from hell, the White House granted a one-day pass to a Chinese-American pathologist, Wang Wenyi, accredited to a Falun Gong publication Epoch Times. It beggars the mind that whatever the justification used to grant the day pass that White House security could overlook the fact that Wang had been the principal speaker at a 27 March Falun Gong rally in Lafayette Park before being removed by security personnel, and that after being denied press credentials in Malta in 2001 had still penetrated security to confront Hu's predecessor, Jiang Zemin.
    • Sure enough, 90 seconds into Hu's speech on the South Lawn, the woman started shrieking, "President Hu, your days are numbered!" and "President Bush, stop him from killing!"
  • Three minutes of terror on split screen: Not only did Wang Wenyi stun both heads of state but she was not removed for three entire minutes, continuing to shout while both Hu and Bush43 stood transfixed. It went on so long that the news media went split screen such that any Occidental coverage of Hu's speech was to be forever shared with Wang Wenyi. When I made the comment that the Secret Service would not have tolerated a sniper for three minutes, a security specialist told me that that was a similar topic of discussion in DC. The Chinese have to believe that this was another Belgrade Embassy bombing. The moron moment goes to National Security Council official Dennis Wilder who told reporters that "It was a momentary blip." More indelible blight than blip, but Wilder probably drew the short straw in having to speak to the press.
  • Lafayette Park demonstrations: Adjacent to the White House, Lafayette Park will play host to a large collection of Chinese, Taiwanese, Tibetan and Uygur dissidents. China is not the first state accustomed to state control of its media and dissident elements that expects quid pro quo for its visiting dignitaries.
  • The nanny moment: It was breathtaking to see one head of state attempting to leave the stage via the wrong staircase, only to be unceremoniously pulled back by the other's hand on his coat. I am astonished how widely reported, usually with photograph, was Milbank's "Hu looked down at his sleeve to see the president of the United States tugging at it as if redirecting an errant child."
  • Cheney's lapses: Cheney fell asleep at a press briefing by Bush43 and Hu (although Cheney's staff said that he was reading notes) and was caught on film by the press. He donned sunglasses for the formal South Lawn ceremony (but then he was the sole parka wearer at an otherwise formal Holocaust commemoration at Auschwitz). No Chinese premier or vice-premier would not have been allowed to make one, much less than both, lapses.
  • Visible impatience: In response to wrote, and likely preapproved, text by Hu, Bush43 grew impatient, finally tapping his foot on the floor.

Hu's preceding visit to Washington state was by all accounts a public relations achievement that purchased some $16 billion in US goods. (Everyone save the Boeing unions sidestepped the fact that China is attempting to build a substitute airline manufacturing capacity.) The difference between the two Washingtons was so great that:

[The] state-run People's Daily published an online opinion article highlighting the differences between the two Washington trips, calling the Seattle visit one of economic cooperation and noting that the District of Columbia visit was characterized by disputes.

It cannot help the US that Chinese elites see a continuation of the confrontational, duplicitous behavior by post-Clinton administrations. Remember that the three goals of Chinese crisis management are:
  1. Survival of the Party
  2. Enforce Party Unity
  3. Protect China’s International Credibility
Believing that when and if the US frees itself from a preoccupation with terrorism that it will refocus on the China Threat, Chinese geopolitical strategists continue to view the US as its foremost adversary, far outranking Russia and India. So long as its vital national interests are not compromised, China will accept "the reality of a U.S.-dominated world for the foreseeable future." I would, however, not make bets in the post 2040-2050 period.

China's peer preoccupation is domestic development which it describes as the "period of strategic opportunity":

Beijing [can] no longer affirm credibly that a foreign policy premised on a desperate need for internal development is a purely domestic matter that does not affect the security of others, particularly when it facilitates the violation of international norms by unsavory regimes. Nor can Beijing aver that its power and influence in international affairs is minimal because of a "developing world" self-image… As China rises, Beijing will need [to] assume greater responsibility to act in ways that reinforce international norms above and beyond its immediate self-interest —becoming what Deputy Secretary of State Robert Zoellick calls a "responsible stakeholder."

I agree that the US needs to be, but under the current administration is not, "psychologically prepared for the impact China’s rise may have on the relative power and influence of the United States in East Asia and beyond." It is an understatement to say:

While China is unlikely to challenge this preeminence in political, economic, or military power fundamentally for the foreseeable future, the rise in China’s relative power will likely lead to, or at least be associated with, economic dislocations in the United States and may alter U.S. strategic relationships with friends and even allies around the world as nations accommodate themselves to China’s new status.

The temptation for the United States to fall back on an actively hostile or antagonistic posture toward Beijing as a result, however, is a dangerous one for U.S. interests. Without serious provocation from Beijing, such a policy would isolate the United States and put Washington at odds with allies and friends around the world who will rely increasingly on China, economically and otherwise. To safeguard its long-term strategic position, therefore, Washington must consider the implications of its China policy on its strategic relations with other nations. The United States should remember that the international community is as uncertain and concerned about the implications of China’s rise for their interests as is the United States and will support, if sometimes tacitly, reasonable U.S. moves to prevent the development of an irresponsible or dangerous China.

Conversely, I believe that a number of US foreign policy initiatives, many of which were executed in the understandably self-absorbed focus following 11 September, have driven states from the US and offered free advantage to others.

CSIS summarizes Chinese elite opinion:

  • At a fundamental level, many Chinese officials and elite are convinced that the United States through various methods will seek to slow or block China’s emergence as a great power.
  • Chinese leaders judge virtually all U.S. policies based on their implications for the Taiwan issue, for continued economic development in China, and ultimately for regime survival.

CSIS goes on to encapsulate China's view of the US (Emphasis in original):

  • China’s people remain enamored of U.S. wealth, power, freedoms, advanced technology, and popular culture, and feel positively about Americans as individuals.
  • Given Beijing’s paramount near- and mid-term priority on attending to its internal challenges and maintaining a peaceful international environment, China’s leaders have assiduously sought to maintain a relationship with Washington that is correct and cordial, if not conspicuously warm.
  • At the same time, they are suspicious of and attuned to perceived hypocrisy in U.S. foreign policy.
    • Elite Chinese harbor lingering grievances over past indignities and perceived victimization at the hands of the United States, including the EP-3 spy plane incident in 2001, the accidental U.S. bombing of China’s embassy in Belgrade in 1999, U.S. congressional opposition in the mid-1990s to China’s application to host the Olympic Games, and continuing U.S. arms sales and defense support for Taiwan.
    • The long-term implications for the relationship of these grievances are uncertain but may be subject to rising populist nationalism in China.
  • China also often reveals its discomfort with U.S. global predominance, fueled by a belief among Chinese officials and elite that the United States will seek to slow or block China’s emergence as a great power by seeking to:
    • Split China through policies of humanitarian intervention, preemption, alliances, missile defense or permanently separating Taiwan from the mainland, de facto if not de jure;
    • Westernize China by propagating "universal values" of democracy and human rights in order to induce change in China’s political system and bring about the downfall of the Chinese Communist Party;
    • Deprive China of an adequate supply of energy for its development;
    • Draw China down the same path it led the Soviet Union, leading to the collapse and dissolution of the Chinese state. China often acts consciously to avoid mirroring Soviet missteps, whether by abjuring the notion of engaging in an arms race with the United States, carefully affirming its intent not to place itself in ideological opposition to the United States, or focusing on economic development before addressing dramatic political reform;
    • Expand U.S. influence along China’s periphery, leading to the development of anti-China blocs that may seek to contain Chinese power or infiltrate and destabilize China’s minority regions.

I maintain that the Global War on Terror (GWOT) has, and is, generally distracted the US from the appropriate attention due China (and I do not mean specifically as "China Threat" but as an emerging superpower) and other regions, while Operation Iraqi Freedom (OIF) has siphoned off the bulk of US short to medium term geopolitical thinking. See:

Over the last four year period, I would say that China has significantly outmaneuvered the US, building allies in the bargain, and will likely continue to do so in at least the short-term:

In negotiations, [Hu] gave the U.S. side nothing tangible on delicate matters such as the nuclear problems in North Korea and Iran, the Chinese currency's value and the trade deficit with China.

The level of non-achievement of the Hu visit from the US point of view was quietly shown by the White House press release that spoke of prescription drug enrollment figures. No mention was made of any accord with China. Hu continued to use the term "win-win" throughout his visit. One wonders if that meant that the two parties to the transaction were Hu and China.

Letters From China
Review of Peter Hessler's 'Oracle Bones'
New York Times
Published: April 30, 2006

Hu Caps Visit With Yale Speech
Barbara Ferguson
Arab News
22 April, 2006 (24, Rabi` al-Awwal, 1427)

China and Its President Greeted by a Host of Indignities
By Dana Milbank
Washington Post
April 21, 2006

Bush, Hu Produce Summit of Symbols
Protester Screams At Chinese President
By Peter Baker and Glenn Kessler
Washington Post
April 21, 2006

New York Post
April 21, 2006

Upbeat on Trade, Hu Offers No New Fixes for Imbalance
By Blaine Harden
Washington Post
April 20, 2006

China: The Balance Sheet Panel Discussion
Center for Strategic and International Studies (CSIS), the Institute of International Economics (IIE), and PublicAffairs Books
Audio (mp3, 1:47:13)
April 17, 2006

China: The Balance Sheet
What the World Needs to Know Now about the Emerging Superpower
Center for Strategic & International Studies and Institute for International Economics
Contributors: C. Fred Bergsten, Bates Gill, R. Nicholas Lardy, and Derek J. Mitchell
ISBN 1-58648-464-8
April 17, 2006

CSIS Briefing on Visit of Chinese Pres. Hu Jintao
Center for Strategic & International Studies (CSIS)
Speakers include Michael J. Green, CSIS Senior Adviser; Kurt M. Campbell, CSIS Senior Vice Pres.; Authors of "China: The Balance Sheet"
Press briefing on upcoming visit of Chinese President Hu Jintao to Washington
CSPAN2: 1 hr. 40 min.
Video Scrolled offline

The Dark Side of China's Rise
By Minxin Pei
Foreign Policy
March/April 2006

Hu’s Priority: Remapping China’s Regional Development
MARCH 2006

Edited by Andrew Scobell, Larry M. Wortzel
Strategic Studies Institute, U.S. Army War College
ISBN 1-58487-206-3
September 2005

End of the US-China honeymoon
By Bonnie S Glaser and Jane Skanderup
Used by permission of Pacific Forum CSIS
Asia Times
Jul 21, 2005

Cutting out the US
By Michael A Weinstein
Asia Times
Jul 13, 2005

Gordon Housworth

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