Law curbing labor abuses abroad not working well

Good morning. TGIF. On the day after Gov. Jerry Brown signed ambitious climate change legislation, we’re reminded that laws don’t always work as planned.  

A statute passed by California lawmakers in 2010 to stem labor abuses abroad has been of meager help in policing tech giant Apple, a group that studies labor abuses in China claims.

The California Transparency in Supply Chains Act, heralded by political leaders as a measure to police poor working conditions in companies doing business in California “has little influence on the labor conditions of these suppliers” in China, Li Qiang, executive director of China Labor Watch, said in a statement to CalWatchdog. “As such, labor rights violations are still prevalent in these factories.”

A study released in late August from China Labor Watch reported that at the Shanghai, China, facility of Apple supplier Pegatron, “working conditions are terrible, and workers are subject to terrible treatment. Currently, Apple’s profits are declining … to mitigate the impact, Pegatron has taken some covert measures to exploit workers.”

CalWatchdog has more.

In other news:

• More about what that climate change legislation calls for and how it’ll work, from the Los Angeles Times. 
• And even more on climate change legislation: How California defines disadvantaged communities when deciding where to send funding for local environmental programs. The Sacramento Bee has more. 
• “Orange County Rep. Loretta Sanchez on Thursday condemned the burial of millions of pounds of nuclear waste on a San Onofre beach bluff and faulted her opponent in the race for the U.S. Senate for not fighting the controversial project,” writes The Orange County Register.
• “Rep. Duncan Hunter says he doesn’t want a new federal policy to stop companies from donating tobacco products — specifically cigars — to members of the military,” reports The San Diego Union-Tribune.

Bonus:

• Looking for a long weekend read? Molly Ball in The Atlantic on how the world of political consultants works… or doesn’t work. 

Legislature:

• Gone ’til December.

Gov. Brown:

• No public events announced.

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The California Transparency in Supply Chains Act, heralded by political leaders as a measure to police poor working conditions in companies doing business in California “has little influence on the labor conditions of these suppliers” in China, Li Qiang, executive director of China Labor Watch, said in a statement to CalWatchdog. “As such, labor rights violations are still prevalent in these factories.” A study released in late August from China Labor Watch reported that at the Shanghai, China, facility of Apple supplier Pegatron, “working conditions are terrible, and workers are subject to terrible treatment. Currently, Apple’s profits are declining … to mitigate the impact, Pegatron has taken some covert measures to exploit workers.”

It’s the seventh report to allege worker abuses by Apple’s Chinese suppliers from New York-based China Labor Watch since 2012.

The California Transparency in Supply Chains Act directs companies of a certain size to declare through a public posting that they are attentive to potential abuses along their supplier base. The goal is to stem human trafficking and slavery, advocates say. Companies last year received a letter from the state Attorney General’s Office, informing them that “your company must post on its Internet website the required disclosures if it meets the eligibility criteria – namely, if your company is a retail seller or manufacturer doing business in California and has annual worldwide gross receipts that exceed $100,000,000.”

But the act doesn’t mandate action to address shortfalls in the supply chain. The disclosures are the only requirement, although they have led to lawsuits filed by citizens who allege companies have filed misleading or false disclosures, using California’s liberal laws regarding consumer rights.

“This bill, it’s a very simple bill, it requires businesses to disclose their efforts to eradicate slavery from their supply chain,” former Gov. Arnold Schwarzenegger said during the ceremonial signing of Senate Bill 657, which created the supply chains act. “This would increase transparency, allow consumers to get more information and make more choices and motivate businesses to ensure humane practices.”

The measure is responsible for several current investigations of companies based on the disclosure required by the supply chains act, state Department of Justice spokeswoman Kristin Ford said.

She declined to comment on Apple’s performance with regard to the act.

Apple, founded and based in Cupertino, Calif., since 1976, has complied with the reporting requirement. In its latest filing in March, Apple said it has a “robust auditing process which has expanded deep into the supply chain over the past ten years. This statement reflects our progress … to combat and prevent human trafficking, slavery, servitude, and forced, compulsory, or involuntary labor in our supply chain.” Apple, though, changed its primary supplier for the iPhone in 2013, handing the deal to Pegatron. Since then, Pegatron has handled other technology for Apple. Last year, according to its annual corporate report, Pegatron worked on Apple CarPlay, which delivers information from an iPhone to a vehicle’s display panel.

Taiwan-based Pegatron is a public corporation with an octopus of subsidiaries throughout Asia. It supplies electronics to a number of companies including Microsoft. But the 19-page labor study from China Labor Watch insists that “Apple is the real reason working conditions are deteriorating.”

Despite Schwarzenegger’s declaration that consumers will “make more choices” with information gleaned from the supply chain act, Apple this year ranked as the world’s most valuable brand for the sixth consecutive year in Forbes magazine’s annual study. Apple’s $154 billion worth is 87 percent higher than that of second place Google, according to the magazine.

Apple’s press office did not return a call.

China Labor Watch said that Apple’s favor among consumers has allowed it to skate on its alleged violations in China.

“Apple’s use of public relations and their popularity here in the U.S. may be why they are able to escape regulation/examination,” Qiang, the executive director of China Labor Watch, said in his statement to CalWatchdog. “In addition, Apple is very much concerned about their shareholders, as opposed to that of workers overseas. “

Touching off another national controversy centered around California, the Federal Bureau of Investigation was discovered to have concealed video and audio monitoring devices around a courthouse in the San Francisco East Bay five to six years ago.

“Federal agents planted hidden microphones and conducted secret video surveillance at Alameda County’s Rene C. Davidson Courthouse for ten months, despite having no court warrant,” the East Bay Express noted. “The surveillance operation was part of an investigation into alleged bid rigging at foreclosed property auctions where thousands of houses and apartment buildings were sold by banks. But defense attorneys for some of the individuals accused say the FBI’s surveillance tactics violated their clients’ constitutional rights, and everyone else whose conversations might have been captured on tape.”

“The government’s unauthorized use of recording devices to capture private conversations at the Alameda and Contra Costa County courthouses violated defendants’ Fourth Amendment rights to be secure against unreasonable searches and seizures,” according to lawyers representing powerful Oakland landlord Michael Marr, as the ABA Journal observed. “Private affairs are routinely discussed as citizens, their lawyers, and even judges walk to and from court, and lawyers often take clients aside outside the courthouse for privileged conversation.”

Making a stink

Marr’s lawyers have had an incentive to swing for the fences. The FBI raided their client’s offices in 2011, and he was indicted, along with 11 other regional investors, by a 2014 federal grand jury. “Dozens of investors in Northern California already pleaded guilty to organizing similar bid-rigging schemes at foreclosure auctions,” according to the Express. “But Marr and his associates insist they are innocent, that he’s a federal scapegoat instead of going after the banks.”

The blockbuster allegations threw into some question the wisdom behind the FBI’s determination to acquire through secretive means the kind of information they might have gathered more traditionally. “At one of the auction locations, in San Mateo, the FBI actually had cooperators who were willing to wear wires to record their conversations with other real estate investors,” Fusion reported. “But the FBI wanted even more evidence, so it decided to bug public areas at the three courts where auctions were taking place over a period ranging from 2009 to 2011.” 

“They placed recording devices in vehicles around the courthouses, in lights near the entrances, in a planter, in a sprinkler, in a bus stop near the courthouse, and in a “backpack placed next to a statue situated inside the Alameda County Courthouse,” according to a letter written by a prosecutor that detailed the recordings.”

Laws in tension

Remarkably, the FBI had set up the surveillance only after checking in with the County Sheriff, not securing the approval of a judge. Although Marr’s lawyers asked the court to consider that the FBI actually recorded public conversations feloniously — California being a so-called “two-party consent” state — state law has also imposed “a fairly broad ‘public area’ exception, which would cover courthouse steps and bus stops,” according to Techdirt. “But that interpretation of the state’s wiretap law exceptions may be subject to the government’s interpretation of public spaces from its 1967 Katz decision, which would grant hushed conversations in public an expectation of privacy.”

The Bureau has been on thin ice in California since pressuring Apple to unlock a cellphone involved in the San Bernardino terror case. “The FBI served Apple with a court order in February compelling the company to help break into an encrypted iPhone” used by one of the San Bernardino shooters, the San Francisco Chronicle recalled. “Apple resisted, and the FBI dropped the case last month after saying it bought a tool from a private entity it hasn’t identified to break into the phone. State and local law enforcement agencies say they have hundreds of encrypted iPhones that they could use the FBI’s help getting into.” 

California lawmakers have emerged as pivotal players in the state’s struggle over cyberlaw — and the country’s. In Sacramento and Washington, D.C., elected officials have placed themselves at the forefront of disputes over the intersection of technology and national security, potentially determining the course of America’s approach to civil liberties for decades to come.

Inside the Beltway, federal oversight of U.S. security agencies has been dominated by Californians. “The current chairman of the House Permanent Select Committee on Intelligence, Rep. Devin Nunes, R-Calif., is now investigating the alleged manipulation of war assessments by the U.S. Central Command,” as McClatchy recently noted. Faced with bombshell allegations from New York Times sources that military officials had spun intel to overstate U.S. progress against the Islamic State, Nunes told the news service that “a special multi-committee task force was needed to investigate the allegations because officials were ‘trying to hide’ from oversight through bureaucratic sleight-of-hand.”

As Nunes’ colleague to his left, Rep. Adam Schiff, D-Calif., has rounded out the top two seats on the committee, observers have watched for signs that Schiff might opt to run to replace Sen. Dianne Feinstein in two years, having previously chosen not to jump into the race to succeed retiring Sen. Barbara Boxer.

Backdoor access

It is Feinstein who has put the biggest California imprint on national security policy. After a bruising tiff with the CIA over its interrogation program, Feinstein made fresh headlines co-authoring a piece of legislation that would recast the relationship between surveillance and technology inside the U.S. A draft of a Senate bill being finalized by Feinstein and Sen. Richard Burr, R-N.C., chairman of the Senate Intelligence Committee, “would effectively prohibit unbreakable encryption and require companies to help the government access data on a computer or mobile device with a warrant,” the New York Times reported.

The bill has instantly ratcheted up the stakes in the already heated controversy surrounding the ongoing efforts of federal officials to force Apple to provide the means to unlock its iPhones. Sen. Ron Wyden, D-Ore., told the Times that Feinstein and Burr’s bill would require all American companies marketing handheld devices “to build a backdoor” into them. “They would be required by federal law per this statute to decide how to weaken their products to make Americans less safe,” he told the paper, vowing to do “everything in my power” to block the effort.

A similarly sweeping bill has been crafted within California itself. Assemblyman Jim Cooper, D-Elk Grove, “introduced new state legislation that would require any new smartphone from 2017 onwards to be,” in the bill’s words, “capable of being decrypted and unlocked by its manufacturer or its operating system provider,” according to ZDNet. “That would impose a near-blanket ban on nearly all iPhones and many Android devices being sold across the state as they stand today, more often than not with unbreakable encryption that even the companies can’t unlock,” the site observed.

A widening threat

Although state and federal legislation has been prompted by terrorist threats and attacks, cybercrime has become sophisticated and prevalent enough to spur other concerns — especially in California, where recent strikes have raised fears that infrastructure and essential services could be crippled more out of greed than an appetite for destruction. So-called ransomware deployed by hackers paralyzed three Southern California hospitals several weeks ago.

“The security breaches — which temporarily disable digital networks but usually don’t steal the data — not only have endangered public safety, but revealed a worrying new weakness as public and private institutions struggle to adapt to the digital era,” as the Los Angeles Times noted. “Government officials are particularly concerned that hackers could lock up digital networks that run electrical grids, and oil and natural gas lines, according to Andy Ozment, assistant secretary of cybersecurity and communications at the Department of Homeland Security.”

The ongoing legal struggle between Apple and the Department of Justice shifted dramatically as federal officials dropped their effort to force the Cupertino tech giant to grant access to the iPhone used by Syed Farook, the terrorist who perpetrated the San Bernardino attacks.

Through means which have yet to be disclosed, DOJ gained access to the phone’s contents on its own, raising questions about its methods which may be revealed to Apple as the focus of litigation shifts away from Riverside, California, to New York.

Cracking the code

“F.B.I. investigators have begun examining the contents of the phone but would not say what, if anything, they have identified so far,” the New York Times reported. “The Justice Department also remained tight-lipped about how it was able to finally get into the smartphone after weeks of furious public debate.

“A second law enforcement official who spoke on the condition of anonymity to reporters in a conference call said that a company outside the government provided the F.B.I. with the means to get into the phone used by Mr. Farook, which is an iPhone 5C running Apple’s iOS 9 mobile operating system. The official would not name the company or discuss how it was accomplished, nor would officials say whether the process would ultimately be shared with Apple.”

But according to industry sources cited by NBC News, the Israeli firm Cellebrite was contracted to do the job. “The firm has been rumored to be behind the FBI’s newfound ability to access the device, thanks to a previous and unconfirmed report from an Israeli newspaper,” The Hill noted. Though Cellebrite and the Department of Justice have not confirmed the rumors or the reports linking the two, Bureau officials have “routinely contracted Cellebrite over the last five years,” The Hill added. “The company, which publicly boasts of its ability to hack into Apple devices, has received over $2 million in purchase orders from the agency since 2012.”

Another shoe to drop

Nevertheless, the details of the government’s behind-the-scenes efforts could soon come to light. “Apple is in the middle of a separate case in Brooklyn, New York, in which the Justice Department wants the company to unlock an iPhone used by an alleged drug dealer. So far, Apple has resisted,” as CNET observed. But if federal officials press forward with litigation, “both sides would have to exchange information and evidence. That’s when Apple could demand that the DOJ explain how it hacked Farook’s iPhone[.]”

According to Reuters, a federal magistrate ruled last month in the Brooklyn case “that he did not have authority to order Apple to disable the security of an iPhone seized during a drug investigation. The Justice Department then appealed to a district court judge.”

“After filing that appeal, U.S. prosecutors notified the magistrate in the San Bernardino case that a third party had demonstrated a new technique which could access the iPhone in question. The Justice Department disclosed the new technique to the judge one day after the demonstration, and then confirmed its success on Monday, according to court filings, though it did not reveal how its solution works.”

Notably, the means whereby the Department of Justice might access the contents of the alleged drug dealer’s cellphone could well differ from those used on Farook’s phone. That’s because “the Brooklyn phone runs an older version of Apple’s mobile operating system, iOS 7, than the phone in San Bernardino, which ran iOS 9,” as Quartz pointed out. “As such, it’s likely that the Brooklyn phone is easier to access. For example, hacking tools can be bought on eBay to unlock some phones running iOS 8 or earlier.”

Edward Snowden recently made headlines by claiming that the FBI lied about needing Apple’s help at the beginning of the controversy because of a relatively easy-to-implement passcode workaround.

Scores of companies threw their weight behind Apple’s effort in court to block the FBI’s bid to unlock the phone. “Google, Amazon, Facebook, Microsoft and a parade of other technology companies filed a barrage of court briefs […] aiming to puncture the United States government’s legal arguments against Apple in a case that will test the limits of the authorities’ access to personal data,” CNBC reported. “The extraordinary show of support for Apple from the tech companies, including many rivals, underscores how high the stakes are for the industry with the case, in which the authorities are demanding Apple’s help” to break into the phone.

Federal fury

The Justice Department fought back with a searing brief, saying “Apple should be compelled to help the F.B.I. break into the iPhone and that the company should not be allowed to hide behind what prosecutors said were diversionary tactics in the court of public opinion,” according to the New York Times.

“The fight has been brewing since mid-February, when Magistrate Judge Sheri Pym of the Federal District Court for the Central District of California ordered Apple to create and deploy an alternative operating system that would help law enforcement agents break into the iPhone in the San Bernardino case. Apple publicly opposed the order, igniting a standoff with the F.B.I. and the Justice Department.”

Underscoring the government’s view of the importance of the case, President Obama himself made a point to remark publicly on the controversy, insisting — if obliquely — that national security was imperiled by the precedent Apple would set. “Speaking at the South by Southwest festival in Texas, the president said he could not comment on the legal case in which the Federal Bureau of Investigation is trying to force Apple to allow access to an iPhone linked to San Bernardino shooter Rizwan Farook. But he made clear that despite his commitment to Americans’ privacy and civil liberties, a balance was needed to allow some government intrusion if necessary,” IT News noted.

A tipping point

But not all in government have agreed. Also in Austin, countering the president’s position, was Rep. Darrell Issa, R-Ca., a former tech titan in his own right who chaired the House Oversight and Government Reform Committee until last year. Issa told USA Today the FBI’s decision to push the limits on privacy protections was “a bad decision,” although he credited FBI Director James Comey with making an “honest and forthright” effort to convince Congress of the merits of the Bureau’s case. “The repercussions of creating a digital ‘backdoor’ to the iPhone not only weakens technology, but endangers the civil liberties of individuals, emboldens prosecutors to pursue thousands of similar cases and compromises corporations like Apple overseas, where privacy laws are stricter,” Issa and his allies have cautioned, the paper added.

On the other hand, foreign countries sizing up the U.S. debate have already seen the introduction of proposed measures that would grant their governments sweeping, invasive new authority. “Intelligence agencies and the police could get powers which would allow them to hack into phones under proposed new laws which would force firms to install deliberate security flaws,” the Daily Mail wrote of a new British scheme. “Under the plans, which are currently being considered by Parliament, internet service providers and technology giants like Apple would have to build secret security flaws into mobile phones, tablets and computers which would allow officials to access the devices. The so-called ‘backdoor technology’ would allow police and security agencies to hack into the devices whenever they wished.”

Critics have charged that Apple is more interested in a marketing coup than in customers’ privacy rights. But recent polling revealed that about half of Americans surveyed “support Apple’s decision to resist the government’s demand to unlock the iPhone,” the San Francisco Chronicle reported. “Meanwhile, public trust in government has remained at some of its lowest points in recent history.”

“The crash may be the first case of one of its autonomous cars hitting another vehicle and the fault of the self-driving car,” Reuters reported. “The Mountain View, California-based Internet search leader said it made changes to its software after the crash to avoid future incidents.”

The collision resulted from a confluence of atypical but not unusual circumstances on a roadway in Mountain View. Because of a sandbagged manhole, the car had to make a wider right turn at an intersection than it had originally planned to do. In the flow of traffic, the bus approached from behind. “We can imagine the bus driver assumed we were going to stay put. Unfortunately, all these assumptions led us to the same spot in the lane at the same time. This type of misunderstanding happens between human drivers on the road every day,” Google concluded in its monthly report for February.

“This is a classic example of the negotiation that’s a normal part of driving — we’re all trying to predict each other’s movements,” the report suggested. “In this case, we clearly bear some responsibility, because if our car hadn’t moved there wouldn’t have been a collision. That said, our test driver believed the bus was going to slow or stop to allow us to merge into the traffic, and that there would be sufficient space to do that.”

Market moves

Despite the reassuring tone of the summary, Google-watchers noted that an important threshold had been crossed. “Google has prided itself on the fact that its self-driving car fleet has never been responsible for any of its crashes — they’ve always been caused by another (decidedly more human) force,” The Verge observed. But business analysts have not been too hard on the company; “in fairness, unless every single car on the road is autonomous, Google is right: there is some degree of negotiation involved, and false assumptions in those negotiations are where the crashes can happen,” The Verge added.

Other companies in the automated car business have been pushing hard to compete. Apple recently (and quietly) acquired the old Pepsi bottling plant in Sunnyvale, a 96,000-square-foot acquisition that quickly sparked speculation around its expanded electric vehicle program, the Silicon Valley Business Journal noted.

Fantasies and fears

Civic leaders, at least in California, have also tilted in favor of a future full of automated cars. In a crowded metropolis — especially one with lots of roads and little public transit — robocars could make a potentially massive difference in emissions and congestion. At a recent appearance with Los Angeles Mayor Eric Garcetti and others for the Times-hosted California Conversation series, Google’s robocar chief had played up the vehicles’ intelligent safety measures. “Chris Urmson, head of Google’s self driving car project, offered a presentation showing how its autonomous cars learned to avoid even the most anomalous hazards — such as a duck in the road being chased by a person in a wheelchair,” the Times recalled. “Urmson said 94 percent of accidents are caused by human error and argued that self-driving cars would save lives.”

Consumers, by contrast, have shown signs of being more skittish. According to a new AAA survey reported by CNN, “75 percent of drivers say they wouldn’t feel safe in such a vehicle,” even though “60 percent drivers would like to get some kind of self-driving feature, such as automatic braking or self-parking, the next time they buy a new car.” The legal issues surrounding insurance liability in automated crashes have also raised questions. USA Today columnist John Shinal wondered who would be held liable “if a hypothetical-and-conscientious Uber driver of the future overrides the control” of a robocar “to avoid an old lady walking her dog — but instead hits and kills an Amazon grocery deliveryman[.]”

Assembly Bill 1681, introduced by Assemblyman Jim Cooper, D-Elk Grove, would mandate that phones made “on or after January 1, 2017, and sold in California after that date” must be “capable of being decrypted and unlocked by its manufacturer or its operating system provider,” as CNET reported. “Any smartphone that couldn’t be decrypted on demand would subject a seller to a $2,500 fine. If the bill becomes law, there would be a ban on nearly all iPhones and many devices that run Google’s Android software across the state.”

With California home to both Google and Apple, observers quickly declared a broadening trend toward increased legal pressure on tech companies. But competing justifications for the crackdown have emerged, with lawmakers outside California opting to hang their own legislation on a different peg. As Ars Technica remarked of AB1681:

Despite very similar language to a pending New York bill, the stated rationale is to fight human trafficking, rather than terrorism.

AB1681’s language is nearly identical to another bill re-introduced in New York state earlier this month, but Cooper denied that it was based on any model legislation, saying simply that it was researched by his staff. He also noted that the sale of his own iPhone would be made illegal in California under this bill.

World worry

California policymakers have become an intimate part of the global push to prevent smartphone encryption from helping individuals and groups evade law enforcement monitoring and detection. At the Davos Open Forum, Rep. Darrell Issa, R-Calif., joined an international panel of public and private-sector officials to air concerns about the potential for over- or under-enforcement. “Governments claim the need for greater security and seek to monitor global communications, while citizens, more willing than ever to share, demand greater protection of their digital privacy,” according to Vice News, whose editor in chief moderated the discussion.

In the U.S., meanwhile, top law enforcement officials have sought to coordinate a nationwide effort patterned after California’s and New York’s, each of which drew support from its respective Attorneys General. “The National District Attorney’s Association hasn’t hidden its intention to mobilize its local offices,” according to The Verge. “The association, along with the International Association of Chiefs of Police, announced in November that they planned to partner with state legislators to enact mandatory smartphone decryption bills around the country. The group wrote in a letter that it looked ‘forward to working with lawmakers to strengthen our current laws, and ensure they are representative of today’s technology and the challenge public safety officials face in preventing crime and safeguarding their communities.'”

An uphill battle

But pushback has already begun from within the crypto and tech communities. On the one hand, advocates and activists have long warned against granting governments a so-called “backdoor” to the data and metadata stored on devices and accessible through them. “There have been people that suggest that we should have a backdoor,” Apple CEO Tim Cook recently said on “60 Minutes,” as the Silicon Valley Business Journal noted. “But the reality is if you put a backdoor in, that backdoor’s for everybody, for good guys and bad guys.”

On the other hand, however, going further, “legal and technical experts argue that even if a national ban on fully encrypted smartphones were a reasonable privacy sacrifice for the sake of law enforcement, a state-level ban wouldn’t be,” as Wired observed. “They say, the most likely result of any state banning the sale of encrypted smartphones would be to make the devices of law-abiding residents’ more vulnerable, while still letting criminals obtain an encrypted phone with a quick trip across the state border or even a trivial software update.” For that reason, both the California and New York bills face an uphill climb, despite strong pressure to pass them — or some version of them — into law.

The move put the self-driving car under development by the tech titan — codename: Project Titan — at the center of a flurry of speculation, opinion and analysis. Citing documents it had obtained, the Guardian reported that Mike Maletic, a senior legal counsel, “had an hour-long meeting on 17 August with the department’s self-driving car experts Bernard Soriano, DMV deputy director, and Stephanie Dougherty, chief of strategic planning, who are co-sponsors of California’s autonomous vehicle regulation project, and Brian Soublet, the department’s deputy director and chief counsel.”

Alongside Google and Uber, that makes three Silicon Valley heavyweights lined up to crank out driverless cars at some point in the future, the Guardian added, noting “Google already has a fleet of robot cars on the streets of California and is planning to have several hundred built in the near future.”

Critical mass

But the competition in driverless cars has already heated up around the world. “According to the California DMV,” Fast Company noted, “their autonomous vehicle program has issued permits for testing to Volkswagen, Mercedes-Benz, Tesla, Nissan, BMW, and Honda, along with Google and auto component manufacturers Delphi, Bosch, and Cruise Automation.” That program, begun at the start of this year, “is working on ways to guarantee autonomous vehicles are safe, tested, and meet quality and performance benchmarks.”

The race to deploy a robocar has led those companies, plus Toyota, Ford, and GM, to line the Valley’s main thoroughfare with research laboratories. The Central Expressway, reaching roughly from Stanford University to San Jose Mineta International Airport, has become so crowded with competitors that Apple’s penchant for secrecy may be at risk if it takes its cars out for a neighborhood spin. “Although Apple recently bought a 43-acre parcel in North San Jose, it doesn’t have much room in Silicon Valley to test its automotive ideas with the secrecy that usually surrounds its tiny devices,” the San Jose Mercury News surmised. “The question is: Would it be willing to test in public?”

Busy rivals

Traffic in secrecy has run both ways, however. Whatever Apple has under wraps, the Mercury News concluded, “its actions have contributed to a frenzy from rivals — especially in the auto industry — to take ownership of autonomous technology, in-car mapping software, vehicle-to-vehicle communication and dashboard Internet applications that could reshape the way we get around in the decades to come.”

To vault to the top of the pack, however, Apple would likely have to square off against Tesla, which has enjoyed a substantial head start. “In the next few years, Tesla has the potential to become the Apple of electric cars, even if Apple enters the industry,” according to Quartz. “The company will have four models on the streets — the Roadster, the S, the X, and the 3 — by the time Apple or any other competitor is likely to have a single model. Tesla will also have its Gigafactory — a massive production facility in Nevada that can produce up to 500,000 cars a year — up and running. If Tesla can bring down its prices, its cars could become a common sight on roads.” Of course, Tesla has automotive rivals of its own, with Audi, Mercedes and Porsche all poised to deliver electric vehicles in about five years or so.

Meanwhile, few inside the auto industry have thrown in the towel on more traditional vehicles. “When it comes to actually making cars, there is no reason to assume that Apple, with no experience, will suddenly do a better job than General Motors, Ford, Volkswagen, Toyota, or Hyundai,” GM ex-chairman Bob Lutz told CNBC, predicting that Apple’s labors would become “a giant money pit.”

The first is because it will remind the public that Silicon Valley-based Apple, Google and Yahoo all have histories with U.S. spies that many find unnerving — even if they weren’t eagerly cooperating, as AT&T reportedly did. The second is because the AT&T leak illustrates yet again that the U.S. government isn’t good at keeping secrets — meaning past examples of corporate cooperation with mass invasions of privacy could come to light in the future.

But the third reason may be the most consequential: the potential fallout this could have for Silicon Valley’s designs on the constantly growing China market. Vinod Aggarwal, a UC Berkeley business and political science professor and the director of the Berkeley Asia Pacific Economic Cooperation Study Center, warns that revelations about ties between tech firms and U.S. spies could easily be used as a reason to keep U.S. products out of any foreign market — China in particular:

The fallout from the NSA scandal is already starting to crimp U.S. corporate expansion plans in Europe. Analysts had expected AT&T to acquire Vodafone Group, whose cellphone operations cover many EU states. Accusations that AT&T gives the NSA data on customers’ telephone calls is raising red flags in those European countries, like Germany, where privacy is taken seriously. Regulators and legislators are already making noises about this deal. If AT&T does go ahead – and even if it prevails and acquires Vodafone — there will be strings attached and much more oversight from European government agencies. Potential regulatory risk has suddenly soared for AT&T.

 

For many foreign companies and governments, there is a certain justice in AT&T paying a price for its links to the U.S. government. After all, it was Huawei’s apparent links to the Chinese military that so enraged one U.S. congressional committee that they recommended that no U.S. public agency or firm should buy Huawei’s telecoms equipment. That effectively shut Huawei out of the U.S. market.

That’s from an essay that Aggarwal co-authored in the Harvard Business Review in late 2013 after the first mass wave of leaks by former NSA contractor Edward Snowden, which included inflammatory revelations about AT&T that hinted at the company’s vast cooperation with the NSA that was reported this week.

Apple’s biggest market may be imperiled

This hostility toward Huawei could easily be invoked by Beijing to hamper Apple at any time. Given that the Cupertino-based company sees China as absolutely crucial to its future, it may consider taking Aggarwal’s advice that tech companies need to sell themselves as international brands, not American ones, so they’re not seen as “as an extension of a troubled hegemon.”

In April, Apple confirmed that China had passed the U.S. in iPhone sales. As Quartz magazine reported in June, Apple has deliberately cultivated the Chinese market.

When Apple first made the iPhone available in gold color — with the 5S in 2013 — smart observers identified it as a play for the Chinese consumer. And, Tim Cook says, the glitter has proved golden in the world’s largest smart-phone market.

 

In an interview with the the Hong Kong edition of Bloomberg Businessweek (available only in print), the Apple CEO points to the gold iPhone — subsequent generations of the phone and the iPad are available in that color — as but one example of how the company localized for the Chinese market.

 

“A big reason for why we released the gold iPhone as because many Chinese consumers like the color gold,” Cook told the publication. “To be clear, sales for the gold iPhones in China have far, far exceeded other markets.”

 

Cook also noted how the introduction of third-party keyboards in iOS 8 was partially inspired by requests from China’s iPhone owners. Typing in Chinese can be very tedious, and many of China’s most popular third-party keyboards had moved from PC to Android seamlessly but weren’t available on Apple phones.

China’s economy and stock market have had a rough few weeks. The Beijing regime is already accused of trying to distract the public from its economic headaches with saber-rattling in the South China Sea, building a military airstrip on a disputed island over the strong objections of the U.S. and Japan. Adopting policies that invoke economic nationalism to keep out or limit Silicon Valley firms in the world’s most populous nation would be an even bigger distraction.