Securing the Oceans, the Internet, and Space

Protecting the domains that drive prosperity

One of my core goals in this job has been to build and rebuild bridges between the Pentagon and America’s wonderfully innovative and strong technology community. When I gave a speech at Stanford last April, I discovered that it was the first time a Secretary of Defense had visited Silicon Valley in almost 20 years. So today, it’s a pleasure to be on my third official visit to the Bay Area, to speak with the Commonwealth Club about the critical common challenges we face and the extraordinary opportunities we share.

Almost a quarter-century ago, I worked in the Defense Department during those critical days after the end of the Cold War. It was evident then, as it was after the end of World War II, that America would be called upon to stand as the world’s foremost leader, partner, and underwriter of stability and security in every region across the globe. It’s a role we continue to fulfill today, even as we’re now entering a new strategic era.

Five Challenges, and our 2017 Defense Budget

I just came from Washington where last week I laid out our defense budget for 2017. In this budget, we’re taking the long view in our mission to defend the United States. We have to, because even as we fight today’s fights, we must also be prepared for what might come 10, 20, or 30 years down the road. This is particularly important because today’s security environment is dramatically different from the last 25 years, requiring new ways of investing and operating for the U.S. military.

Five evolving challenges — namely Russia, China, North Korea, Iran and terrorism — now drive DoD’s planning and budgeting, and I want to briefly describe each of them to you before I dive deeper into issues I know are top-of-mind for this community.

The first two of the five challenges reflect a return, in some ways, to great power competition. One is in Europe, where we’re taking a strong and balanced approach to deter Russian aggression. The second challenge is in the Asia-Pacific, the single most consequential region for America’s future, where China is rising, which is fine, but behaving aggressively, which is not.

Now, we don’t desire conflict with either country. And while I need to say that they pose some similar challenges militarily, they are very different nations and very different situations, and our preference is to work together with important nations. But we also cannot blind ourselves to their apparent goals and actions.

Meanwhile, two other longstanding challenges pose threats in specific regions. North Korea is one — that’s why our forces on the Korean Peninsula remain ready, as they say, to “fight tonight.” The other is Iran, because while the nuclear accord is a good deal for preventing Iran from getting a nuclear weapon, we must still deter Iranian aggression and counter Iran’s malign influence against our friends and allies, especially Israel.

The fifth challenge — very different from the other four, but just as important — is our ongoing fight against terrorism, especially ISIL, which we must and will deal a lasting defeat…most immediately in its parent tumor in Iraq and Syria, where we’re accelerating our campaign in every dimension, as well as where ISIL is metastasizing in the world. We’re doing that in North Africa. We’re also doing that in Afghanistan, where we continue to stand with the Afghan government and people to counter al-Qaeda, and now ISIL. And at the same time, all the while, we’re continuing to work with other government agencies to protect our homeland.

We don’t have the luxury of choosing among these challenges. But we do have the ability to set a course for the future: a future that is uncertain but will surely be competitive and demanding of America’s leadership, values, and military edge. That’s why a common theme across our budget is that DoD has to innovate to be competitive in a competitive world — as I often say, we in the Pentagon need to think outside our five-sided box. That’s why, to give just one measure, we’re spending $71.8 billion on research and development next year alone. For a little local context, that’s more than double what Intel, Apple, and Google spent on R&D last year combined.

That goes to fund things like making DoD the leader in cybersecurity, advancing our commanding lead in undersea capabilities, and developing new hypersonic missiles that can fly over five times the speed of sound. It involves advancing artificial intelligence, autonomy, and robotics so that no matter what our enemies throw at out systems, they just work. It enables taking long-existing systems and giving them surprising new capabilities. And it invests in new strategic approaches to preventing and winning conflicts against 21st century threats.

All this reflects our understanding of how much technology development has changed in recent decades. When I began my career, most technology of consequence originated in America, and much of that was sponsored by the government, especially DoD. Today, much more technology is commercial. And as many of you know, the competition is global.

For these reasons, our budget also invests hundreds of millions of dollars next year in building and rebuilding bridges with America’s technology and business community, including here in the Bay Area. Because we need a strong partnership to succeed in the 21st century. One way we’re reaching out is through our Defense Innovation Unit-Experimental, or DIUx, which we opened in Mountain View last year to explore different ways for DoD to better tap into the region’s innovation ecosystem and build relationships with local companies…some of which I’ll be meeting with later today…and we’re still exploring, because we want to be iterative and agile. Another example is the Manufacturing Innovation Institutes that we’re co-funding with the private sector in key technology frontiers…including the one focused on flexible hybrid electronics located in San Jose. There, over 30 of our partner organizations have a presence between Silicon Valley and the Golden Gate Bridge — including companies from Apple to Lockheed Martin to Xerox.

We’re making these investments because our military must always be capable enough to deter even the most advanced future threats in a changing and competitive world. And this means that just like competitive companies here in the Bay Area, we have to innovate and seize opportunities in everything we do.

Just as companies here are constantly restructuring and reevaluating their approaches to their competitors, we in DoD are doing the same, making our contingency plans and operations more flexible and dynamic in every region. I can’t talk about this much here, but it’s yet another place where our military commanders excel over others.

Just as companies here compete furiously for the best talent, we in DoD must do so as well. That’s why we’re building what I call our Force of the Future — because as good as our technology is, it’s nothing compared to our people — and in the future we must continue to recruit and retain the very best talent from future generations. That’s also why we’re opening all combat positions to women — to expand our access to 100 percent of Americans for our all-volunteer force. Competing for good people for an all-volunteer force is a critical part of our military edge, and everyone should understand this need and my commitment to it.

And just as companies here in San Francisco continually seek greater efficiency to benefit both their customers and their shareholders, we in DoD are pushing Congress for much-needed reforms across the defense enterprise — from acquisition reform, to closing bases we don’t need, to reducing overhead — so that your taxpayer dollars will be spent more wisely, and so that our troops get everything they need to succeed and come home safely.

Security, Stability, and Prosperity

We’re doing all these things to make sure that the remarkable stability and prosperity that’s been achieved in the Asia-Pacific region and around the world can endure. Trade requires safe passage. Investment requires stability. Innovation requires freedom. And each of these requires security.

Security is what enables the stability and success of global markets. And the very foundation that shapes the global order depends on the physical and perceived security that DoD provides.

Whether you think about it or not, this community can and will continue to thrive because here, that foundation has been rock-solid — from the seas to space to cyberspace. Indeed, the Bay Area’s prosperity depends on connectivity to the wider world, and stable markets enriched by global investments. It always has…first as a port, from the Gold Rush through to the present. Now today, this community thrives because of an open, global marketplace over the Internet. And increasingly, many tech leaders here are now seeking to reach above the sky, building and launching path-breaking satellite and space technology — a reflection of how the world looks here, to you in the Bay Area, to see what that next great thing will be.

In these three critical domains — the oceans, the Internet, and outer space –continuing to ensure the free movement of information, goods, and services will require the private sector and DoD to work together. And it will require fresh thinking — in the Bay Area, yes, but also in Washington — to chart a future that brings a common benefit, a common wealth, to all of us.

We’ve done this before. Seventy years of security, stability, and prosperity on both sides of the Pacific didn’t happen on its own. Neither did the extraordinary leaps that allowed us to network the world and reach for the stars. All three were the product of hard work and focus by generations of individuals — military and civilian, government and industry alike — who stepped forward together to build that prosperous future. The government helped ignite the spark, but this was the place that nurtured the flame that created incredible applications. Now we must do so once again, and renew and strengthen our partnership, lest others chart the future instead of us.

The Sea — Our Guiding Example

Let me begin with the guiding example of the sea. San Francisco’s history is inextricably tied to trade in the Pacific. The remarkable diversity of commerce and people who’ve crossed the Golden Gate over the centuries proves that the Pacific has never been the domain of any one nation — it belongs to and benefits all.

But that common benefit relies upon a foundation of stability and peace. Since the end of World War II, the United States and our military have played an indispensable role in helping create that foundation of security, allowing people, economies, and countries to rise, prosper, and innovate…first Japan, Taiwan, and South Korea, then the nations of Southeast Asia, and now, China and India. Hundreds of millions have been lifted into the middle class. And in many nations, democracies have taken hold.

America’s policy of rebalancing to the Asia-Pacific is about sustaining this progress, and maintaining our pivotal role to ensure stability and prosperity in a changing region. The U.S. Navy patrols the seas to ensure the free flow of commerce, as we have for generations, not only for the United States but every nation — because it’s fundamentally in our own best interest. We will also continue to forge stronger bonds between the nations of this critical region…including the bonds between our respective defense industries. When we build things together, the bonds between nations grow stronger, and others can share the burden of common defense. We’ll also continue to provide defense systems to friends and allies, and train with them to advance the maritime security of all our nations — which we’re doing increasingly, as more Asia-Pacific nations are drawn to partner with us. And we’re investing in this in our budget, too, with a $425-million Maritime Security Initiative for Southeast Asia between now and 2020.

To be clear, America’s efforts in this region have never been aimed to hold any nation back or push any country down. The United States wants every nation to have an opportunity to rise. That includes China. We welcome its rise, and its inclusion in this architecture, but we do not welcome aggressive behavior.

We all have a fundamental stake in the security of maritime Asia, including in the South China Sea. Nearly 30 percent of the world’s maritime trade transits its waters annually, including approximately $1.2 trillion in shipping trade bound for the United States — as I saw in the Strait of Malacca when I was in Singapore last year. That is why the United States joins virtually every nation in the region in being deeply concerned about the artificial island construction and militarization in the South China Sea — including steps China has taken most recently by placing anti-access systems and military aircraft on a disputed island. These activities have the potential to increase the risk of miscalculation or conflict among claimant states. China must not pursue militarization in the South China Sea. Specific actions will have specific consequences.

Indeed, while some in the region appear determined to play spoiler, the United States and our many friends in the region don’t plan on letting anyone upend seven decades’ worth of progress. For our part, it should be clear that the U.S. military will continue to fly, sail, and operate wherever international law allows, as we do all over the world. Because the maritime domain must always be open and free to all.

One is in undersea capabilities, where we continue to dominate and where we’re investing over $8 billion next year to ensure ours is the most lethal and advanced undersea and anti-submarine force in the world, including with new undersea drones. Another investment is of course in our surface fleet, which in our budget grows both the number of ships and their capabilities — to deter even the most advanced potential adversaries, and protect the maritime security we all depend on. All in all the rebalance has dedicated by far the most, and the newest forces, to this region. And more is coming.

All of these military investments are necessary, but not sufficient. Because security and prosperity are inextricably linked, America must also build on its growing political and economic engagement in the Asia-Pacific. Most importantly, Congress must complete action on the Trans-Pacific Partnership trade agreement, or TPP. I’ve said that from a strategic perspective, with respect to foreign policy, having TPP is as important to me as an aircraft carrier. We cannot allow anything to undo this critical achievement. It’s time to get this done.

Cyber — A Free, Open, and Secure Internet

Now, as our military preserves freedom of navigation and the free flow of commerce at sea, we are equally committed to the free flow of information and commerce online. The Internet was created by DoD, academia, and industry working together, and since then we’ve seen it enable boundless transformation and prosperity across all sectors of our society…making many things easier, cheaper, and safer. But as we’ve also seen in recent years, these same technologies present a degree of risk to the individual people and businesses who rely on them every day…making it easier, cheaper, and so it seems to them, safer to threaten all that.

Like so many Bay Area businesses, the Defense Department relies on networks heavily, which is why defending our networks and weapon systems is job one for DoD in cyberspace — they’re no good if they’ve been hacked. DoD’s second mission in cyberspace is to help other agencies defend the nation against cyberattacks from abroad, especially if they would cause loss of life, property destruction, or significant foreign policy and economic consequences. And the third mission is to provide offensive cyber options that can be used in a conflict — as we’re doing now against ISIL.

In the defense budget, we’re investing more in all three of these missions — a total of $35 billion over the next five years, with much, much more going to modernizing and securing DoD’s hundreds of vital networks. Part of that goes toward building and training Cyber Mission Forces, some of whom I’ll meet in Seattle later this week. These are talented individuals — some active-duty, but also Reservists and National Guard members — who hunt down intruders, red-team our networks, and perform the forensics that help keep our systems secure. And it’s just one way the American military is helping protect U.S. interests in cyberspace and preserve access to a free, open, and secure Internet, so businesses can continue to innovate and individuals can continue to interact without having to live under any threat.

This is important, because the rules of the Internet, to the extent they exist, have always been a product of all its users. They weren’t written or dictated by anyone. They came out of garages, dorm rooms, home offices, and research labs. In many ways, they still do, and are continuing to be shaped by individuals, including many in the Bay Area.

When it comes to the Internet, no one nation, no single entity has the authority to write all the rules for everyone else.

That’s not just my opinion; it’s the firm position of the Obama administration, which has shown in recent trade negotiations, diplomacy, and decisions on net neutrality that the United States is a strong proponent of a free and open Internet.

But here too, some nations seek to play spoiler. China and Russia, for example, are pursuing a different vision — one predicated on absolute government control of the Internet, anti-access policies like the “Great Firewall,” state-sponsored cyber theft, including theft of intellectual property, cyberespionage, and also cybercrime. Just last week, China’s government further restricted foreign companies from publishing and distributing online content in China, and made clear that state media would speak for the party’s will alone. We’ve seen that China aims to, as one news headline put it last year, “rewrite the rules of the global Internet,” limiting the access their 1 billion-plus citizens have to an open society. China has also indicated intent to require backdoors for all new technologies — potentially forcing the world to operate, and innovate, on China’s terms. That’s not right.

Clearly this approach is contrary to the values we share as a nation here in the United States. So let me take a moment to tell you where the United States government and the United States military stand. We share the same underlying objectives and values as America’s technology community — and we believe in living the values we defend. We believe we all have a stake in protecting intellectual property, and making sure the Internet remains free, open, secure, and prosperous. And that means we must continue to respect, and protect, the freedoms of expression, association, and privacy that reflect who we are as a nation.

As Secretary of Defense, my mission is ensuring our military can defend our country and make a better world. And DoD is at its best when it has the best partners. Knowing how we’ve worked together in the past with those of you in the innovative tech sector, and how critical that your work is to our country, strengthening that partnership is very important to me. And I’m glad we’ve started to make real progress on that over the last year.

We always want America’s best contributing to our national security, and for it to be a two-way street. There’s a lot we can learn from each other on better securing our networks, and defending against emerging cyber threats. Getting it right depends on getting the right people, which is why we’re creating new ways to bring talent from the technology community into DoD, even if only for a time, so they can help us do better. An example of this is our new Defense Digital Service, which brings in talent from America’s vibrant, innovative technology community to help solve some of our most complex problems. I brought its leader, Chris Lynch, out here with me — before Chris came to us he was a serial entrepreneur in the tech world, also worked at Microsoft. He’s recruited coders from places like Google, Palantir, and Shopify for a tour of duty with DoD. And he’s done such a good job cutting through red tape, he even figured out how to get away with wearing a hoodie and jeans to the Pentagon every day.

We want people like Chris to help keep us strong, creative, and forward-thinking — and hopefully that infusion of innovative, entrepreneurial spirit will rub off on us, and help sustain and strengthen the bridges we’re building with the tech community for many years to come. I’ll have more to say on that tomorrow.

I know the issue of data security, including encryption, has been a hot topic here in the Bay Area and around the country. There are limits on what I can say about the case that’s been in the news lately — particularly because it’s under litigation and it’s a law enforcement matter. So let me speak more broadly, because this is one of the most complicated challenges of our time.

First, it’s important to take a step back here, because future policy shouldn’t be driven by any one particular case.

Second, encryption is a necessary part of data security, and strong encryption is a good thing. DoD is the largest user of encryption in the world, principally because our troops need it. It helps keep our fighter jets and sensor networks from getting hacked. It allows us to surprise our adversaries. And it lets our people deployed around the world communicate securely with their families back home — from sailors aboard aircraft carriers to soldiers in Afghanistan. For all these reasons, we need our data security and encryption to be as strong as possible.

Third, as we together engineer approaches to overall human security in the information age, I know enough to recognize that there will not be some simple, overall technical approach — including the so-called “back door”.

The bottom line is that the tech community and policymakers need to work together to solve these complex challenges, just as we have in the past.

Future technology will only grow more complicated. And in this global marketplace, failing to work together would risk letting others set the standard on their terms — that wouldn’t be consistent with U.S. values, and it wouldn’t be good for U.S. businesses either.

The right way is partnership. It is easy to see wrong ways to do this. One would be a law hastily written in anger or grief. Another would be to have the rules be written by Russia or China.

That’s why the Department of Defense will continue seeking to work with Bay Area companies — because we’re living in the same world, with the same basic trends and the same basic threats. And we must innovate the way forward together.

Space — An Emerging Marketplace Creates a Remerging Challenge

Meanwhile, as we work together to protect the free flow of commerce at sea and online, we must also recognize the opportunities — and threats — to the free and open domain of outer space.

Many companies in this community are now exploring the frontiers of this domain, and nearly every business depends on it to some extent, even if just for things like communications and GPS. In DoD, we rely on it just as much, and we have for quite some time. From secure communications, to reconnaissance satellites, to allowing for precise navigation and targeting, space is integral to our operations. Indeed, space enables great things here on Earth for security and prosperity — from financial companies with global presence, to the remote street vendor conducting business on a satellite phone. GPS, first developed in partnership with the Defense Department and maintained for decades by us, is now woven into every aspect of our lives…from hailing a car service on the Embarcadero, to finding and targeting terrorists in the Middle East. And decades ago, we pioneered space together. It was the innovation of this region that led to the cutting-edge satellites that have quite literally changed how we see the world today.

Today, many companies are going to space on their own, with ambitions for greater commercial imaging, micro-satellites, and even aspirations for tourism. Just as government-led efforts in space have benefitted both our security and society, private-led efforts are already doing so too — one recent example being that the public disclosure of China’s surface-to-air missiles in the South China Sea was due to it being discovered in commercial satellite imagery.

However, this emerging marketplace is leading to a reemerging challenge. Space can get crowded, particularly with many companies and many nations seeking to operate there in ways we’ve never seen so many do before — including some that can pose threats to safe, global order in space. To give you just one example of the dangers we would face if space turned from universal benefit to unrestricted battlefield, consider the longevity of space debris, which can cause great harm if it impacts a satellite or a spacecraft mid-orbit. When a Chinese anti-satellite test destroyed a defunct weather satellite in 2007, it dispersed over 3,000 pieces of debris, expanding the amount orbiting Earth by 15 percent. The remnants of that satellite are still there, and will remain for over a century — just as 100 years after the battle of Verdun, French farmers still encounter unexploded ordnance in their fields. A kinetic battle in space could leave behind a legacy that would last far longer, and make this common domain hazardous for commercial applications for generations. And make no mistake, both Russia and China have developed such anti-satellite systems.

Just like with the maritime and cyber domains, it’s in the self-interest of every nation to advance the common interest of a free and stable environment in space.

While in the past some may have thought of space as a sanctuary, DoD must now prepare for, and seek to prevent, the possibility of a conflict that extends into space. And in our budget, we’re continuing to invest more in space, totaling more than $22 billion in 2017, including with investments to enhance our ability to identify, attribute, and negate threatening actions in space.

DoD has a responsibility to protect its assets and interests in space, and to ensure this domain remains available for both security and commercial applications. This too requires working together more with the private sector. Commercial space needs must be considered and protected to realize the continuing promise of this remarkable domain, and the only way to do that is through effective partnership and communication. We believe strong rules of the road that grow out of commercial and civil interest in space will benefit all nations. They will propel American space entrepreneurship, which directly benefits national security, and they will allow us to differentiate between acceptable and unacceptable behavior in space.

Let me close with a reminder about how much we’ve done together to shape the world in each of the three domains I’ve discussed — the sea, cyberspace, and outer space. Because in many ways, we don’t even think about it.

When someone orders an iPhone, they buy a device that brilliantly harnesses breakthrough technologies that were seeded by DoD and government investments — from multi-touch to iOS’s Siri. Chances are, they order it using the Internet that DoD, industry, and academia helped create together. The phone gets packaged in Asia, then shipped over an ocean our Navy patrols to ensure that shipping goes unimpeded. And it’s tracked from start to finish by GPS technology, which DoD could not have invented or launched without a robust, innovative private-sector.

DoD’s fundamental promise is to protect U.S. citizens and our interests. But we’re most proud of providing the foundation of security that underpins global stability and prosperity. That is why the partnership between the DoD and this community is so important.

It’s true that because we have different missions and somewhat different perspectives, sometimes we’ll disagree — and I think that’s okay. Because whether we’re developing a new product or a new policy, the lesson to me is always the same: vigorous debate and exchange produce breakthrough ideas.

My pledge to you is this: you will always have strong and willing partner in America’s Department of Defense. You can count your military — the finest fighting force the world has ever known — to do its part so you can continue to innovate and excel with us for generations to come.