Posted on 08/22/2003 11:51:17 AM PDT by Paul Ross
US Economic Intelligence Policy and Global Competition
By Garth Hancock
(When this was written --Mr. Hancock was a second year graduate student working towards his MA in International
Policy Studies. Prior to attending the Institute he worked as a small company vice-president.
His concentration was in trade, with a particular interest in govemment-private relations.
"It would not surprise me that intelligence agencies in
all countries are involved in examining what their
international competitors are doing, but I'm not
aware of any such activities on behalf of the US
intelligence agencies."
- US Commerce Secretary Ron Brown, October 19,
1995.
Many Americans who follow US-Japanese relations may have been surprised
when Japan recently voiced concerns regarding the Central Intelligence Agency
(CIA) bugging the conversations of Japanese negotiators during trade talks
with the US. It was reported that the US government had eavesdropped on
Japanese auto executives and officials in Geneva earlier this year during
high-level trade negotiations over possible tariffs on Japanese luxury cars. It
appears that reports, based on the tapped conversations, may have been fed
to US Trade Representative Mickey Kantor and others in order to give the
Americans an advantage in their negotiations.
The response in Japan to the incident provides insight into the world of
economic intelligence. Though some Japanese negotiators expressed shock and
dismay upon hearing the news that the US was spying on Japanese auto
makers, Trade Minister Ryutaro Hashimoto down played the report, stating
that the eavesdropping would not have changed the outcome of the talks. It is
not difficult to guess why high level officials in Japan are less concerned about
the incident. Such activities are becoming increasingly routine as each country
seeks to gain any possible advantage in the competitive global market place.
Japan's own economic intelligence efforts directed against US companies have
not gone unnoticed in Washington, and the Japanese government is unlikely
to press the issue in fear of drawing greater public attention to its own
to press the issue in fear of drawing greater public attention to its own
substantial intelligence gathering activities.
By most accounts the US government, though involved in gathering
information of an economic nature, has not been as aggressive or adept as
other countries in assisting its companies with the acquisition of economic
intelligence. This fact has led to a heated debate among US policy makers,
business executives, and scholars. The exact role of the US intelligence
community in gathering, analyzing, and disseminating economic intelligence
has not been clearly defined. While some view this process as vital to US
national security, others perceive the involvement of the US intelligence
community in the international market place as dangerous, wasteful, and
clearly outside the country's best interests. Although questions regarding acts
of economic espionage have sparked public and scholarly interest, little
research has been done on how a more aggressive and comprehensive US
economic intelligence policy might work in practice. The forces which have
shaped current policy are seldom addressed and possible models for future
policy have not been adequately explored.
Research Questions
This study seeks to investigate one central question: If the US were to adopt a
comprehensive and aggressive plan to provide economic intelligence to US
companies and protect them from the economic espionage activities of foreign
governments, what issues or questions would such a policy confront?
To help answer this question, several supporting questions will be touched on.
How does the economic intelligence debate fit into the major theories of
international political economy? What legal, political and organizational
questions would have to be addressed? Finally, does the US government have
the ability to effectively collect, analyze and disseminate economic intelligence?
Analytical Framework
There are certain limitations when one engages in research of this kind.
Intelligence agencies do not publish reports on their activities. Information on
the activities of the CIA in Japan, for example, is difficult to obtain. Further,
much of the information which does exist is anecdotal, fragmented, or difficult
to confirm. Despite these problems, a substantial amount of material has
emerged on the topic in the last three years. Intelligence journals, one book,
countless newspaper articles, and one master's thesis are the primary sources -
for this study. for this study.
Another problem related to this topic is the overlapping and vague
terminology. For the sake of clarity I have chosen the following definitions
from an article by Samuel D. Porteous:
"Economic Security" - The maintenance of those
conditions necessary to encourage sustained
long-term relative improvements in labor and
capital productivity and thus a high and rising
standard of living for a nation's citizens,
including maintenance of a fair and dynamic
business environment conducive to innovation,
domestic and foreign investment, and
sustainable economic growth.
"Economic Intelligence "- Policy or
commercially-relevant economic information,
including technological data, financial,
commercial, and government information, the
acquisition of which by foreign interests could,
either directly or indirectly, assist the relative
productivity or competitive position of the
economy of the collecting organization's
country. The acquisition of economic
intelligence becomes a security concern when
the acquisition of this information by foreign
interests could economically disadvantage the
country concerned by jeopardizing jobs,
research and development, investments, relative
productivity, competitiveness, or economic
growth.
"Industrial Espionage" - The use of, or
facilitation of, illegal clandestine, coercive or
deceptive means by a private sector entity or its
surrogates to acquire economic intelligence.
Economic Espionage - Clandestine or illicit
attempts by foreign interests to assist their
economic interests by acquiring economic
intelligence which could be used to sabotage or
otherwise interfere with the economic security
of another country.
"Sharp Practices" - The use of illegal, clandestine,
coercive, or deceptive means by a foreign
government or entity intended to benefit the
economic or commercial interests of the
perpetrator. This broad category includes not only economic espionage, but other
questionable practices, such as bribery and
sabotage.
It should also be noted that this research and the conclusions drawn here are
grounded in a particular theory of international political economy,
neomercantilism. This approach brings certain assumptions to the subject of
this research as more fully explained below. Further, the relationship between
neomercantilism and economic intelligence will be explored.
In 1776, Adam Smith in The Wealth of Nations made the case against
old-fashioned mercantilism. Smith maintained that nationalistic economic
practices were inefficient and resulted in higher prices for everyone. David
Ricardo built on Smith's work and presented the idea of comparative
advantage:
The theory of comparative advantage assumes that
trade occurs because of specialization; there are
certain commodities that each nation can produce
relatively more efficiently, given its natural resources,
labor force, and technological capabilities. If all
countries specialize in the commodities in which they
possess comparative advantages, exporting these
goods and importing others, an optimal allocation of
world resources would result.
The neoclassical tradition is one with which Americans are most familiar. It
suggests that the market operates most efficiently when it is left alone.
Interference from the government translates into losses for the consumer and
makes companies inefficient. More than any other determinant, the health of a
society can be measured by how much it can consume; in economic jargon,
the higher your consumption curves the better.
The rationale for the market system is that it increases economic efficiency,
maximizes economic growth, and thereby improves human welfare. Although
liberals believe that commerce also enhances the power and the security of the
state, they argue that the primary objective of economic activity is to benefit
the individual consumers. Their ultimate defense of free trade and open
markets is that they increase the range of goods and services available to the
consumer. Neoclassicism views economic competition as a uniting force
because all countries should benefit in absolute economic terms even if relative gains differ.
A contemporary of Adam Smith's, the German economist Friedrich List,
responded to the laissez-faire approach and provided the basis for today's
neomercantilists. List had traveled to America and was impressed by the
manufacturing base built there behind protective tariffs. His argument was
that history suggested that nations do not develop an advanced
manufacturing base without some form of state intervention. States were likely
to become proponents of open markets only after they had developed a strong
base domestically and were therefore prepared to face and benefit from
international free trade. List saw a hidden motivation behind powerful
countries, like England, that pushed for open markets once it was in their best
interest to do so but not necessarily in the best interests of other nations who
might be locked into a comparative disadvantage for exporting raw goods
instead of developing new technologies. List's interpretation of history also
suggested that when it came to certain basic industries, the steel industry for
instance, which is vital to any war effort, state cooperation with industry was
both necessary and sound economic practice.
Perhaps the greatest divide between the two theories centers around the
question, what is economics for? As stated previously, neoclassical economists
focus on the individual and consumption. Neomercantilists, on the other hand,
focus on the state. They equate economic strength with national security and
the very concept of power. For neomercantilist theorists the overall wealth and
security of a nation depends less on what a society can buy than on what it
can make, what James Fallows calls the consumer versus producers debate.
Neomercantilists argue that in the long run, consumer oriented societies will
lose out to producer oriented societies. The rise and fall of great economic
powers can be traced in large part to each country's ability or inability to tackle
new markets and technologies. Neomercantilists rank different industries in
terms of importance and global positioning. Great Britain didn't build an
empire on consumption and free trade principles but on the strength and
advanced nature of its manufacturing base.
Neomercantilism, at least as it is understood in the US, is still developing; yet
the theory, as outlined by James Fellows in his book Looking at The Sun,
already deviates from neoclassicism in several other important ways.
Neoclassicists tend to see economic growth as automatic and dynamic;
markets and technologies change, preferences vacillate, and it is best to let the
market decide what should flourish and what should die. In neomercantilistic market decide what should flourish and what should die.
In neomercantilistic
theory some industries or markets are too important to leave their fate up to
the unpredictable market place. Sometimes certain industries need plans,
pushing, help or coordination. Japan is the best modern-day example here. In
Japan, cooperation exists between the universities, technical industries,
government" and industry. All are directed toward producing high quality
products both for the home market and for export. This is how Japan became
Japan, Inc. This does not mean that domestically strong competition within
industries does not exist - for example, within Japan, Nissan, and Toyota are
fierce competitors.
Another important difference between the two theories concerns process
versus result. Neoclassicism focuses on economic processes, on getting prices
right and letting the market go its own way. Neomercantilists, on the other
hand, are interested in results. If domestic industries are losing out to
international competition, then adjustments are needed. This might mean
government support in the form of money for research and development or
protection from outside competitors. South Korea entered the intensely
competitive international car market this way - not by letting the market
decide. A strict interpretation of the theory of comparative advantage would
suggest that the South Korea of the early 1980s would be mad to get into the
semi-conductor market, yet after years of government involvement, South
Korea now possesses a share of the global market. Granted, this share came at
a cost to South Korean taxpayers, but again, from a neomercantilistic vantage
point, consumers may have to suffer in the short term for the long term health
of the nation.
Finally, neoclassicism and neomercantilism differ in how they view the game
itself. Neoclassicism suggests that in a completely free global market every
country would see some gain. Neomercantilist theory sees a different world
where a few countries seem to consistently have the comparative advantage in
most things. The theory suggests the economically weak states are at the
mercy of economically powerful states. Neomercantilism argues that the
wealth, rather than being created, is transferred from one nation to another.
Britain is not the same country it was in 1900, just as America is not the
country it was in 1950. From the neomercantilist perspective, competitive
advantage seems to move around: Britain had it, and now it does not. The
example of Britain looms significantly in the neomercantilist mind.
Neomercantilism sees a Britain that failed to plan, failed to invest in new
technologies, failed to build modernized factories, and failed by allowing its
capital and brain power to flow out of the country. In short, business is war
capital and brain power to flow out of the country. In short, business is war
with hard felt consequences for countries who lose in battle.
It should be noted that all of these arguments quickly become complex and
that each theory has its strengths and weaknesses. However, the growing
acceptance in the US and elsewhere that many neoclassical assumptions may
be flawed is all that is required to start changing the way states act. Politicians
and policy makers interpret academic debate in various ways. The convincing
arguments provided by neomercantilists have a real-world impact. The Clinton
administration's tough line against Japan during recent trade talks, for
example, is based in part on neomercantilistic arguments, which suggest that
Japanese behavior is not unenlightened in the neoclassical sense of the word
but is fundamentally different. The success of countries like Japan and South
Korea will continue to erode the ideological underpinnings of free market
liberals and their institutions. Success breeds imitation.
It is also interesting to note, based on the limited public information available,
that the use of state intelligence agencies in the furtherance of commercial
goals is much more prevalent in states which tend to be neomercantilistic in
nature when compared to those that are more liberal in approach. Within the
European Union, for example, France has developed a reputation for activity of
this kind while Britain's intelligence services, based on the information
gathered, have never been accused of conducting economic espionage.
Neomercantilism offers a new perspective in the free trade debate. More
importantly, however, it provides a sophisticated defense for the role of
governments in forming strategic trading policies including the use of
intelligence operations. Neomercantilism suggests a different focus for
economic activity, one that views economic competition as a struggle between
states: business as war versus business as peace. The implications of this
change in focus forecast intensified competition for global resources and
markets and an increasing reliance on economic-related intelligence.
Background
Two major factors have led to a re-evaluation of the role of the US intelligence
organizations in promoting US economic competitiveness:
First, the end of the cold war and an evolving definition of national
security which incorporates national economic health and industrial
strength; and
Second, a decline in America's ability to compete in certain key industries,
chronic trade deficits, and a perception that other countries are playing by
a different set of economic rules.
More generally, the marked increase of economic intelligence activities at the
international level can be at least partially attributed to increasing trade
liberalization and the rules and regulations of the successive GATT agreements.
The theory of political realism suggests that states often support cooperative
agreements while taking actions which undermine cooperation if clear benefits
are perceived. This means that as states lower trade barriers and reduce
subsidies, they will simultaneously seek new ways to give domestic producers a
leg up in international competition.
The debate concerning the degree to which states are able to cooperate in
anarchy is a familiar one to political science. Liberal institutionalists argue that
the gains from cooperation will lure states towards cooperative agreements via
institutions like the WTO/GATT for their mutual benefit based on rational
choice. The neomercantilist position, on the other hand, suggests that while
states may see the benefit of a generally free trade environment they are also
likely to seek ways to circumvent the system. Realists point out that as the
GATT lowered tariffs, a rise in non-tariff barriers took place. The degree to
which GATT has been successful to date may be due in large part to the fact
that states were able to find ways around the system. GATT's lax rules of
enforcement might be seen as a crucial ingredient to its continued existence.
Non-tariff barriers to trade, national structural barriers to foreign imports, large
scale bribery in international business contracts, and other illiberal strategic
trade policies have all flourished under GATT to a remarkable degree.
In this same vein, Joseph Grieco conducted an in-depth study of non-tariff
barrier negotiations within GATT and concluded that even if we assume states
are rational actors who might cooperate for the highest individual gain, they
are just as or more likely to choose options which keep other players from
benefiting. Or, in his words, "the fundamental goal of states in any relationship
is to prevent others from achieving advances in their relative capabilities."
Robert Gilpin argues that the international liberal system "stimulates, and may
compel, a state to increase its power; at the least, it necessitates that the
prudent state prevent relative increases in the power of competitor states." It is
a short trip between this idea and the logic behind aggressive economic
intelligence activities.
As stated earlier, success in the most profitable and certainly the most future As stated earlier, success in the most profitable and certainly the most future
oriented industries (i.e. computer parts and software, telecommunications,
consumer electronics, aerospace, etc ... ) depends less on natural endowments
which are fixed such as land resources, capital and materials, than on more
malleable resources such as a highly skilled work force and process knowledge.
As a result, information has become a highly prized commodity. The
acquisition of this information, whether by illegal or legal means, is an area
outside of any effective international body. Economic intelligence efforts reflect
one way governments can capitalize on the changing nature of international
economics while still meeting, or appearing to meet, the minimum
requirements of international cooperative agreements like GATT.
The end of the cold war has significantly altered the United States' security
priorities. Although traditional security concerns such as the threat of nuclear
proliferation or attack, terrorist activities and regional and ethnic conflict still
remain, new issues have surfaced which demand the attention of US policy
makers. Chief among these is a growing appreciation of the relationship
between national economic strength and national security. A recognition that
governments can give their producers an edge in international competition has
led to an obvious corollary, a view of international trade as a type of warfare.
As Paul Kennedy and others have remarked, the language of international
trade has become "increasingly military in nature; industries are described as
'under siege,' markets are'captured'or'surrendered,' and comparative rates of
research and development expenditures are scrutinized as anxiously as the
relative size of battle fleets before 1914... A neomercantilist world order
remains, even if recourse to war is not an option." r 81 In order to observe how
these challenges have become reflected in practice and to demonstrate the
new emphasis on economic competitiveness which characterizes the post-Cold
War era, one need only look at the changing focus of the international
intelligence community. It is estimated that economic espionage costs US
business as much as $100 billion per year. William Warner points out:
With the strategic military confrontation which
characterized the Cold War substantially abated, if
not altogether ended, there has been a worldwide
revival of the mercantilist notion that economic
power is the fundamental component of national
power. An obvious corollary is that economic
information propagates economic power. Both US
private industry and the US government are
apparently coming around to an awareness that the
achievement and maintenance of economic power is
achievement and maintenance of economic power is
a matter for intelligence concern as well as traditional
fiscal policy. The end of the Cold War not only
changed the game, it shuffled the players around.
Last year's politicavmilitary ally is now this year's
economic antagonist.
The growth of economic espionage has at its roots many neomercantilist
assumptions.
First, that nations are often unwilling to let the market determine
the location of production for certain industries and seem committed to
playing an important role in economic affairs, involving themselves in the
promotion and control of commerce.
Second, from an American vantage
point, the end of the cold war and the relative economic decline of the US
necessitates a change in focus for US foreign policy.
Third, that the rules under
which international trade is conducted have been, or are in the process of
being, reinterpreted based on mercantilistic principles. Last, economic
competitiveness is a valid and vital measure of national strength.
US Senator
David Boren made some of these same points in an April 1990 address:
"When you look at the targets for intelligence against
the United States - (foreign) government intelligence
services are shifting to economic sources - we're
going to have to know about intentions about oil
production levels and exchange rates and trade
policy. We're going to have to protect our own
commercial enterprises against theft of commercial
secrets. We're going to have to begin to think about
the role that we want our own intelligence services to
play in terms of protecting America's economic and
commercial interests around the world."
The belief that economic considerations are gaining precedence over traditional
military concerns is reflected in the changing role of the Central Intelligence
Agency (CIA) and the Federal Bureau of Investigation (FBI).
Former CIA Director
William Webster has stated, "There is now universal recognition that economic
strength is key to global influence and power .... Throughout the next decade,
we will continue to see an increased emphasis on economic competitiveness as
an intelligence issue."
The FBI now considers economic espionage as the
"top national security threat posed by foreign intelligence operatives."
These two quotes from America's most important intelligence organizations
reflect a world in which the state not only works to promote economic fitness
but an international economic environment where governments must actively
protect themselves from foreign competitors. This is not a position founded on
protect themselves from foreign competitors. This is not a position founded on
the "business as peace" idea in neoclassicism. The Japanese Ministry of
International Trade and Industry (MITI) encourages and conducts market
research, fosters economic activity in Japan, and serves as a organizational
center for gathering economic information about competitors. The French
government has gained a reputation for aggressive economic espionage
activities in the US, although Germany, Switzerland, Yugoslavia, South Korea,
Israel, China, and others have all been identified as carrying out similar
activities. The Russians have long been interested in gathering information
on American technology, and there is no evidence that the end of the Cold
War has changed this fact.
Although intelligence gathering is directed toward every possible business from
the shoe industry to synthetic diamond production, the following indicates
what author J. Thompson Strong calls "The Critical Technologies Threat List:"
Air breathing propulsion
Microelectronic circuits
data
Arrays
Passive sensors
Biotechnology
Photonics
pulsed power
Composite materials
Semiconductor materials
Fusion Sensitive radar
Flexible manufacturing
Signature control
High energy density Simulation & modeling
materials
High performance Software engineering
computing
Hypervelocity Superconductivity
projectiles/propulsion
Machine intelligence and Weapon system
robotics environment
The target industries for economic espionage reveal both an important point of
contention between neomercantilism and neoclassicism and the changing
nature of international economics. The concept of comparative advantage no
longer seems to dictate the location of production in high technology fields
like the ones listed above. Unlike liberal economists' models, in the real world
government policies, including the use of economic espionage, affect which
countries will capture the advantage in the markets driven by new technology.
countries will capture the advantage in the markets driven by new technology.
The products that will be developed from the technologies outlined above will
be produced where the best technology has been developed and applied. Or,
stated another way, "New industries of the future such as biotechnology
depend on brain power. Man-made comparative advantage replaces the
comparative advantage of Mother Nature (natural-resources endowments) or
history (capital endowments)."
This means that research and development as well as process development will
become vitally important in the race to capture market share. The neoclassical
idea that producers and governments should allow natural market forces to
determine who will produce what and where no longer makes sense when, for
example, one studies the history of the semiconductor market.
A shift in attention from geopolitics to geo-economic politics is underway
among western industrialized states. This is reflected in the actions of their
intelligence services. The post-Cold War landscape has linked trade issues and
economic strength to national security. This development confirms many
neomercantilistic assumptions and suggests that trade and economic
competition, while working to unite nations, may simultaneously cause
potential conflict.
A perception in the US that the country is losing out to foreign competitors, as
the Japanese and others come to dominate markets that were once American
strongholds, is likely to cause US trade policy to become more confrontational
and defensive, emphasizing results over process. The quotes given above from
American intelligence officials signal a new "fight fire with fire attitude" that
stems from the perception that the outside world is playing by a different set
of economic rules and from fears about further American economic decline if
nothing is done.
Case Studies
It is clear that many of America's economic competitors have focused their
intelligence activities toward the collection of business and economic
information. Although each country is different, both Japan and France
(excluding several other countries) provide models for more organized,
aggressive and largely successful economic intelligence when compared to the
US example, given their relative resources.
Japan
While the line between national security and economic strength is just now
beginning to blur in the US, it has never existed in Japan. A 1987 CIA report
entitled Japan: Foreign Intelligence and Security Services named the following
priorities for Japan's intelligence agencies:
1 .Intelligence on technological and scientific developments in the United
States and Western Europe.
2. Intelligence on political decision-making in the United States and Europe
relating to trade, monetary, and military policy in Asia and the Pacific
region.
3. Intelligence regarding access to foreign sources of raw materials to include
oil and food.
It is estimated that perhaps eighty percent of Japan's intelligence efforts, which
are directed towards the United States and Western Europe, focus on
gathering economic-related information, especially high-tech developments
and trade secrets.
The two primary agencies responsible for Japan's economic intelligence
operations are the Ministry for International Trade and Industry (MITI) and the
Japanese External Trade Organization (JETRO). Both organizations disseminate
collected information to Japanese industry and business. Recent case studies
on Japanese efforts in gaining technological information or trade secrets in the
computer, telecommunications, optics, aircraft, aerospace, and electronics
industries attest to an organized and effective program.
Starting in 1984 an overhaul and reorganization of Japanese intelligence
centralized the country's operations. A new Information and Resource Office
serves as a central clearing house for the collected data of Japan's various
official and unofficial intelligence gathering organizations and has close ties to
Japanese business. An Intelligence Committee works to coordinate the
priorities of the various agencies involved. The committee includes members
from the highest levels of both commerce and security. f 201
Japanese corporations place a high priority on information collection and,
unlike most US firms, seem willing to pay the costs associated with the
maintenance of what are essentially commercial intelligence agencies. Several
Japanese commercial intelligence operations in the US and elsewhere have
come to light, though many intelligence specialists point out that a consistent come to light, though many intelligence specialists point out that a consistent
number of cases here and there indicate a comprehensive and extensive
program. It is presumed that most operations never become public. Further,
even if legal action is taken against a company engaged in economic
espionage, it may well be worth the price. For example, Mitsubishi Corporation
pleaded "no contest" to charges that it paid an employee of the Celanese
Corporation $150,000 for industrial film technology. Mitsubishi was fined
$300,000 by a US judge but compared to the estimated value of the
information, $6 million, the operation was a resounding success.
Coordination between government and industry is greatest when a clear
industrial target exists. Beginning in the late 1970s, the Japanese government
and its companies were determined to take on the micro-chip industry.
Collection of data in Silicon Valley was so aggressive that the FBI and the State
Department finally decided to reduce the number of visas granted to Japanese
businessmen. The results of the Japanese effort are nothing less than
astounding. "Our estimate is that intelligence operations provided at least 35
to 40 percent of the base-line data on which the Japanese were able to
extrapolate and achieve what they did." The CIA had estimates as high as 70
percent. The end result was a successful economic intelligence operation which
turned the international micro-chip industry on its head.
By 1980 Japanese companies had surpassed US merchant semiconductor firms
in the design and manufacture of the latest generation of semiconductor
devices. By 1983 Japanese-based firms held a share of the world market equal
to that of the US-based firms. By 1986 the Japanese firms had taken 65
percent of the world market for memory products, while the US share had
fallen to 30 percent. In 1988 Japan held 85 percent of the market for one
megabit memory chips, while the American share... had dwindled to eight
percent.
Japanese efforts in the microchip industry represent one instance where the
Japanese government became directly involved. An FBI sting operation nabbed
officials from the Japanese consulate in San Francisco and Naicho, a small but
important Japanese intelligence branch directly tied to the office of the Prime
Minister, may have been connected to the operations.
Japanese government officials have explored every possible source of data,
including Japanese graduate students studying abroad. Incidents have been
reported at Berkeley, Stanford and the Massachusetts Institute of Technology
where students at top research facilities were pressured to produce where students at top research facilities were pressured to produce
information on research activities. The problem is deemed important enough
by the US government that some officials have called for "tracking" the
activities of US students working on advanced technological and scientific
projects in America's best schools.
Not all of Japan's efforts are clandestine. The Freedom of Information Act,
aimed at providing government information to the public, allows foreign
companies to gain in-depth, detailed information on both American companies
and US government agencies. It is estimated that individuals or organizations
acting on behalf of Japanese companies have made approximately 1,500
requests annually for information on the US space program alone, including
requests on various rocket types.
Japan's economic intelligence efforts reflect an overall emphasis on industrial
competitiveness and an obsession with the latest technological developments.
The system in Japan facilitates government and industry cooperation and the
government provides a recognizable and workable structure for getting
commercial information to its companies. Finally, outside of official
government efforts, Japan's companies arguably have the world's most
advanced competitive intelligence units.
France
"In any intelligence service worthy of the name one
would easily find cases where a single operation
[involving the economy, industry and science] paid
the year's operating budget."
-Former French intelligence official, Count Alexendre
de Marenches,
Dans Les Secrets des Princes.
France has an established history in the collection of economic intelligence.
According to Peter Schweizer, France employs approximately two hundred
agents around the world; agents who work full time gathering economic
information. In addition, a network of part-time agents or "honorary
correspondents" provide additional information and support. The United
States, in particular, has been a consistent source of information to French
companies. The following list indicates US firms which have been identified by
the French government as targets for intelligence gathering:
Allied Signa,
Lawrence Livermore
National Labs
Bankers Trust LTV
Bell
McDonnell Douglas
B.F. Goodrich
Martin Marietta
Boeing
Merrill Lynch
Chase Manhattan Bank
Morgan
Guaranty
Chemical Bank
Motorola
Corning Glass
NASA Space Centers
First Boston Bank
Northrop
Ford Aerospace
Pratt and Witney
General Dynamics
Prudential Bache
Grumman Aerospace
Soloman Brothers
GTE
Rockwell International
Honeywell
Texas Instruments
Hughes Aircraft
TRW
Lockheed
United Technologies
Los Alamos Labs
Westinghouse
Like Japan, France reorganized its intelligence services in the early 1980s in
order to better focus on economic matters. A group called Planning,
Forecasting and Evaluation outlined new priorities for French intelligence. The
results of implementing the guidelines were felt world-wide. Not only did
France gain a reputation for aggressive and bold espionage tactics, from
bugging the business class section of Air France to intercepting diplomatic
pouches en route to the Japanese embassy in Paris. France, along with South
Korea and Japan, pushed the limits of normally accepted intelligence
techniques among the major western allies.
One of the most spectacular successes of the French program occurred in 1982
when the French won a $2 billion contract with the Indian government for
production of fighter aircraft. According to reports, the French had recruited
an important Indian civil servant and other public officials who passed on
information to the French during bidding negotiations.
Pressure from France
and the inside connections established in the Indian government were enough
to secure the contract with a French company and not with the main
competitor on the deal, a US firm.
The use of intelligence in pursuit of economic goals is routine in France. The
French attitude toward spying on one's allies is summed up by Pierre Marrion,
former director of French intelligence.
"I think you have to separate very clearly what are the
fields which are not covered by an alliance. It's clear
that when you have an ally, you have certain sectors
[that are covered]. I'm speaking of armaments. I'm
thinking of diplomatic matters where you normally
should not try to gather intelligence. But in other
fields where being allied does not prevent the states,
the corresponding states are competitors. Even
during the Cold War, the completion was still
existing. [This] is even more true now, since the
competition between states is moving from the
political-military level to the economic and
technological level."
The separation of two spheres of intelligence, one military and political and the
other economic or commercial, is vital to an effective economic intelligence
program. This task is especially difficult in the US for two basic reasons. First,
the United States'superpower status, history, and traditional focus on military
and political concerns has made the transition to also tackling economic
matters a difficult one. This idea is summed up nicely by a CIA agent who was
quoted as saying "I'll give my life for my country but not for Chrysler." Second,
the generally liberal system in the US is one which views government
involvement in the market as both intrusive and detrimental. Recent
Republican calls for dismantling the Commerce Department reflect this idea. In
France the relationship between government and industry is basically
cooperative, reflected for instance, in recent government programs meant to
help small and medium size businesses create or improve upon their
competitive intelligence capabilities. In February of this year a team of
experts met with aides from French intelligence agencies to discuss a new more
comprehensive counter espionage program and called for the creation of a
fund in order to provide money for the economic intelligence concerns of
smaller companies. Reacting to a perceived threat from the US, (five CIA agents
were recently asked to leave the country based on accusations of economic
spying) some French officials have openly called for a European response to the
problem. Recently, France in its global military review, acknowledged:
1. that security is now less defined in terms of 1. that security is now less defined in terms of
territory than in economic and industrial interests;
and 2. that France's vital interests, particularly at the
economic and industrial level are barely discernible
from its EU members.
The report calls for a reduction in reliance on US intelligence given the new
focus of many intelligence agencies.
To summarize, France has been relatively forthright regarding its on-going
effort to gain commercial and technical information from its international
competitors and its activities abroad in support of French business. French
economic intelligence activity is marked by sharp practices and extensive
information gathering directed at foreign visitors to France. French intelligence
officials including the former head of operations have indicated that the
benefits of the French approach have greatly outweighed the costs. Like the
Japanese government, the French government enjoys a largely harmonious
relationship with big business. This fact is reflected by joint
commercial-governmental conferences, seminars and programs aimed at
improving France's overall competitive intelligence capabilities. Given its size
and available resources, France has made the utmost of its intelligence
agencies in the international market place.
Legal Obstacles and Problems
The involvement of state intelligence agencies in the international market place
raises new questions for both international and domestic law.
Since World War 11, there has been consistent growth in international law.
International agreements, cooperative arrangements, and treaties covering
space, oceans, commerce, and trade are all examples of this general trend.
Despite this fact, and despite a corresponding increase in intelligence activities,
one will be hard pressed to find international legal standards for covert
operations and intelligence. This is to be expected. Intelligence operations are,
by definition, secretive. Behavior which is not normally observable, hard to
define and often impossible to verify is difficult, if not impossible, to regulate.
Many countries simply deny carrying out any intelligence operations at all.
However, in many ways intelligence has become an accepted part of the
international system. In 1947, the US National Security Act publicly recognized
intelligence as a "legitimate foreign policy process." Notably, the document
provoked little international reaction. The way in which countries handle the discovery of intelligence operations or
espionage in their country reveals a great deal about the place of intelligence
in the international system. Normally, the offending agents are quietly asked to
leave the country within a certain number of days and an official complaint is
discreetly passed on to the appropriate officials in the offending country.
Reciprocal tolerance for intelligence operations is the general rule of
international relations. The recent story of CIA agents being asked to leave
France was an exception to the norm and it was reported that the French
Prime Minister was outraged that the issue somehow became public, though
many suggest that the abnormal "leak" was allowed to occur for domestic
political reasons. There is a general lack of enthusiasm for making intelligence
gathering or covert activity international crimes.
Whether the rise in economic
espionage and sharp practices will change this fact remains to be seen but the
prospect is doubtful given the points made above. This is not to suggest that
all intelligence activities have escaped legal literature. Espionage and covert
operations are sometimes considered a breach of territorial integrity. Domestic
law defines illegal behavior which covers a great many intelligence tactics. An
example of one such law is the US Foreign Corrupt Practices Act (FCPA).
In the face of ever increasing international competition, a great deal of
economic intelligence activity has focused on seeking to influence negotiations
of international business contracts. This has included, as noted earlier in this
paper, the use of intelligence to pressure foreign officials or actually arranging
for the payment of bribes. The FCPA makes criminal the payment of bribes to
foreign officials for the purpose of winning business. Amended in 1988, the
FCPA punishes bribery by US businesses in two ways. First, the act of engaging
in, knowing of, or willingly not trying to gain knowledge about an improper
payment violates the FCPA. Second, the accounting of such payments is
impossible to do legally under US law. Both individuals and companies can be
fined or punished. The United States is the only member of the Organization
for Economic Cooperation and Development to effectively make bribery in the
international marketplace an illegal activity. As a result, this single piece of
legislation costs at the very least "hundreds of millions of dollars in contracts
every year" according to US Secretary of State Warren Christopher. The US
has tried in vain to pressure other states to adopt similar legislation. Without
any international support, the US, facing growing pressure from its companies,
has two options: either the Congress can rescind the FCPA, or the government
can try to find some way to try to level the international field. The Clinton
administration has turned to the CIA. CIA Director James Woolsey has publicly
stated the CIA role:
"We collect intelligence on those efforts to bribe foreign companies and foreign
governments into, for example, awarding an airport contract to a European
firm rather than an American firm... and when we find out about those, and
we do a fair amount of time, we go not to the American corporation that's
competing, but the Secretary of State, and he sends an American ambassador
to see a president or a king, and he - that ambassador says, "Mr. President," or
"Your Majesty," your minister in charge of construction is on the take, and you
have a lot going on with the United States, and we don't really take kindly to
your operating that way. Frequently but not always the contract is re-bid and
the American firm gets a share of it... sometimes the whole thing is done right,
sometimes not. But we calculate, really very conservatively, that several billion
dollars a year in contracts are saved for American firms by our conducting that
type of intelligence collection. We intend to continue to do it. It is relatively
new. We are, frankly, very good at it, and we have had some very positive
effects on contracts for American businesses. I sometimes smile as I read the
newspaper because some of the very same corporations for whom we have
saved, very, very large contracts by operating this way will have officials or
executives go public and say "We don't need any help from the American
intelligence community." That's fine, that's the way the intelligence business
goes."
The role of the CIA in this field raises important questions both for the general
debate regarding the use of intelligence in the market place and as it relates to
the murky waters of international and domestic law. It is ironic that the CIA,
acting due to US legislation regarding bribery and the international
community's reluctance to pass similar legislation, may in fact, in the course of
fulfilling its mandate, violate domestic laws in these countries. In its quest to
discover improper payments, the CIA will likely rely on covert activity and the
use of the National Security Agency's (NSA) extensive communications
intelligence. The NSA's ability to intercept nearly all forms of communication
worldwide will undoubtedly raise both eyebrows and legal concerns as US
intelligence becomes increasingly involved in monitoring international business
transactions.
Despite the problems associated with this kind of activity, it may be well worth
the costs. As Samuel Porteous points out, "savings in the billions from this sort
of activity by the CIA may not be as fantastic as it seems. Foreign governments
often make purchases of telecommunications systems, aircraft or arms that
frequently run into the billions of dollars." 1371 There is no shortage of frequently run into the billions of dollars."
There is no shortage of
examples to make this point clear. It has been reported that the CIA was crucial
in seeing that Raytheon won a contract with the Brazilian government instead
of the French firm Thompson S.A., which had attempted to bribe a Brazilian
official. And in 1990, a $100 million contract in Indonesia involving the
modernization of its telecommunications system was about to be awarded to a
Japanese company, NEC. The CIA reportedly discovered that the Japanese had
threatened to reduce foreign aid to Indonesia unless NEC received the contract.
AT&T through its European subsidiary had submitted a bid below NEC's price.
Reports of the potential contract were given to President Bush who wrote a
letter to Indonesia's president stating the US position.
The contract was
awarded fifty percent to the AT&T and fifty percent to NEC. US intelligence,
along with the Department of Commerce, recently produced a study of over
100 international business deals (worth approximately $45 billion) where
competitors used bribery or other "unofficial" means to undercut US
companies. Eighty percent of the deals went to the foreign companies. It is
interesting to speculate how other intelligence agencies might react to the
CIA's new role in international business. It is important to remember that bribes
for the purpose of securing business are most often legal outside of the US,
both in the bribing country and in the country where the bribe takes place. The
legal basis for CIA activity in tracking international business deals is, like the
law relating to most intelligence activities, unclear.
The increasing use of intelligence in the economic realm is pushing the
informal acceptance of international intelligence activities. Unlike other
controversial intelligence activities such as assassination, economic intelligence
operations are a constant and widespread practice. To complicate matters
further, the vast majority of the information collected by intelligence agencies
is obtained through perfectly legitimate means.
Thus far, national governments have been treating economic intelligence
activities like military and political operations. The practice of "reciprocal
tolerance" legitimizes economic intelligence activities, though even here one
can imagine international agreements in the future which attempt to regulate
certain types of actions. The US continues to strive to have bribery included in
the structure of GATT. Alarmist literature concerning "economic warfare," in
which governments purposely induce a financial crisis via computer viruses or
misinformation, may create enough concern that an international organization,
tasked with building an agreement on acceptable behavior in the competitive
intelligence arena, might be formed.
Domestically, a more comprehensive US intelligence program raises clear legal
concerns. Several commentators on the subject point out that government
involvement, not to mention the secretive practices of intelligence agencies, in
the free market is highly regulated and extremely controversial in the US. It has
been suggested that if the CIA, for example, were to pass on information to a
US firm, such an action may be in violation of US anti-trust law.
Presumably, someone in the government would have to decide which company
or companies would receive the information and in what form. Further, certain
industries would likely benefit while others would suffer. Anti-trust laws
specifically prohibit the government from favoring one industry over another.
To further complicate matters the litigious and open system in the US would
cause foreseeable problems. One can easily imagine a lawsuit against the US
Government brought by company X because company Y had benefited from
information supplied by US intelligence. Yet despite these obstacles, one can
speculate on ways to overcome these problems. In fact the current debate
within the intelligence community, among scholars, in Congress and in
business is already beginning to address many of these questions.
A Model and Its Implications
In just the last three years a small but thoughtful body of literature has
emerged which, in broad terms, addresses the possibility of a new, more
comprehensive and aggressive US economic intelligence program should US
policy makers choose that route. The impetus behind a new intelligence focus
has three main sources as identified earlier in this paper. The first is the end of
the Cold War and a growing realization that, "Mercantile concerns, once
subservient to ideological conflict, are today, from Tiananmen Square to
Toronto, the primary motivators in foreign policy." The second is a growing
perception that other countries are playing by a different set of economic rules
and that as a result US industry has suffered. Last, I have argued that the rise
of economic espionage may have been spurred by trade liberalization and the
rules and regulations of GATT.
In the face of economic espionage activities directed against US companies
(and given the importance most industrialized states are beginning to place on
effective economic intelligence), the US faces three main options. The first
option is to take little or no action. This would mean that agencies like the CIA
would only provide general economic reports, primarily in areas where the ties would only provide general economic reports, primarily in areas where the ties
between security and economics were fairly clear such as in certain
high-technology industries, or regarding oil and gas availability. A second
option would focus on an attempt to use international cooperative
arrangements like GATT and the WTO to regulate and minimize the negative
effects of other countries'economic espionage activities. It is conceivable that
the US could lobby to have economic espionage and sharp practices defined
and monitored. Rules and agreements would forbid the use of state
intelligence agencies in the international market place or at least clearly
identify which activities are and which activities are not acceptable. A bilateral
approach to this problem could also be taken. In this scenario the US would
threaten trade action against any country caught conducting economic
espionage against US firms. Finally, the US could adopt an economic
intelligence program that is commensurate with its size, resources and national
and security interests.
Both Japan and France offer important lessons for a more comprehensive and
effective US intelligence program. One way to optimize a state's economic
intelligence capabilities centers on the intelligence capabilities of business. The
Japanese example and, to a lesser extent the French case, both make clear that
corporations have substantial resources and are often equipped to meet their
own competitive intelligence needs. Recently, Motorola, and not the CIA,
uncovered a major bribery case in a bid'for a contract in Taiwan. US companies
have been behind their international counterparts in the development of
security measures to keep their information safe and in their abilities to track
international competition. The experiences of the 1980's, however, which saw
a fourfold increase in the number of reported cases of economic espionage,
have begun to change this.
Competitive intelligence is the new buzz word in US business. The US has seen
a marked increase in the number of private intelligence companies in the last
few years and most large corporations with substantial overseas business have
or are beginning to form modern competitive intelligence units as a part of the
accepted corporate structure. One can find job listings on the Internet for
competitive intelligence professionals. However, the Japanese and French
examples also make clear that cooperation between the government and
industry is one of the primary reasons economic intelligence has worked in
both of these countries. It is this task which is perhaps the most difficult in the
US case. Many have argued that without an industrial policy in the US, a
French or Japanese style economic intelligence program is impossible. This
seems doubtful. Some evidence has emerged that US government officials and seems doubtful. Some evidence has emerged that US government officials and
the intelligence community already funnel some information through informal
methods, at industry conferences and meetings and via the country's national
laboratories. A series of articles in MotherJones magazine suggests that
go-between organizations like the "Partnership for a New Generation of
Vehicles" were used to disseminate information the CIA had gathered in Japan
to US auto makers. r 431 If the US decided that the intelligence community did
uncover information useful to US business, these semiformal organizations
may be the best way to get the information out. Not only does this avoid
direct contact between US intelligence and US business, but it helps to keep US
activity relatively quiet. The French example suggests that open and bold
economic intelligence tactics have political costs, if only because it gives other
states an excuse to carry out their own questionable activities .
In order to assess a possible model for the US, it is necessary to conceptually
separate different kinds of economic intelligence activity. Intelligence insider,
Stansfield Turner, has suggested a useful hierarchy of possible policy levels
from merely adopting basic counter espionage measures to a complete
program, as exists in Japan or France. r441 Combining this idea of a progression
from a weak to strong economic intelligence program with Samuel D. Porteous'
offensive-defensive model yields a fairly clear set of options for US policy
makers. For each additional level all the activities described in the previous
level should be added.
At the lowest level the US would use existing
intelligence to provide counter-intelligence
support. In the US this task rests primarily with
the FBI, which reports to US policy makers on
the activities of foreign governments in the US.
The FBI is also charged with helping combat
economic espionage and sharp practices
directed against US business. Included at this
level would be broad based information on
economic matters provided by the US
intelligence community. This might mean a
report on the peso crisis from the CIA or
information on the political backdrop of major
economic trends.
The second level would incorporate more
detailed economic tracking and the analysis of
basic industries. Most importantly, this level
would include monitoring trade agreements
and "unfair" commercial practices like bribery on
the international stage. The recent Department seems doubtful. Some evidence has emerged that US government officials and
the intelligence community already funnel some information through informal
methods, at industry conferences and meetings and via the country's national
laboratories. A series of articles in MotherJones magazine suggests that
go-between organizations like the "Partnership for a New Generation of
Vehicles" were used to disseminate information the CIA had gathered in Japan
to US auto makers. If the US decided that the intelligence community did
uncover information useful to US business, these semiformal organizations
may be the best way to get the information out. Not only does this avoid
direct contact between US intelligence and US business, but it helps to keep US
activity relatively quiet. The French example suggests that open and bold
economic intelligence tactics have political costs, if only because it gives other
states an excuse to carry out their own questionable activities .
In order to assess a possible model for the US, it is necessary to conceptually
separate different kinds of economic intelligence activity. Intelligence insider, Stansfield Turner, has suggested a useful hierarchy of possible policy levels
from merely adopting basic counter espionage measures to a complete
program, as exists in Japan or France. Combining this idea of a progression
from a weak to strong economic intelligence program with Samuel D. Porteous'
offensive-defensive model yields a fairly clear set of options for US policy
makers. For each additional level all the activities described in the previous
level should be added.
At the lowest level the US would use existing
intelligence to provide counter-intelligence
support. In the US this task rests primarily with
the FBI, which reports to US policy makers on
the activities of foreign governments in the US.
The FBI is also charged with helping combat
economic espionage and sharp practices
directed against US business. Included at this
level would be broad based information on
economic matters provided by the US
intelligence community. This might mean a
report on the peso crisis from the CIA or
information on the political backdrop of major
economic trends.
The second level would incorporate more
detailed economic tracking and the analysis of
basic industries. Most importantly, this level
would include monitoring trade agreements
and "unfair" commercial practices like bribery on
the international stage. The recent Department the international stage. The recent Department
of Commerce report on bribery in international
business deals is an example of this kind of
activity. Tracking the extent to which other
states are adhering to important international
agreements would be included here. Porteous
mentions the example of Canada's interception
of Spanish shipping communications during the
recent Canadian-Spanish dispute regarding
commercial fishing agreements in the North
Atlantic. Each case would be selected based on
its security and economic importance. More
broadly, the US would use its intelligence
resources to find out what other countries are
trying to hide.
At the third level US intelligence would, in
addition to those duties outlined above, provide
broad based information on "industry trends" to
US business through organizations like the
Association of US Auto Makers. This has taken
place on an informal basis already. The
Department of Commerce might be a good
vehicle for getting this type of information out.
This would include information on Japanese
efforts in the aircraft industry or reports on
Airbus Industries The Department of Commerce,
along with the FBI, might also be involved in
providing information on counter-intelligence
programs for US businesses. A model program
for this type of activity was seen in the French
case study.
At the fourth level the substantial capabilities of
the National Security Agency would be brought
into play. The US has no equal in its ability to
listen in on the world's conversations. The US
also boasts the best imaging technology. This
level would also include using computer experts
to gather available open source information
including "gray area" semi-public information.
At this level the US would use its eyes and ears
to track and further its economic goals.
The fifth and final level would utilize
intelligence agents abroad for the collection of
information by covert means. The information
would then be modified, if necessary, for
consumption by US business and industry. This
level would also include what Porteous calls
"Special activities designed to influence events, behavior or policy formation in foreign lands."
This means misinformation campaigns and
covert influence on economic decisions deemed
important to national economic security. This
final level might also include preparation for
"economic warfare" and a tough stance on
foreign agents caught stealing US business
secrets.
Given the unique business and legal environment in the US, the importance of
the US's international reputation, and the disputed economic benefits of
commercial intelligence, the appropriate US economic intelligence policy rests
at the fourth level described above. However, practical problems remain. Does
the US government have the capabilities to collect and analyze economic data
of this sort? What agencies would be involved? How would decisions be
made? Finally, would the benefits of the policy outweigh the costs? Taking
these questions one at a time the obstacles, though substantial, are not
insurmountable.
The US government already has a number of agencies and sub-agencies
devoted to the collection and analysis of economic information. In her careful
and thorough study, Erica Ballard evaluated the US government's ability to
collect and analyze economic intelligence. Based on six criteria - cost, accuracy,
suitability, target accessibility, releasability, and timeliness - Ballard concluded
that "the United States Government can collect and analyze economic
intelligence that is usable by US industry. The [intelligence] Community would
need to make some changes to focus on detailed industry information versus
broad economic trends; internal assets would require redistribution to perform
the mission."
The following US government agencies are already involved in collecting and
analyzing economic data and would conceivably play a part in US economic
intelligence policy defined in option number four:
The President's Office, The Department of
Defense,
The National Security
Council, and National Security Agency,
The Department of State, The Defense intelligence
Agency,
The Central intelligence Agency, The Department of Commerce,
The Federal Bureau of Investigation, The Department of Energy,
The Secret Service, The US Information
Agency.
Associated with these agencies are several sub-agencies or independent
government offices:
The National Counterintelligence Center: An
office set up by the White House which recently
identified efforts by allied countries to spy on
US business.
The Financial Crimes Enforcement Network
(FinCEN): This small but growing agency tracks
financial data in order to identify financial
crimes.
The Advocacy Center: This White House project
connected to the Commerce Department is
"staffed by specialists who track minute by
minute, the status of thousands of giant
projects around the world that American firms
are vying to win... The idea is to bring the
whole force of the government together to
press the case for American business."
Obviously, the US government is already in the process of taking on some of
the economic intelligence activities described earlier.
What is not apparent is
whether US efforts in building an economic intelligence program have any
clear direction or guidelines. A specific framework which outlines which
activities are acceptable and which are not should be adopted. This is especially
important if the US continues to push for international agreements that limit
economic espionage and sharp practices. Equally important is the
establishment of an organizational center to give direction to the program.
Someone has to decide which agencies are doing what and how information is
to be shared. Duplicated work has been a problem for US intelligence agencies
in the past, and the mistake should not be repeated.
Policy should be coordinated between Congress and the White House while
including input from representatives of the major agencies involved. This will
not be easy given the varying interests involved and ever present bureaucratic
not be easy given the varying interests involved and ever present bureaucratic
rivalry. One agency which would be small and attract little attention should act
as a clearing house for the information supplied from the various agencies
involved. Obviously a program which involved constant flows of information
from all the agencies listed would overwhelm the system. An economic
intelligence program as described above at the fourth level would primarily rely
on data from approximately five agencies or sub-agencies. I am not suggesting
the roles of any one of these agencies be significantly altered in order to meet
economic intelligence needs.
For the most part, due to the United States'substantial data collection and
human resources for analysis of the information, all that is required is
coordination, direction, and a slight change in focus for selected divisions
within a few of the agencies listed. This could even be broken down by task or
topic area. For example, the monitoring of international contracts might
involve the CIA, the Commerce Department and the National Security Agency.
Counter-intelligence activities might involve just the CIA and the FBI.
This paper has addressed some of the main issues and questions surrounding
the adoption a more comprehensive and aggressive US economic intelligence
policy. An economic intelligence program as described above would allow the
US to meet major economic and security objectives while avoiding the bulk of
the negative press and the ethical and legal questions associated with
economic espionage and sharp practices. Given the stakes involved, US
competitiveness in key industries, billion dollar contracts and the protection of
America's trade secrets, the costs involved in implementing the program would
be minimal. The twentieth century will be defined by intense global economic
competition. Political leaders in every country pledge to increase living
standards and sustain economic development. The populace in democratic and
less than democratic societies alike have placed a supreme value on economic
advancement and consumption. Politicians will come under increasing pressure
to take every action which strives toward that goal. More likely than not,
economic intelligence will be increasingly used as one method in seeking to
achieve that goal.
Notes
1. Executive News Service "US's Brown says intelligence has role in Trade" (October 19, 1995)
Reuters Ltd.
2. Samuel D. Porteous, "Economic/Commercial Interests and the World's Intelligence Services: A background
Canadian Perspective" Intelligence and
Counterintelligence (Vol. 8, No. 3) p. 275- 306.
3. Robert Kitten, The End of laissez-faire (New York:
Alfred A. Knopf, 1991)4.
4. Robert Gilpin, The Political Economv of
International Relations (Princeton: Princeton
University Press, 1987) 364-365.
5. James Fallows, Looking at the Sun (New York: back
Pantheon Books, 1994) 183-185.
6. Ibid.
7. Gilpin., p. 364-366. back
8. Paul Kennedy, Preparing for the 21st Century
(New York: Vintage Books, 1993) 127.
William Warner, "International Technology
9. Transfer and Economic Espionage" Intemational
Joumal of Intelligence and Counterintelligence V.
7, No. 2. Summer 1994. p. 145.
Jeffrey W. Wright "International Technology
10. Transfer and Economic Espionage" Intemational
Joumal of Intelligence and Counterintelligence V.
5, No. 2. Spring 1990. p. 290.
11. Ibid., p. 206.
Kristen Michael, "Business Counterintelligence
and the Role of the US Intelligence Community"
12. Intemational Joumal of Intelligence and
Counterintelligence V. 7, No. 2. Summer 1994.
P. 1.
13. Wright., p. 204.
J. Thompson Strong, "Tilting with Machiavelli:
Fighting Competitive Espionage in the 1990s"
14. Intemational Joumal of Intelligence and bFac7k
Counterintelligence V. 7, No. 2 Summer 1994. p.
168.
15. Kuttner., p. 120-121. ask
16. Fallows., ch. 1. b.
17. John F. Quinn, "Managing Risk in the Information Age" Fifth National OPSEC Conference, May 2-4,
1994. (Trancript p.2).
18. Ibid. back
19. Peter Schweizer, Freindly Spies: How America's
Allies Are Using Economic Espionage to Steal Our
Secrets (New York: Altantic Monthly Press, 1993)
p. 67-84.
20. Ibid., p. 86-87. ask
21. Ibid., p. 88-89. a C*
Erica Ballard Russell, "The Capabilities of the US
Government to Collect and Analyze Economic
22. Intelligence" (Fort Leavenworth, Kansas: US Army b
Command and General Staff College, 1994) p.
35.
23. Ibid., p. 35. back
24. Schweizer., 79-80. b
25. Ibid., p. 93.
26. Ibid., p. 101.
27. Russell., p. 27.
28. Schweizer., 110.
29. Ibid., p. 1 1 1.
30. Ibid.
31. Ibid., p. 99.
32. "France: A Secret and Aggressive System"
Business Intelligence (October 12, 1995) p. 3.
33. Ibid.
34. M. E. Bowman, "Intelligence and international Law" Intelligence and Counterintelligence (Vol. 8
No. 3) p. 328.
35. Porteous., p. 294.
36. Ibid., p. 295.
37. Ibid.
38. Ibid., p. 296.
39. Ibid.
40. Schweizer., p. 286-289.
41. Ibid. ask
42. Porteous., p. 275.
43. Russell., p. 72.
44. Schweizer., p. 293.
45. Porteous., p. 288-290.
46. Russell., p. iii.
Ping
The New Physics.............The 'whole' world is now in a new black 'hole'.
/sarcasm
This comparison between the schools is particularly apt:
Perhaps the greatest divide between the two theories centers around the question, what is economics for? As stated previously, neoclassical economists focus on the individual and consumption. Neomercantilists, on the other hand, focus on the state. They equate economic strength with national security and the very concept of power. For neomercantilist theorists the overall wealth and security of a nation depends less on what a society can buy than on what it can make, what James Fallows calls the consumer versus producers debate. Neomercantilists argue that in the long run, consumer oriented societies will lose out to producer oriented societies. The rise and fall of great economic powers can be traced in large part to each country's ability or inability to tackle new markets and technologies. Neomercantilists rank different industries in terms of importance and global positioning. Great Britain didn't build an empire on consumption and free trade principles but on the strength and advanced nature of its manufacturing base.
As I recall, in the late 80's, the economic mantra of free trade with the Asian Continent was that there would be "billions", with a "B", of consumers for American made products. Instead, these "billions of consumers" also turned out to be capable of becoming producers, too. And at cheaper labor rates than Americans. The proposed consumer is now the producer and the producer has become the consumer. The unintended consequences of the U.S. executive suites contempt of skilled, blue collar craft, as well as Labors intransigence regarding benefits has finally come home to roost. Eventually, the CEO of General Motors will be managing a Walmart store selling goods made in China.
Their typically erroneous and fatuous rationalization would be, well, if they are selling cheaper, then they must be more efficient. [They aren't even close] Or if they are subsidizing, it's their loss. Wrong.
They are willing to do whatever it takes for the express purpose of damaging the U.S. economy's productive sector and hope to inflict long-term dislocations and dependencies. They really don't have labor costs, because the harvesting horticultural labor force is where a lot of the slave labor from their prisons is allocated. (It requires little training and minimal oversight).
The dollar surplus they are accumulating, can then be turned over to the PLA to build and buy more weapons and advanced dual use technology. And it is also reinvested in financing further economic attacks on our economy...note they are currently building up their bio-training universities, and hope to capture the U.S. bio-research field by offering the irresistable carrot of 'outsourcing' the R&D to their fresh-faced new graduates who will work for 1/10th the price.
Remember how Kruschev always promised to 'bury us' with their production? And how Lenin always predicted that we would wither and lose our ability to wield the very industry and technology that gave us our primacy and that the 'scepter' of primacy would be seized from our limp, wasting hands? Free trade is what makes it all possible.
Only it is China which is makiing that promise happen, with a whole raft of Fifth Columnists and Useful Idiots who don't give a rip about our country. And there is no reversing this, (short of removal of every 'free trader' from all areas of policy) because the buyer in China is the government. The WTO is being run circles around. The Reason: They have iron controls over their 'business' entities. And they won't buy American if it helps us more than them. They will optimize their purchasing activity to be destructive of the U.S. productive capacity. Don't buy U.S. manufactures. Buy their factories and relocate them to China. Don't buy U.S. foods, undermine their farm economy by dumping food on them. And the beat goes on.
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