There need be absolutely no dishonour in trying to ascertain what a potential or actual opponent is likely to attempt. ... The risk of disrepute will depend on the extent to which the individual intelligence officer or his organization departs from the norms of morality in uncovering an opponent's activities. -- R.V. Jones, former Director of British Intelligence(1)
I. THE PROBLEM
The FBI defines economic espionage as "foreign power-coordinated intelligence activity directed at the U.S...., which involves: (1) the unlawful or clandestine targeting or acquisition of sensitive financial, trade or economic policy information, proprietary economic information, or critical technologies; or (2) the unlawful or clandestine targeting or influencing of sensitive economic policy decisions."(2) In 1996 there were approximately 800 economic espionage matters under investigation by the FBI, directly implicating 23 foreign powers.(3) The International Trade Commission estimated worldwide losses to U.S. industries at $23.8 billion in 1987 alone, and growing steadily--"Using the 1982 average loss ratio of $7 billion = 130,000 jobs, this would constitute a loss of about 450,000 U.S. jobs."(4) Further, in a report by the American Society for Industrial Security (ASIS) surveying 325 U.S. corporations, 700 incidents of proprietary loss were cited in 1995, an average of 32 incidents per month, with a total loss claimed for the 700 incidents at $5.1 billion.(5) In 1997, ASIS reported those same losses to have exceeded $300 billion.(6) Note also that any statistical margin of error should be presumed lower than actual numbers, due to the reluctance of companies to accurately report losses out of fear of investor backlash.(7)
The effects of economic espionage are also less tangible in that they can stunt idea development. In testimony before the Select Committee on Intelligence, FBI director Louis Freeh noted in 1996 that the United States spends $249 billion on public and private research and development.(8) Small companies who come up with unique ideas will quickly fold once larger foreign companies take each idea and mass produce it more cheaply.(9) Companies lose incentive to develop technology when they have no way of protecting their creations and recouping their research costs.
With such significant national effects of economic espionage, national intelligence agencies have had to confront the issue vigorously. This entrance into the business arena has led to a vicious cycle of some national intelligence agencies corruptively spending billions of dollars each year in their economic espionage efforts, and counterintelligence agencies spending billions of dollars trying to thwart those efforts.(10) During 1993 and 1994, the FBI "briefed nearly 250,000 persons at almost 20,000 companies, in addition to briefings at academic institutions, laboratories, and state and local governments" regarding economic espionage activities.(11) The FBI reported that "its economic espionage caseload doubled from 400 in 1994 to 800 in 1995."(12) In 1996, the FBI had twenty agents assigned to trade secret theft investigations full time in Silicon Valley.(13)
The involvement of intelligence agencies also tends to raise the stakes of the game and worsen the situation as nations become more politically implicated. In February 1995, the French government publicly requested that five CIA operatives leave the country after having been caught allegedly stealing economic secrets in Paris.(14) This cadre included one agent who allegedly paid approximately 100 dollars each time an aide to the Prime Minister provided information on French positions on matters being negotiated at GATT trade talks.(15) Reports by France and Italy of industrial espionage by the United States have even sparked an inquiry in the European Parliament as to the actions of the CIA and its use of information from the global espionage system ECHELON.(16) Given the dangerously growing problem of economic espionage and the involvement of national governments, we must make an affirmative movement toward reducing this trend. …