The future of spying is business In the new world of high-tech trade rivalry, there are no allies

March 31, 1996|By PETER SCHWEIZER

SHORTLY AFTER CIA officer Aldrich H. "Rick" Ames began selling secrets to the Soviet KGB in 1985, a scientist named Ronald Hoffman also began peddling classified information.

Ames, the last known mole of the Cold War, received $4.6 million for names of CIA informants before he was apprehended in early 1994.

But Mr. Hoffman, a project manager for a company called Science Applications Inc., made $750,000 selling complex software programs developed under secret contract for the Strategic Defense Initiative -- SDI.

Mr. Hoffmann sold his wares to Japanese multinationals. Nissan Motor Co., Mitsubishi Electric, Mitsubishi Heavy Industries and Ishikawajima-Harima Heavy Industries wanted the information for civilian aerospace programs.

Ames received the more dramatic and sensational coverage, as he should have, given that his betrayal led to the loss of life.

But the Hoffman case represents the future of intelligence.

While one spied for America's chief military rival, the other sold information to a major economic competitor.

As economic competition supplants military confrontation in global affairs, spying for high-tech secrets with commercial applications will continue to grow. Military spying will recede into the background.

How the United States elects to deal with this troubling issue will not only determine the direction of the American intelligence community, but also set the tone for commercial relations in the global marketplace.

A growing number of states have become very active in gathering intelligence on specific indus- Peter Schweizer is a visiting scholar at the Hoover Institution and author of "Friendly Spies: How America's Allies Are Using Economic Espionage to Steal Our Secrets." This article is adapted from Foreign Affairs magazine. tries or even companies and sharing it with domestic producers. Indeed, economic espionage -- the outright theft of private information -- has become a popular tool as states try to supplement their companies' competitive advantage.

The United States is far less involved in economic espionage than most of its major allies and trading partners.

Over the past 15 years, the FBI has chronicled numerous cases involving France, Germany, Japan, Israel and South Korea. An FBI analysis of 173 nations found that 57 were covertly trying to obtain advanced technologies from U.S. corporations. Altogether, 100 countries spent public funds to acquire U.S. technology.

Former French Intelligence Director Pierre Marion put it succinctly: "In economics, we are competitors, not allies. America has the most technical information of relevance. It is easily accessible. So naturally your country will receive the most attention from the intelligence services."

A 1993 survey commissioned by the American Society for Industrial Security found a dramatic upswing in the theft of proprietary information from corporate America. The number of cases increased 260 percent since 1985. Those with foreign involvement shot up fourfold.

A 1993 study by R. J. Heffeman and Associates noted that an average of about three incidents every month involve the theft of proprietary information from American companies by foreign entities. These estimates are probably conservative.

Companies prefer not to admit that they have been victims. An admission can depress the price of their stock, ruin joint ventures or scuttle U.S. government contracts.

The sort of espionage that threatens U.S. corporations varies with the national characteristics and culture of the perpetrators. France possesses a well-developed intelligence service, one of the most aggressive collectors of economic intelligence in the world.

Using techniques often reminiscent of the KGB or spy novels, the French in recent years have planted moles in U.S. companies such as IBM, Texas Instruments Inc. and Corning Inc.

In Asia, public-private partnership has evolved between the Ministry for International Trade and Industry and the Japan External Trade Organization, supplementing and nurturing the already well-developed commercial intelligence networks created by Japanese corporations. These commercial networks rival the intelligence services of medium-sized nations.

Matsushita's intelligence operations in the United States, for example, occupy two full floors of a Manhattan skyscraper, according to Herb Meyer, special assistant to CIA Director William J. Casey during the Reagan administration.

That so many states practice economic espionage is a testament to how profitable it is believed to be.

Economic espionage can grossly disrupt trade and corrode a nation's science and technology base. It is a parasitic act, relying on others to make costly investments of time and money. And to destroy the rewards of investment is to destroy the incentive to innovate.

The United States needs to treat economic espionage not only as an intelligence issue, but as the competitiveness and economic issue it has become. Until it does, the American response will be spotty and the results minimal.

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