Ibrahim Erdogan Columnist JTW printable version send your friend

Monday, 5 January 2009

After the Cold War, the thought of entering a new era where relative peace and friendly relations would prevail seems more of a dream nowadays. The competition for military and political supremacy appears to have been replaced by a different but equally stiff struggle for economic dominance. So serious has the struggle been perceived by nations, former allies as much as foes are now coming up to face-to-face.  

A succinct description of the change that has been taking place is provided by a former FBI agent: 

"The Cold War is over and the industrial (economic) war has begun... countries that once used spies to gather information surreptitiously about troop deployments and missile batteries are now using the same techniques and technology to approach the industrial (economic) war." [1]

Businesses, companies, and corporations are now viewed as divisions, regiments, and troops of the Cold War. Their tangible and intangible assets, such as proprietary information, are perceived as modern arsenals which need protection and further improvement. Superior information awards those with a commercial advantage over the others who fail to develop similar knowledge. The quickest way of catching-up or staying ahead of the economic competition is to spy on others while limiting the effect of the other states’ spying. 

First accounts of economic espionage can be traced as back as Chinese civilization when over 1500 years ago a Chinese princess provided silkworms to an Indian and revealed the secrets of silk making.[2] Until recently such experiences have largely remained insignificant with regard to the number of incidents reported and the harm caused over states’ economies.  

In 2002, the cost of economic espionage to the US companies was reported to the Congress as high as $300 billion per year and six million jobs within a decade.[3] A survey of 325 US companies in 1995 found that almost half of them had experienced trade secret theft of some sort during the previous 2 years. They also reported a %323 increase in the number of incidents of intellectual property loss.[4]

The proliferation of global communication and information systems, including the internet, added another dimension to the increasing threat posed by economic espionage. The reported number of information security incidents rose from about 500,000 events in 2002 to 1.4 million in 2003 and then to 56 million events in the first six months of 2004. [5] In its 2007 cyber security study report, McAfee announced that 120 countries were now using the Internet for Web espionage operations.[6]

Then why do states commit espionage activities? The demise of the Soviets signalled a renewed competition for leadership as well as a higher rank in the order of international power position. The nature of the competition has appeared as such that sheer military strength is no longer sufficient to determine once power. Other factors such as the economy have risen in significance which has moved it from being subject to low politics to become an issue for high politics.  

Moreover, the decrease in the potential of a devastating conventional or nuclear all-out war has caused a commensurate decrease in military spending. That in turn led nations to refocus domestic and foreign policies and programs to increase economic standards of living for their citizens.  

At present, developed countries are concerned with maintaining their standards of living, while developing countries equally determined to improve their own. Both sides are under increasing pressure to improve their productivity and ensure their economic security by whatever means they have. Therefore, those who do not have the financial resources to buy or build themselves quickly to prosperity are forced to steal technological, scientific, and commercial secrets from others.[7]

On the other hand, following the Cold War many of the traditional intelligence services, both from the Communist and Western camps, found their role and resources diminished. Several of the former intelligence members were now unemployed, underpaid and disillusioned. As they were looking for ways to survive, economic espionage provided a rational alternative for employment and well paid jobs. Their training and talent were quickly sought by those who had economic espionage activities in mind.[8]

The fact that economic espionage emerged as a profitable business is another factor why so many states have begun to do it. Take Australia for example, the value of economic espionage activities is estimated to be worth $ 2 billion per year.[9] A former French spy chief’s statement is more indicative as he wrote that “in some cases the whole year’s budget has been paid for in full by a single (economic espionage) operation.[10]

Another contributing factor to the booming economic espionage activities is the ever-increasing value of proprietary information and the decreasing portion of corporate tangible assets against intangible assets. According to a survey sponsored by ASIS, at the turn of the century proprietary information, such as trade secrets, consisted of up to 70 percent of a US company’s value.[11] Take that against the backdrop of increasing costs of developing new technologies which was estimated to be well more than $600 billion a year in the US by 2002 ($2 trillion in the last decade).[12] Remaining competitive in such an economic environment has put enormous pressure both on companies and governments to not only find access to this information, but also to steal it from competitors. 

Finally, the ability to steal confidential information and trade secrets has become much easier because of increased computer technology. Instead of copying hundreds of documents containing the trade secrets, an employee may now simply download all the relevant scientific and technical information onto a single computer disk. 

In a world where economic and technological information are as much a target of foreign intelligence collection as military and political information, realistically no business is especially immune from economic espionage.[13] A CSIS report names the following areas as the focus of foreign interests; aerospace, biotechnology, chemicals, communications, information technology, mining and metals, nuclear power, oil and gas and environmental technology.[14]

There is no specific method proven successful in economic espionage, “any traditional method goes” would say a spy who is involved in the action. Following are some of the most common approaches employed by those who commit such activities: 

Planting "Moles" or Recruiting Agents
Exploiting Ethnic-Religious-Ideological Loyalties
Old Tricks of Bribery, Blackmail, or the Use of a ’Swallow’
Clandestine Entry, Stealing and Surveillance
Technical Operations
Student Placements
Dumpster Diving
Bugging and Tapping
Joint Ventures and Acquisitions
 
 
The best answer to question of who commits economic espionage is given by a former Congressman and Chairman of the House Intelligence Committee, that of 173 countries 100 are waging economic espionage, among which are 23 industrialized countries. The question he adds; “is not who steals, it’s who doesn’t steal."[15]

A search done over the recent cases of economic espionage by using the Lexis-Nexis database brought about the following states topping the list of major offenders (in Alphabetical order): Belgium, Britain, China, Cuba, Egypt, France, Germany, India, Iran, Israel, Japan, North Korea, Pakistan, Russia, Saudi Arabia, Sweden, Switzerland, South Korea, Taiwan, and The Netherlands.  

On the question of adverse effects of economic espionage, one needs to keep in mind that such activities are not pursued purely on the grounds of stealing information. Sometimes companies and institutions are chosen as targets in order to weaken capabilities and reputations. For which ever purpose economic espionage is done, it can grossly disrupt trade and corrode a nation’s science and technology base. Destroying the rewards of investment could destroy the incentives to be innovative which is essential for further development. That in turn could become a devastating blow to a nation’s economy, thus power. 

In conclusion, the question of whether economic espionage would actually succeed as a national strategy for competitiveness is open to debate, but it would certainly cause further tensions among states. To count a few of the steps taken by the US to combat against the increasing threat of economic espionage would succinctly put the subject into perspective:    

In 1993, the Clinton Administration established the National Economic Council to give economic issues the same importance the National Security Council gives national security.[16] To follow suit, the State Department created a new office whose primary responsibility was economic issues and the Commerce Department established a "war room”, a name which best depicts the new US attitude towards international trade.  

All that point to one conclusion that the United States has begun to view its economic and technological strength as key to its power, influence, and security.[17]