This art icle was downloaded by: [ Dr. Mat t hew Crosst on] On: 24 Novem ber 2014, At : 11: 39 Publisher: Rout ledge I nform a Lt d Regist ered in England and Wales Regist ered Num ber: 1072954 Regist ered office: Mort im er House, 37- 41 Mort im er St reet , London W1T 3JH, UK International Journal of Intelligence and CounterIntelligence Publicat ion det ails, including inst ruct ions f or aut hors and subscript ion inf ormat ion: ht t p: / / www. t andf online. com/ loi/ uj ic20 Soft Spying: Leveraging Globalization as Proxy Military Rivalry Mat t hew Crosst on Published online: 20 Nov 2015. To cite this article: Mat t hew Crosst on (2015) Sof t Spying: Leveraging Globalizat ion as Proxy Milit ary Rivalry, Int ernat ional Journal of Int elligence and Count erInt elligence, 28: 1, 105-122, DOI: 10. 1080/ 08850607. 2014. 962377 To link to this article: ht t p: / / dx. doi. org/ 10. 1080/ 08850607. 2014. 962377 PLEASE SCROLL DOWN FOR ARTI CLE Taylor & Francis m akes every effort t o ensure t he accuracy of all t he inform at ion ( t he “ Cont ent ” ) cont ained in t he publicat ions on our plat form . However, Taylor & Francis, our agent s, and our licensors m ake no represent at ions or warrant ies what soever as t o t he accuracy, com plet eness, or suit abilit y for any purpose of t he Cont ent . Any opinions and views expressed in t his publicat ion are t he opinions and views of t he aut hors, and are not t he views of or endorsed by Taylor & Francis. 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Term s & Condit ions of access and use can be found at ht t p: / / www.t andfonline.com / page/ t erm sand- condit ions International Journal of Intelligence and CounterIntelligence, 28: 105–122, 2015 Copyright # Taylor & Francis Group, LLC ISSN: 0885-0607 print=1521-0561 online DOI: 10.1080/08850607.2014.962377 Downloaded by [Dr. Matthew Crosston] at 11:39 24 November 2014 MATTHEW CROSSTON Soft Spying: Leveraging Globalization as Proxy Military Rivalry Despite Hollywood romanticizing about the fictional escapades of various James Bonds and Jason Bournes, one of the most prevalent forms of modern intelligence activity is arguably the least emphasized: economic and industrial espionage. Aimed at garnering financial and innovation advantages for countries seeking greater influence in a highly globalized world, this activity is not merely about economic policy. It also serves as a de facto proxy military rivalry: states maneuver to outperform, outwit, and ‘‘outstrategize’’ their competitors across all spheres of profitable activity via this lesser ‘‘INT.’’ Like the more ubiquitous concept of soft power, soft spying (a term interchangeable with ‘‘economic and=or industrial espionage’’) is the avoidance of war while still achieving dominance, wherein states engage one another in myriad transactions and contestations, Dr. Matthew Crosston is Professor of Political Science, Miller Chair for Industrial and International Security, and Director of the International Security and Intelligence Studies Program at Bellevue University, Bellevue, Nebraska. A graduate of Colgate University, with an M.A. from the University of London, and a Ph.D. from Brown University, he has done post-doctoral work at the University of Toronto’s Munk Centre for International Studies. A specialist in intelligence analysis, counterterrorism, and cyberwar ethics, Dr. Crosston has expertise in Russian-area studies, political Islam, and global conflict. He previously taught at Clemson University and the Virginia Military Institute (VMI). The author of Fostering Fundamentalism: Terrorism, Democracy and American Engagement in Central Asia (London: Ashgate, 2006), his articles have appeared in numerous peer-reviewed publications. AND COUNTERINTELLIGENCE VOLUME 28, NUMBER 1 105 Downloaded by [Dr. Matthew Crosston] at 11:39 24 November 2014 106 MATTHEW CROSSTON and global futures can rise or fall without a single bullet being fired. Soft spying is an under-emphasized aspect of globalization and the everincreasing transnational technical connectivity among nations. More importantly for Americans, structural=cultural flaws in the world of business reveal how the United States might arguably always end up more victim than perpetrator in this globally pervasive activity. The motivation to engage in soft spying and conduct economic espionage is no small matter. The end of the Cold War signaled a shift from heavy emphasis on military alliances to the focus on hyper-economic development. The turnaround was due not so much to the end of war and a cessation of hostile activities as a switch to competition with more productive and prosperous end goals. All around the world states understood that failure to keep up in a rapidly globalizing economy would likely doom a state to not merely economic hardship but expose it to dangers of the decidedly old-school realist variety: war, occupation, loss of territory, and the like. Yet, emphasizing economic development does not magically and overnight create an industrial juggernaut. As developing states began to realize just how difficult steady, progressive, rational growth would be, they soon began to find ways to shortcut the journey. Soft spying became arguably the chief method in this new national security priority of economic development. Spy movies notwithstanding, the traditional methods of economic espionage truly read like a primer from novelist Ian Fleming: planting moles and=or recruiting inside agents; surveillance; clandestine entry; bag drops and collections; dumpster diving; bugging and phone tapping; invasive computer programs; and drop-by spies.1 The National Counterintelligence Center (NCC) has been actively developing a database since 2000 and reporting to Congress on foreign economic collection and industrial espionage. Its work has been invaluable in understanding not just the economic appeal of soft spying but the potentially dangerous national security consequences undergirding all such initiatives. The pervasive spread of technology with dual applications (economic and military) is increasingly problematic and offers a powerful incentive for countries to actually intensify their investment and resources on soft spying.2 In fact, since 2000 the NCC has never had a year where all the categories on the Department of Defense’s Militarily Critical Technologies List weren’t regularly targeted by foreign countries, both developed and underdeveloped, traditional rivals and allies alike. The danger from threat countries is in attempting to obtain critical technical information that will enable U.S. rivals to disable, copy, neutralize, or force significant change to American systems and strategies.3 Elaborating the categories in full shows how soft spying impacts more than just bottom line profit-sharing or stock market positions. It exposes INTERNATIONAL JOURNAL OF INTELLIGENCE 107 SOFT SPYING weaknesses and reveals flaws that could negatively impact the protection of the homeland: . . . . . . . Downloaded by [Dr. Matthew Crosston] at 11:39 24 November 2014 . . . . . . . . . Information systems Sensors and lasers Aeronautics Armaments and energetic materials Marine systems Guidance and navigation Signature control Space systems Manufacturing and fabrication Information warfare Nuclear systems technology Power systems Chemical-biological systems Weapons effects and countermeasures Ground systems Directed and kinetic energy systems The NCC’s efforts have revealed how rarely one method alone is used to collect valuable data. Whether through open sources that are legal or illegal, involving compromised systems or agents, the end result is the same: not just the loss of possibly billions of dollars in trade secrets and technological innovation but the increased vulnerability of some of the country’s key systems. Ironically, data suggests that the most active collectors are not exactly a who’s who list of American enemies: China, Japan, Israel, France, Korea, Taiwan, and India all regularly make the list of most aggressive soft spies. Only China is a rival and even then not a pure one: that is what makes the potential damage of soft spying so frightening—not that the loss of materials, data, and technology is harmless, but that maybe the only thing stopping the misappropriation and misuse of the information so far has been that its performance has remained in the hands of countries deeply dependent upon and interactive with the American economy. Unfortunately, the hurdles to jump over to get past this danger are numerous and significant. Against this backdrop is discovered a rather unimpressive and compromised legal foundation trying to deal with this increasingly important reality of global affairs, intelligence, and foreign policy. The issue is no longer just about economics. DEFICIENCIES IN FORMAL LEGISLATION AND LEGAL CUSTOMS The legal foundation for most analyses of U.S. soft spying needs to begin with the Economic Espionage Act of 1996 (EEA). Falling squarely in the AND COUNTERINTELLIGENCE VOLUME 28, NUMBER 1 Downloaded by [Dr. Matthew Crosston] at 11:39 24 November 2014 108 MATTHEW CROSSTON middle of President Bill Clinton’s eight-year tenure and a major focal point of his administration’s emphasis on economic development and trade security, the EEA was not necessarily a hammer against foreign agents and organizations operating freely against American economic interests. Rather, it was more an admission by the President and Congress that up to then very little formal legislation explicitly attempted to address this increasing illicit activity. While the EEA did try to formally define both ‘‘economic espionage’’ and ‘‘theft of trade secrets’’ as illegal acts punishable by fines as high as ten million dollars, unintended flaws in the language of the document became exacerbated in the 21st-century digital age. The EEA’s Section 1831(a) states, in general, ‘‘whoever, intending or knowing that the offense will benefit any foreign government, foreign instrumentality, or foreign agent, knowingly’’ shall be subject to the full force of the American legal system.4 The problem with this formulation is multi-layered. The document’s crafters were clearly hindered by an American economic cultural bias regarding commercial activity. In the United States, the belief in the power of the free market and the inefficiency of government assistance or interference runs so strongly that the drafters of the EEA apparently envisioned a distinct line of demarcation between business and government, thus making it ostensibly easy to identify ‘‘actions that would knowingly benefit a foreign government.’’ That demarcation indeed exists in the U.S. with its independent business culture and desire for limited if not non-existent government intervention. But this is not the case for most of the world, which has attempted to deal with pronounced America’s technical innovation and consumption advantages by blurring the line between business and government. Interestingly, this initial adjustment was not done to encourage or foster economic espionage. Rather, most developing states (and even some advanced industrial states willing to admit their distinct disadvantages in comparison with the mammoth American economy) felt that government support and assistance was essential for the proper growth and expansion of their own industries and national economies. This fact in and of itself sets the United States at a disadvantage in the conceptualization of terms within the EEA. If a strong demarcation between business and government is best for proper attribution, then those countries absent such demarcation are structurally building their economies and industries in a manner that would make soft spying that much more difficult to detect. Again, the EEA defines economic espionage as any foreign body ‘‘knowingly and willingly’’ seeking to benefit a foreign government. If the line between government and industry is hopelessly opaque, then it becomes nearly impossible to adjudicate intent behind any particular industrial action. INTERNATIONAL JOURNAL OF INTELLIGENCE 109 Downloaded by [Dr. Matthew Crosston] at 11:39 24 November 2014 SOFT SPYING The attempt of American businesses trying to steal secrets from other U.S. businesses is considered a standard, if perhaps distasteful, part of the game. For competitors to strive to gain early access to patents, trade secrets, strategies, and the like is not explicitly illegal. The domestic laws of many nations, America included, do not explicitly prohibit intruding into foreign lands for the direct purpose of acquiring and collecting economic information.5 This might explain why so many American businesses tend to avoid preaching about the elimination of soft spying, and why such espionage activity is often ignored when done by traditional allies.6 But if done expressly for the gain of a foreign government, then the act does become illegal under the EEA. Since the EEA has not ultimately become a hammer of punishment over the past nineteen years, with the American government seldom seeking retribution and levying fines on countless offending countries, the conclusion is that Congress and those legal bodies charged with enforcing the EEA’s precepts have taken a more liberal interpretive view of most foreign industrial fusion between business and government. Ironically, this lenient prosecutorial tendency was arguably powered by American industry—the very group the EEA was originally designed to protect. Ever mindful of creating a positive trade and investment climate, the passage of the EEA was always met lukewarmly by U.S. businesses. While the idea of protecting industry from blatant attempts at theft and espionage was appreciated and valued, any overzealous implementation of the EEA against valuable trade partners was seen as counterproductive and ultimately harmful. As a result, the EEA has become a wolf with blunted teeth: legislation was finally on the books, but the desire for full enforcement has been muted at best. This fact, combined with massive advances in technological innovation coming right on the heels of the EEA’s adoption, ultimately proved too sweet a temptation for many countries to pass up: the 21st century has seen an explosion of soft spying. If the EEA got off to a bad start with its conceptualization of ‘‘economic espionage,’’ it certainly did no better defining ‘‘foreign instrumentality.’’ As defined in the EEA: ‘‘Foreign instrumentality’’ means any agency, bureau, ministry, component, institution, association, or any legal, commercial, or business organization, corporation, firm, or entity that is substantially owned, controlled, sponsored, commanded, managed, or dominated by a foreign government.7 Despite that effort, no amount of explicit categorization can overcome the structural reality of the 21st-century global economy: increased attempts by the United States to protect itself legally have resulted in the opacity of state-industrial fusion becoming ever more clouded, this time by design. AND COUNTERINTELLIGENCE VOLUME 28, NUMBER 1 Downloaded by [Dr. Matthew Crosston] at 11:39 24 November 2014 110 MATTHEW CROSSTON What were initially benign governmental programs meant to help develop young industries soon became confusingly intertwined entities that were nearly impossible to tell apart between company and state. In fact, some particularly adept and aggressive states like China have sought to obfuscate everything—from ownership, to employee lists, management hierarchies, and corporate strategies—ostensibly rendering null and void the EEA’s ‘‘foreign instrumentality’’ clause. International law does not help clear the murky waters of soft spying legislation either. Scholars have tended to focus on United Nations (UN), Resolution 1236 and Resolution 2131, as at least peripherally connecting to proper economic behavior among states. Resolution 1236 discusses the duty of non-intervention in other states’ internal affairs and calls upon all disagreements to be settled in a peaceful manner, while Resolution 2131 deals with the inadmissibility of intervention in the domestic affairs of states and the protection of their sovereignty. 8 Those two resolutions, passed in 1957 and 1965, respectively, were obviously not developed in response to the overwhelming technical interconnectedness of the 21st-century global economy. The scholarly connection of these two resolutions to soft spying comes from the interpretive reach that allows intelligence activities to bypass and largely circumvent the regular domestic legal authorities of most states. As such, they are usually designed to not only not encourage peaceful resolution of disagreements between states but might ultimately be aimed at improperly influencing and negatively impacting domestic affairs. 9 While undeniably true, this is also relatively vague, with no explicit procedures or actionable causes elaborated for law enforcement. As such, the usual criticism levied against international law in general applies here: international law isn’t so much law as perhaps a set of guidelines. While following the guidelines is advisable, what, if any, consequences will occur as a result of a violation of said laws is not necessarily clearly understood. So, while soft spying can technically be framed by the two international unresolutions as a violation of sovereignty and the principles of non-intervention, the empirical problem remains that hardly any states outside of America take such claims seriously.10 Thus, victim states more often than not find themselves arguing in the dark, since establishment of a global business culture that treats economic cyber espionage as akin to more traditional prohibited forms of force and invasion has not been successful. International groups like the World Trade Organization (WTO)—a body that should have a natural alignment in seeing greater progress against soft spying—have to date shown no major prioritization or interest in this objective. The structural rules governing the system continue to hinder progress: in the WTO context, establishing economic espionage as actually violating any specific or explicit WTO agreements INTERNATIONAL JOURNAL OF INTELLIGENCE 111 Downloaded by [Dr. Matthew Crosston] at 11:39 24 November 2014 SOFT SPYING has been difficult. The WTO, as does international law, establishes guidelines for members’ operations inside their own territories. But no established procedures impose punishment or enforce such guidelines outside those limits.11 Yet another double-dilemma is manifest in the international sphere: no rules currently protect American companies from corrupt or improper business practices overseas. The United States attempted to self-regulate through the passage of the Foreign Corrupt Practices Act, but even this effort confronts a fundamental structural problem with the global system: very few nations have enacted laws criminalizing the bribing of foreign officials in terms of economic commercial activity. This situation prevails not so much because only America cares about corruption or doesn’t itself engage in economic information collection. Rather, it is a testimony to how prevalent is the focus elsewhere in the world on development at any cost. America’s dominance in terms of technical innovation and corporate long-term strategizing comparatively diminishes nearly every other country. The issue is not so much about how ‘‘provable’’ this is but rather the ‘‘perception’’: most of the world’s countries believe they have little to offer America in terms of intellectual and industrial property worth stealing—at least in comparison to what they consider to be worth stealing from the United States. Paradoxically, in terms of soft spying, this perception is actively encouraged by Americans, as evidenced by former Central Intelligence Agency (CIA) director R. James Woolsey, who infamously stated that only a few areas of European technology surpassed American versions, but that those areas were ‘‘very, very, very small.’’12 As such, the concern for adopting explicit, enforceable, and transparent legal rules to constrain soft spying remains largely undeveloped, even in its primary victim, the United States. While the relevance and potential supra-economic damage possible from soft spying is becoming better-known, the ability to craft legal awareness and security vigilance has been slow to develop. The Subcommittee on Counterterrorism and Intelligence of the U.S. House of Representatives Committee on Homeland Security in the 112th Congress formally expressed a worry that the threat of soft spying could be ‘‘massively undervalued’’ at the present time, largely because so many important thefts, attempts, and corruption cases go unreported. 13 In part, this manifests structural=cultural flaw of American business, which seeks to obsessively hide weakness and let such ‘‘defeats’’ get buried in paperwork that never sees the light of shareholder day. While completely rational from an economic strategy perspective, the practice undermines the legal= security effort to combat those agents=companies=governments looking to take advantage of this flaw. The consequences are severe: the Federal Bureau of Investigation (FBI) has reported a massive increase in weapons AND COUNTERINTELLIGENCE VOLUME 28, NUMBER 1 Downloaded by [Dr. Matthew Crosston] at 11:39 24 November 2014 112 MATTHEW CROSSTON proliferation wherein items with U.S.-acquired components are being found. This is generally not the result of unscrupulous American companies selling out their patriotism for profits, but rather direct proof of how successful soft spying has become even within the most illicit and taboo activities. The FBI’s disruption of illegal transfers of technology involving weapons of mass destruction has nearly tripled since 2011.14 Of course, how many illegal transfers go undetected for every one that is stopped is disturbingly unknown. As the global economy has entered the cyber age, so too has the American attempt to keep up with it legally. The Deter Cyber Theft Act of 2013 passed by the 113th Congress required the Director of National Intelligence (DNI) to develop a watchlist and a priority watchlist of foreign countries that engage in economic or industrial espionage in cyberspace with respect to the United States.15 Unfortunately, the law itself remains vague, operating more at the level of encouraged action rather than being an explicit procedure of how to enforce and deter potential threats. In this particular case, the Deter Cyber Theft Act doesn’t go much beyond allowing the DNI to determine and identify suspicious countries and foreign actors. Perhaps with unintended humor, the act even specifically mentions that the goal is to distinguish among the ‘‘most egregious’’ perpetrators of economic and industrial espionage, thus opening the door to legal interpretations as to what exactly is or is not ‘‘egregious’’ soft spying.16 In totality, the United States obviously accepts and understands the gravity of economic espionage and its cascade effects that go far beyond industrial profiteering. What America has not been able to do is enact effective legislation that authorizes government agencies to intervene in or change a business culture that seeks to ‘‘handle its own affairs’’ without any governmental intrusion. Not only does American industry at times handcuff the government and the nation’s own security organizations from properly protecting crucial assets, often with an overly cavalier attitude that feigns hyper-vigilance and competence, but previous discussions that considered the possibility of American intelligence proactively ‘‘helping’’ American businesses were apparently deterred by design. This arguably leaves the United States even further exposed and weak in comparison to other countries that have no qualms about using their own intelligence communities for such activity. This might be the time to reopen such discussions and consider if the nation can find a proper role for American soft spying. PROACTIVE INTELLIGENCE AND AMERICAN BUSINESS: NOT EVEN RELUCTANT PARTNERS While the motivation in drafting the EEA was well-intentioned, it has proven to be relatively toothless after nearly two decades of operation. The result has INTERNATIONAL JOURNAL OF INTELLIGENCE 113 SOFT SPYING Downloaded by [Dr. Matthew Crosston] at 11:39 24 November 2014 been an extremely small number of prosecutions and an overemphasis on Chinese activities, even though multiple U.S. intelligence agencies have simultaneously collected substantial data on many other countries that try to engage in soft spying against the United States.17 But this problem is not exclusively dependent on a lack of governmental motivation or a lack of passion on the part of prosecutors. Rather, the true culpability seems to stem from the business community itself, both in terms of the culture with which it is governed and the general rules it likes to play by. According to Aaron Burstein, The goals and design of trade secret law are fundamentally different from national security information regulations. Though the purpose of trade secrets as a legal doctrine is still widely debated, most commentators agree that it helps to order commercial relationships among private parties. Private parties decide whether to treat information under their control as a trade secret. They decide whether to take action to enforce their trade secret rights. None of this changed when the EEA made it a federal crime to misappropriate a trade secret . . . it is doubtful that devoting more prosecutorial resources to using the EEA to define norms for international economic information collection would succeed. The basic problem of economic espionage is that agents act on behalf of principals who stand outside a shared system of formal and informal constraints on their conduct.18 This problem is double-edged. Businesses like to emphasize their need for secrecy and try to minimize damage that could occur from the open transparency of trade theft. Thus, even if soft spying occurs, businesses are more inclined to underreport or non-report it, believing that such action could negatively impact a company’s financial strength and standing. But the more complex and multi-layered deception indicative of the cyber age also means that businesses might not even realize that soft spying has been perpetrated against them until it is far too late: knowing what to look for or understanding what an ‘‘attack’’ looks like is a largely still unrefined business skill across many industries.19 Consequently, the EEA and similar other legislative measures are incomplete: they have set the stage for making soft spying more explicitly illegal but they have made no inroads in better aligning business incentives with the concerns of national security.20 If the United States does not communicate to the private sector a better sense of how many foreign nations invest in economic espionage and how ill-equipped American business is dealing with it on an independent, traditional free-market basis, then the problem of soft spying against America will only increase. President Barack Obama has merely continued what seems to now be American presidential custom: to argue how much trade secret theft AND COUNTERINTELLIGENCE VOLUME 28, NUMBER 1 114 MATTHEW CROSSTON threatens national security and then develop ‘‘strategic actions’’ that usually encompass the following: Focus diplomatic efforts to protect trade secrets overseas Promote voluntary best practices by private industry to protect trade . Enhance domestic law enforcement operations . Improve domestic legislation 21 . Public awareness and stakeholder outreach Downloaded by [Dr. Matthew Crosston] at 11:39 24 November 2014 . . Obviously, the problem with this approach is its clear acquiescence to the business culture that continues to resist increased government involvement or interaction. Accordingly, formal government strategy utilizes such ambiguous ‘‘action verbs’’ as focus, promote, enhance, and improve: none of these strategies enforces commitment or creates greater legal specificity and explicitness. Thereby arises a possible internal contradiction: domestic legislation will likely not improve any time soon as long as the use of ‘‘best practices’’ across private industry remains a strictly voluntary activity. Nearly two decades have featured legal criticism highlighting how this duality—formal legislation that only ‘‘encourages’’ voluntary participation— ultimately leaves enforcement weakened, if not impotent. And just as Presidents Clinton and George W. Bush before him, Obama has clearly decided to not draw a line in the sand in terms of fighting soft spying. Such a stand becomes most obvious, as David Fidler points out, when a President fails to assert that economic espionage is in fact a violation of international law and that his priority is in achieving ‘‘improved legal frameworks . . . and strong and efficient remedies for trade secret owners.’’22 What’s more, this strategic-legal bipolar tendency is not restricted to the executive branch. William Edelman asserts that the legislative branch of the United States is just as culpable in not remedying these contradictions: In a floor statement introducing amendments [to the EEA], Senator Herb Kohl [D-Wisconsin] explained that the new wording [of his amendments] was designed to ensure that the law ‘‘not apply . . . to foreign corporations when there is no evidence of foreign government-sponsored or coordinated intelligence activity,’’ and he encouraged enforcement agencies to keep this limiting principle in mind when administering the law.23 Time and again the United States has faced a fundamental dilemma when it comes to soft spying: while it recognizes its place of primacy as an object of attack for other countries, it worries that even the impression of overly vigilant prosecution of actual law might end up detrimentally affecting the expansion and prosperity of American industry. American politicians have long tried to walk this extremely fine line, honoring the need for real INTERNATIONAL JOURNAL OF INTELLIGENCE 115 Downloaded by [Dr. Matthew Crosston] at 11:39 24 November 2014 SOFT SPYING law with the desire to not hurt industry, but have ultimately landed firmly on the side of business and its innate desire to see less government intrusion, even in regard to laws designed to protect bottom-line industrial interests. Even more damaging is how easily this position has been acknowledged and manipulated by foreign countries that seek to intensify their soft spying efforts against the United States. That the dominant trend in the 21st century global economy, in terms of state-industrial fusion, has been an increasing impenetrability is not coincidental: by structural design states like China, France, Israel, and India make nearly impossible a determination of where state influence begins and industrial independence begins. Thereby, the American legal-political demand for direct evidence of foreign government sponsorship or coordinated intelligence activity is futile: many nations not only purposely bury such explicit connectivity, they have also given ‘‘full legal authority’’ to their intelligence communities to conduct soft spying for economic advantage.24 To wit, an expansive corporate survey conducted in 2005 by ASIS International, the world’s largest professional security association, reported that nearly 70 percent of all compromised information intrusions by foreign entities were intended to benefit their own individuals, firms, and governments.25 In contrast, while clearly having the most powerful and expansive intelligence community in the world, American intelligence efforts basically lack an economic espionage component for the direct benefit of U.S. businesses. Responsibility for this reality rests less on the political motivations of the United States government than on the industrial structural-cultural logic flaws that are unconvincing and counter-productive.26 While America consistently prides itself on being the epitome of the free market, this core belief that the market shall ultimately be the judge, jury, arbiter (and executioner as the case may be) of ideas, products, and services, produces a dismissive attitude that typically shuns government involvement. Unfortunately, this self-assuredness is not matched by an effort to develop an industrial in-house priority to combat soft spying: that capability remains uneven though such heavy control of industry runs counter to the culture of trust and collaboration needed for long-term multi-national economic success. 27 This lack of effort is not solely explained by any devotion to ‘‘purist economic theory.’’ Even in this hyper-cyber age, companies can still be remarkably naı̈ve regarding their own vigilance against soft spying, which is often couched as someone else’s problem and some other industry’s dilemma.28 A marked skill deficiency problem also exists across American industry: Managers, business owners, executives, auditors, and forensic accountants have important roles to play as decision-makers, AND COUNTERINTELLIGENCE VOLUME 28, NUMBER 1 116 MATTHEW CROSSTON Downloaded by [Dr. Matthew Crosston] at 11:39 24 November 2014 investigators, consultants, expert witnesses and knowledgeable employees in the assault on trade secret piracy. It is important for [any of these people] who work with intellectual property to be able to identify a trade secret, be familiar with reasonable steps to preserve secrecy, be aware of misappropriation methods used to acquire trade secrets, know when to consult legal counsel in a trade secret case, and design and implement a compliance plan to protect an entity’s trade secrets.29 Quite frankly, such highly skilled executive leadership has not yet become common across American industry. So if the U.S. government is operating at a distinct legal disadvantage because of its own compromises and contradictions, then American business also suffers disadvantages because of its own biases and misplaced confidence. An examination of the extent to which foreign states engage in ‘‘high politics’’ to avoid these same problems reveals how steep a hill America has to climb to address this disparity. HIGH POLITICS: EMBRACING SOFT SPYING FOR NATIONAL SECURITY GAIN The reach and pervasiveness of soft spying is difficult to overestimate. A Federal Bureau of Investigation study of 173 countries found that fully 100 had conclusively engaged in attempts to invest significant financial resources in the quest to illegally acquire U.S. technology. Of those, 57 were believed to have conducted physical covert operations against U.S. targets.30 While documentation indicates how the United States seems to make a distinction between economic espionage and traditional intelligence activity, this dichotomy does not seem to matter in other countries. Former heads of both the Central Intelligence Agency (CIA) and FBI have gone on record testifying that France and Russia currently employ methods for economic espionage that are barely different from the traditional methods employed during the Cold War.31 Indeed, soft spying has in some ways become the highest form of politics in the 21st century, replacing military campaigns as the preferred method for acquiring power. As Darren Tucker explains: Economic espionage is perceived by offending states as a lesser offense than political espionage. Many states consider the practice vital to their continued stability and success—to these states, economic spying is a matter of national security. . . . Its practice is considered by many to be vital to state security. The fact that no minimum obligations regarding economic espionage exist at the international level suggests states are reluctant to relinquish sovereignty in this area.32 INTERNATIONAL JOURNAL OF INTELLIGENCE 117 SOFT SPYING Downloaded by [Dr. Matthew Crosston] at 11:39 24 November 2014 But not all that glitters is gold when it comes to soft spying, not even for the most adept and skilled illicit economic collectors. According to Mark Danielson, Superficially, economic espionage has a zero sum outcome: one state’s loss is another’s gain. A broader examination reveals otherwise. It discourages innovation by eroding businesses’ hard-earned competitive advantage. It reduces profitability, forcing businesses to recoup losses by raising costs to consumers. Businesses, already undercut by lower production costs overseas, may not be viable after factoring in the cost of these thefts. Economic espionage unquestionably raises tensions between states and challenges the security and stability of sovereign states.33 And yet, soft spying remains not only viable, it increasingly reigns supreme in the intelligence portfolios of many countries. A brief look at China, the state cited as the most accomplished ‘‘soft spy,’’ will shed light on the continued attraction of economic=industrial espionage. Determining whatever advantages China has accrued will help reveal general principles applicable to other cases. China began formally experimenting with soft spying in the mid-1980s, when it launched its ‘‘863’’ program, designed to acquire and develop biotechnology, space technology, information technology, laser technology, energy technology, and the like.34 Some have argued that China’s program for soft spying has basically resulted in a sort of de facto virtual economic neo-colonialism, where its ‘‘plunder of intellectual property creates a massive global subsidy worth hundreds of billions of dollars to its businesses and people.’’ 35 China thereby succeeds in ‘‘invading’’ the economies of other nations rather than their territories. More importantly, this ‘‘invasion’’ is not aimed at destruction or devastation, but rather in the management, control, and siphoning of another country’s prosperity so as to benefit itself. In some ways China preempted American legislation through its practice of not relying solely on formal government=intelligence agents for the collection of data and information. China has always employed a broad interpretation of the means for foreign intelligence gathering. As a consequence it has relied on regular businesspeople, researchers, faculty, and students to acquire, assemble, and even interpret information.36 Thus, as the United States was dutifully setting prosecutorial boundaries on its legislation so as to prevent undue governmental harassment of the economic sector, China was creating an economic intelligence culture that purposefully blurred the line between government and civilian, between intelligence and business. While acknowledging the extensive damage done to American industry, the brilliant foresight of such a strategy cannot be AND COUNTERINTELLIGENCE VOLUME 28, NUMBER 1 118 MATTHEW CROSSTON denied: China basically preempted and countered the one area of legal danger it could have encountered even before such legislation was passed in the United States. Downloaded by [Dr. Matthew Crosston] at 11:39 24 November 2014 CHINESE SOFT SPYING: HEGEMONY UNNOTICED To resolve any doubt about the impact of these strategies on the U.S. and whether portraying the massive American economy and consumptive power as disadvantaged, looking no further than Julian Assange, the infamous creator of Wikileaks and considered by most American government circles as an enemy of the state, will attest its accuracy. When asked if the U.S. or China were perpetrators of industrial espionage, Assange tellingly declared that the U.S. is one of the ‘‘victims.’’37 Indeed, the success of China’s soft spying program has allowed it to achieve the hallmark of illicit organized crime: to blur assets and acquisitions so that the entire enterprise becomes at least ‘‘quasi-legal’’ in the eyes of the law and difficult to prosecute. In China, that process goes from outright industrial theft to concentrated emphasis on direct foreign investment Souvik Saha has described the results: Foreign ownership of an American corporation provides a presence for that company’s country in the United States. This creates a potential conduit for leaking American technology, intellectual property, and sensitive information pertaining to critical infrastructure. . . . While China has focused heavily on economic growth through trade partnerships, its success has translated into a dramatic increase in its power potential relative to other countries. In particular, the United States’ lop-sided trade deficit with China endows China with the upper hand in the economic sector, which subsequently provides China financial capital and technical expertise to expand its military capability and political clout.38 China remains the overwhelming empirical counterargument to those who argue about the debilitating economic blowback dangers innate to soft spying: no country engages in soft spying more than China and no country is in a position to more completely challenge American hegemony. While these two statements may not be cause-and-effect, the Chinese strategy for economic development is unquestionably seen as worthy of emulation by many other nations around the world. While China is not yet fully a challenger to American dominance in technical innovation, it has legitimized its corporate presence in America and solidified its place as a primary maintainer of the global economy. Its economic and political power was built largely on the successes it gained through soft spying. And its accomplishment is a more powerful argument to other countries for soft INTERNATIONAL JOURNAL OF INTELLIGENCE 119 SOFT SPYING spying than any theoretical or legal principles offered by the United States against it. THE NEED FOR AN AMERICAN POLICY REVISION Downloaded by [Dr. Matthew Crosston] at 11:39 24 November 2014 America’s military allies are economic adversaries. Refusal to acknowledge that an adversarial trade relationship exists . . . prevents the United States from responding effectively to the competitive challenge [and risks its own national security interest]. —Selig Harrison and Clyde Prestowitz39 That soft spying represents a significant threat to the United States has never been an issue or under question. The debate that continues today is about how best to deal with the problem. Unlike many issues in the increasingly complex 21st century global economy, soft spying doesn’t lend itself to simple fixes revolving around revised legislation or more aggressive prosecution. Soft spying is so difficult to deal with primarily because potential resolutions tends to run contrary to the root of some fundamental American socio-economic structural and cultural values. First, the general separation in America between state and industry doesn’t adhere as strongly in other countries, especially those in the developing world. Principles of American self-reliance and the normal cleansing= correcting purity of the free market creates a deep skepticism and reluctance to rely on government solutions to ‘‘business problems.’’ Second, unfortunately in the context of soft spying, this reluctance to rely on government has not been matched by vigilance, training, and development of advanced skill sets within American industry to protect itself from the increasingly sophisticated economic espionage initiatives of foreign agents and organizations. Third, this backdrop sets the stage for the enactment of uninspired, vague, ambiguous, and non-commital legislation that fails to constrain soft spying in any substantive manner. Just as the attacks on the U.S. of 11 September 2001 (9=11) continue to generate profound discussions about the cost of freedom and how steep a price is to be paid for security, an equally impassioned debate needs to be conducted about soft spying and the relationship between free commerce and legal security. Many fascinating parallels have yet to be investigated in regard to their fullest impact on American civil society. Finally, parallel to the general wariness between business and government is the difficulty in understating the mistrust and near derision expressed when business community leaders are asked if America’s intelligence agencies should proactively engage in economic espionage for the benefit of American industry. Direct cooperation and interaction with the American Intelligence Community is generally considered anathema to best business AND COUNTERINTELLIGENCE VOLUME 28, NUMBER 1 Downloaded by [Dr. Matthew Crosston] at 11:39 24 November 2014 120 MATTHEW CROSSTON practices and somehow a violation of business ethics. The issue is not so much that the United States does not collect economic information from foreign sources, but rather that this collection is routinely done to enhance the security of American citizens and protect American national security interests. The U.S. does not deny spying on foreign firms and business interests. But it does deny that such spying is done for a particular industrial purpose or for the advancement of specific American industries so that they may be more competitive in the global market.40 Whether that position is fully accepted or exceptions are offered to that general rule, the result still places the United States in a decidedly harmful position, as most of its main competitors in the global market, and all of its main political adversaries, have long since eliminated any such barriers or walls-of-separation between their own intelligence communities and local industries. Simply following those proactively engaged in soft spying may not be the correct path. But not treading that path while simultaneously failing to address the flaws, dilemmas, debates, and contradictions discussed here simply results in the United States being quadruply burdened: its political values, economic principles, laws, and civic culture unfortunately work to its detriment when it comes to soft spying. This is no small thing, as it speaks to more than just bottom-line reports and profit-sharing margins. This gap reflects the overall weakening global position of the United States as economic power becomes ever more influential in political and military rivalries, and soft spying becomes a more prevalent and dominant strategy for foreign intelligence operations. REFERENCES 1 2 3 4 5 6 7 8 9 Karen Sepura, ‘‘Economic Espionage: The Front Line of a New World Economic War,’’ Syracuse Journal of International Law and Commerce, Vol, 26, Fall 1998. National Counterintelligence Center, Annual Report to Congress on Foreign Economic Collection and Industrial Espionage (Washington, DC, 2000). Ibid. U.S. Congress, Economic Espionage Act of 1996, Washington, DC. Mark E. A. Danielson, ‘‘Economic Espionage: A Framework for a Workable Solution,’’ Minnesota Journal of Law, Science, and Technology, Vol. 10, No. 2, 2009. Ibid. U.S. Congress, Economic Espionage Act of 1996. Karen Sepura, ‘‘Economic Espionage: The Front Line of a New World Economic War.’’ Ibid. INTERNATIONAL JOURNAL OF INTELLIGENCE 121 SOFT SPYING Downloaded by [Dr. Matthew Crosston] at 11:39 24 November 2014 10 David P. Fidler, ‘‘Economic Cyber Espionage and International Law: Controversies Involving Government Acquisition of Trade Secrets through Cyber Technologies,’’ ASIL Insights, Vol. 17, No. 10, 2013. 11 Ibid. 12 Michael Mosier, ‘‘Causes of Action for Foreign Victims of Economic Espionage Abroad by US Intelligence,’’ Duke Journal of Comparative and International Law, Vol. 11, 2001. 13 112th U.S. Congress, Economic Espionage: A Foreign Intelligence Threat to American Jobs and Homeland Security, Subcommittee on Counterterrorism and Intelligence of the Committee on Homeland Security, House of Representatives, 28 June 2012, Serial No 112–101. 14 Ibid. 15 113th U.S. Congress, Deter Cyber Theft Act 2013, United States Senate, S. 884. 16 Ibid. 17 Aaron J. Burstein, ‘‘Trade Secrecy as an Instrument of National Security? Rethinking the Foundations of Economic Espionage,’’ Institute for Information Infrastructure Protection Program, Dartmouth College, Hanover, New Hampshire, 2009. 18 Ibid., pp. 34–42. 19 Ibid. 20 Ibid. 21 David P. Fidler, ‘‘Economic Cyber Espionage and International Law.’’ 22 Ibid. 23 William J. Edelman, ‘‘The ‘Benefit’ of Spying: Defining the Boundaries of Economic Espionage Under the Economic Espionage Act of 1996,’’ Stanford Law Review, No. 447, 2011. 24 Georgetown University Law Center, ‘‘From Goldfinger to Butterfinger: The Legal and Policy Issues Surrounding Proposals to Use the CIA for Economic Espionage,’’ Law and Policy in International Business, 1995. 25 Mark E. A. Danielson, Economic Espionage: A Framework for a Workable Solution. 26 Georgetown University Law Center, ‘‘From Goldfinger to Butterfinger: The Legal and Policy Issues Surrounding Proposals to Use the CIA for Economic Espionage.’’ 27 Anonymous, ‘‘Who Needs Cyber Spying? Corporate Espionage,’’ The Economist, 23 February 2013. 28 Ibid. 29 Carl J. Pacini, Raymond Placid, and Christine Wright-Isak, ‘‘Fighting Economic Espionage with State Trade Secret Laws,’’ International Journal of Law and Management, Vol. 50, No. 3, 2008, p. 131. 30 Darren S. Tucker, ‘‘The Federal Government’s War on Economic Espionage,’’ University of Pennsylvania Journal of International Economic Law, Vol. 18, No. 3, 1997. AND COUNTERINTELLIGENCE VOLUME 28, NUMBER 1 122 MATTHEW CROSSTON 31 Ibid. Mark E. A. Danielson, ‘‘Economic Espionage: A Framework for a Workable Solution.’’ 33 Ibid. 34 Mark A. Frazzetto, Protecting Against Economic Espionage: Trade Secrets, Standards, and Criminal Liability (Loyola University of Chicago School of Law, 2010). 35 Ibid. 36 James A. Lewis, ‘‘China’s Economic Espionage: Why it Worked in the Past but Won’t in the Future,’’ Center for Strategic and International Studies, 13 November 2012. 37 Souvik Saha, ‘‘CFIUS Now Made in China: Dueling National Security Review Frameworks as a Countermeasure to Economic Espionage in the Age of Globalization,’’ Northwestern Journal of International Law & Business, Vol, 33, 2010, pp. 201–207. 38 Ibid. 39 Quoted in Stanley Kober, ‘‘The CIA as Economic Spy: The Misuse of US Intelligence after the Cold War,’’ Cato Institute Policy Analysis, No. 185, 1992. 40 Jack Goldsmith, ‘‘Reflections on US Economic Espionage, Post-Snowden,’’ Lawfareblog, 10 December 2013. Downloaded by [Dr. Matthew Crosston] at 11:39 24 November 2014 32 INTERNATIONAL JOURNAL OF INTELLIGENCE