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International Journal of Intelligence and
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Soft Spying: Leveraging Globalization as
Proxy Military Rivalry
Matthew Crosston
Published online: 20 Nov 2015.
To cite this article: Matthew Crosston (2015) Soft Spying: Leveraging Globalization as Proxy
Military Rivalry, International Journal of Intelligence and CounterIntelligence, 28:1, 105-122, DOI:
10.1080/08850607.2014.962377
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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 andindustrial espionage. Aimed at garnering financial and innovation
advantages for countries seeking gre ater 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 wa r while still achieving dominance,
wherein states engage one another in myriad transactions and contestations,
Dr. Matthew Crosston is Professor of P olitical 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 donepost-doctoral work at the University of Toronto’s Munk Centre for
International Studies. A specialist in int elligence analysis, counterterrorism,
and cyberwar ethics, Dr. Crosston has e xpertise in Russian-area studies,
political Islam, and global conflict. He previously taught at Clemson
University and the Virginia Milita ry Institute (VMI). The author of
Fostering Fundamentalism: Terro rism, Democracy and American
Engagement in Central Asia (London: Ashgate, 2006), his articles have
appeared in numerous peer-reviewed publications.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
AND COUNTERINTELLIGENCE VOLUME 28, NUMBER 1 105
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and global futures can rise or fall without a single bullet being fired. Soft
spying is an under-emphasized asp ect of globalization and the ever-
increasing 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 morevictim 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 decidedlyold-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. Sof t 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 pervas ive spread of technology with dual applications
(economic and military) is increasin gly problematic and offers a powerful
incentive for countries to actually intensify their investment and resources
on soft spying.2In 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, tradi tional 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.3Elaborating
the categories in full shows how soft spying impacts more than just
bottom line profit-sharing or stock market positions. It exposes106 MATTHEW CROSSTON
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weaknesses and reveals flaws that could negatively impact the protection of
the homeland:
.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, involvingcompromised 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 tha t the loss of materials, data, and
technology is harmless, but that maybe the only thing stopping themisappropriation and misuse of the i n f o r m a t i o ns of a rh a sb e e nt h a ti t s
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 globa l affairs, intellig ence, 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 theSOFT SPYING 107
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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 operatin g freely against American economic interests.
Rather, it was more an admission by the President and Congress that upto then very little formal legislation e xplicitly attempted to address this
increasing illicit activity. While th e 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, i n general, ‘‘whoever, intending or
knowing that the offense will benefit any foreign government, foreign
instrumentality, or fore ign agent, knowingly’’ shall be subject to the full
force of the American legal system.
4The problem with this formulation is
multi-layered. The document’s cra fters were clearly hindered by an
American economic cultural bias rega rding 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 w ould 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,
w h i c hh a sa t t e m p t e dt od e a lw i t hp ronounced 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 stat es 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 termswithin 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 adjudi cate intent behind any particular
industrial action.108
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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 explicit ly illegal. The domestic laws of many
nations, America included, do not explicitly prohibit intruding into foreignlands for the direct purpose of acquiring and collecting economic
information.
5This might explain why so man y 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. S ince the EEA has not ultimately
become a hammer of punishment over the past nineteen years, with the
American government se ldom seeking retribution and levying fines on
countless offending countries, the c onclusion 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 thebooks, 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’’ mea ns any agency, bur eau, ministry,
component, institution, associat ion, or any legal, commercial, or
business organization, corporation, firm, or entity that is substantially
owned, controlled, sponsored, commanded, managed, or dominated bya 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 eve r more clouded, this time by design.SOFT SPYING 109
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What were initially benign governmen tal programs meant to help develop
young industries soon became confusingly intertwined entities that were
nearly impossible to tell apart betw een company and state. In fact, some
particularly adept and aggressive states like China have sought to
obfuscate everything—from ownership, to employee lists, managementhierarchies, 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 pea ceful manner, while Resolution 2131
deals with the inadmissibility of intervention in the domestic affairs ofstates and the protection of their sovereignty.
8Those 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 r e l a t i v e l yv a g u e ,w i t hn oe x p l i c i t
procedures or actionable causes elaborated for law enforcement. As such,
the usual criticism levied against inte rnational 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.10Thus, 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 agreements110 MATTHEW CROSSTON
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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 enfo rce 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 struc tural 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.’’12As 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 sl ow 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 ‘‘massivelyundervalued’’ at the present time, largely because so many important
thefts, attempts, and corrupt ion cases go unreported.
13In 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 weaponsSOFT SPYING 111
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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 massdestruction has nearly tripled since 2011.
14Of 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 w atchlist of foreign countries that
engage in economic or industrial espionage in cyberspace with respect to
the United States.15Unfortunately, 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 Stat es 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 effectivelegislation that authorizes government agencies to intervene in or change a
business culture that seeks to ‘‘ha ndle 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 proac tively ‘‘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 noqualms 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 has112
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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.17But this problem is
not exclusively dependent on a lack of governmental motivation or a lackof 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 tradesecrets as a legal doctrine is still widely debated, most commentators
agree that it helps to order commercial relationships among privateparties. 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 afederal crime to misappropriate a trade secret …it is doubtful that
devoting more prosecutorial res ources to using the EEA to define
norms for international economic information collection wouldsucceed. The basic problem of economic espionage is that agents act onbehalf of principals who stand outside a shared system of formal andinformal constraints on their conduct.
18
This problem is double-edged. Busine sses 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.19Consequently, 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.20If 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 theftSOFT SPYING 113
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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
.Public awareness and stakeholder outreach21
Obviously, the problem with this appr oach 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 commitmen t or creates greater legal specificity
and explicitness. Thereby arises a possible internal contradiction: domesticlegislation will likely not improve any time soon as long as the use of ‘‘best
practices’’ across private industry rem ains 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 priori ty 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 orcoordinated intellige nce activity,’’ and he encouraged enforcement
agencies to keep this limiting principle in mind when administering thelaw.
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 real114 MATTHEW CROSSTON
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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 countri es that seek to intensify their soft
spying efforts against the United Sta tes. 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 coor dinated intelligence activity is
futile: many nations not only purpose ly bury such explicit connectivity,
they have also given ‘‘full legal authority’’ to their intelligence communities
to conduct soft spying for economic advantage.24To 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.25In 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 le ss on the political motivations of the
United States government than on the industrial structural-cultural logicflaws 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 atti tude that typically shuns government
involvement. Unfortunately, this se lf-assuredness is not matched by an
effort to develop an industrial in-house priority to combat soft spying: that
capability remains uneven though s uch heavy control of industry runs
counter to the culture of trust and collaboration needed for long-termmulti-national economic success.
27This 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 naı ¨ve regarding their
own vigilance against soft spying, which is often couched as someone else’s
problem and some other industry’s dilemma.28A marked skill deficiency
problem also exists across American industry:
Managers, business owners, executives, auditors, and forensic
accountants have important rol es to play as decision-makers,SOFT SPYING 115
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investigators, consultants, expert witnesses and knowledgeable employees
in the assault on trade secret piracy. It is important for [any of thesepeople] who work with intellectua l property to be able to identify a
trade secret, be familiar with reasona ble 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 ex ecutive 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 sp ying is difficult to overestimate.
A Federal Bureau of Investigation stu dy of 173 countries found that fully
100 had conclusively engaged in attempts to invest significant financial
resources in the quest to illegally a cquire U.S. technol ogy. Of those, 57
were believed to have conducted physical covert operations against U.S.
targets.30While documentation indicates how the United States seems to
make a distinction between economic espionage and traditional intelligence
activity, this dichotomy does not s eem 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 theircontinued stability and success—to these states, economic spying is amatter of national security. …Its practice is considered by many to be
vital to state security. The fact that no minimum obligations regardingeconomic espionage exist at the international level suggests states arereluctant to relinquish sovereignty in this area.
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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 ex amination reveals otherwise. It
discourages innovation by eroding bu sinesses’ hard-earned competitive
advantage. It redu ces profitability, forcing b usinesses to recoup losses
by raising costs to consumers. Busi nesses, 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 sovereignstates.
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 statecited 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.
34Some 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 o f intellectual property creates a
massive global subsidy worth hundreds of billions of dollars to its
businesses and people.’’35China thereby succeeds in ‘‘invading’’ the
economies of other nations rather than their territories. More importantly,
this ‘‘invasion’’ is not aimed at destr uction 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 aconsequence it has relied on regular bu sinesspeople, researchers, faculty,
and students to acquire, assemble, and even interpret information.
36Thus,
as the United States was dutifully set ting prosecutorial boundaries on its
l e g i s l a t i o ns oa st op r e v e n tu n d u eg o v e r n m e n t a lh a r a s s m e n to ft h e
economic sector, China was creating an economic intelligence culture that
purposefully blurred the line betwe en government and civilian, between
intelligence and business. While acknowledging the extensive damage done
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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.
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. Whenasked if the U.S. or China were perpetrators of industrial espionage,
Assange tellingly declared that the U.S. is one of the ‘‘victims.’’
37Indeed,
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
t h ee n t i r ee n t e r p r i s eb e c o m e sa tl e a s t ‘‘quasi-legal’’ in the eyes of the law
and difficult to prosecute. In China , that process goes from outright
industrial theft to concentrated em phasis 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 pertaini ng to critical infrastructure. …While
China has focused heavily on economic growth through tradepartnerships, its success has translated into a dramatic increase in itspower potential relative to other co untries. In particular, the United
States’ lop-sided trade deficit with China endows China with the upperhand 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. Whilethese two statements may not be cause-and-effect, the Chinese strategy for
economic development is unquestio nably 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 i n America and solidified its place as a
primary maintainer of the global e conomy. 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 soft118
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spying than any theoretical or legal principles offered by the United States
against it.
THE NEED FOR AN AMERICAN POLICY REVISION
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 co mpetitive 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 tosimple fixes revolving around revised legislation or more aggressive
prosecution. Soft spying is so diffi cult 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 matche d by vigilance, training, and
d e v e l o p m e n to fa d v a n c e d skill sets within Amer ican 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 ab out 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 commerceand 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 i f America’s intelligence agencies
should proactively engage in econo mic espionage for the benefit of
American industry. Direct cooperation and interaction with the American
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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 businessinterests. But it does deny that such spying is done for a particular
industrial purpose or for the advanceme nt of specific American industries
so that they may be more competitive in the global market.
40Whether 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 sin ce 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 pa th while simultaneously failing to
address the flaws, dilemmas, debates, and contradictions discussed here
simply results in the United States be ing quadruply burdened: its political
values, economic principles, laws, a nd 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
1Karen Sepura, ‘‘Economic Espionage: The Front Line of a New World Economic
War,’’ Syracuse Journal of International Law and Commerce ,V o l ,2 6 ,F a l l
1998.
2National Counterintelligence Center, Annual Report to Congress on Foreign
Economic Collection and Industrial Espionage (Washington, DC, 2000).
3Ibid.
4U.S. Congress, Economic Espionage Act of 1996, Washington, DC.
5Mark E. A. Danielson, ‘‘Economic Espionage: A Framework for a Workable
Solution,’’ Minnesota Journal of Law, Science, and Technology, Vol. 10, No. 2,
2009.
6Ibid.
7U.S. Congress, Economic Espionage Act of 1996 .
8Karen Sepura, ‘‘Economic Espionage: The Front Line of a New World Economic
War.’’
9Ibid.120 MATTHEW CROSSTON
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10David P. Fidler, ‘‘Economic Cyber E spionage and International Law:
Controversies Involving Government Acquisition of Trade Secrets through
Cyber Technologies,’’ ASIL Insights , Vol. 17, No. 10, 2013.
11Ibid.
12Michael Mosier, ‘‘Causes of Action for Foreign Victims of Economic Espionage
Abroad by US Intelligence,’’ Duke Journal of Comparative and International Law ,
Vol. 11, 2001.
13112th U.S. Congress, Economic Espionage: A Foreign Intelligence Threat
to American Jobs and Homeland Security, Subcommittee on Counterterrorism
and Intelligence of the Committee o n Homeland Security, House of
Representatives, 28 June 2012, Serial No 112–101.
14Ibid.
15113th U.S. Congress, Deter Cyber Theft Act 2013, United States Senate, S. 884.
16Ibid.
17Aaron J. Burstein, ‘‘Trade Secrecy as an Instrument of National Security?
Rethinking the Foundations of Economic Espionage,’’ Institute forInformation Infrastructure Protectio n Program, Dartmouth College, Hanover,
New Hampshire, 2009.
18Ibid., pp. 34–42.
19Ibid.
20Ibid.
21David P. Fidler, ‘‘Economic Cyber Espionage and International Law.’’
22Ibid.
23William 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.
24Georgetown University Law Center, ‘‘From Goldfinger to Butterfinger: The
Legal and Policy Issues Surrounding Proposals to Use the CIA for EconomicEspionage,’’ Law and Policy in International Business, 1995.
25Mark E. A. Danielson, Economic Espionage: A Framework for a Workable
Solution.
26Georgetown University Law Center, ‘‘From Goldfinger to Butterfinger: The
Legal and Policy Issues Surrounding Proposals to Use the CIA for Economic
Espionage.’’
27Anonymous, ‘‘Who Needs Cyber Spying? Corporate Espionage,’’ The Economist ,
23 February 2013.
28Ibid.
29Carl 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.
30Darren S. Tucker, ‘‘The Federal Government’s War on Economic Espionage,’’
University of Pennsylvania Jour nal of International Economic Law ,V o l .1 8 ,
No. 3, 1997.SOFT SPYING 121
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31Ibid.
32Mark E. A. Danielson, ‘‘Economic Esp ionage: A Framework for a Workable
Solution.’’
33Ibid.
34Mark A. Frazzetto, Protecting Against Economic Espionage: Trade Secrets,
Standards, and Crim inal Liability (Loyola University of Chicago School of
Law, 2010).
35Ibid.
36James A. Lewis, ‘‘China’s Economic Espionage: Why it Worked in the Past but
Won’t in the Future,’’ Center for Strategic and International Studies ,1 3
November 2012.
37Souvik Saha, ‘‘CFIUS Now Made in China: Dueling National Security Review
Frameworks as a Countermeasure t o Economic Espionage in the Age of
Globalization,’’ Northwestern Journal of International Law & Business ,V o l ,3 3 ,
2010, pp. 201–207.
38Ibid.
39Quoted in Stanley Kober, ‘‘The CIA as Economic Spy: The Misuse of USIntelligence after the Cold War,’’ Cato Institute Policy Analysis, No. 185, 1992.
40Jack Goldsmith, ‘‘Refl ections on US Economic Espionage, Post-Snowden,’’
Lawfareblog, 10 December 2013.122 MATTHEW CROSSTON
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