Economic Espionage in the U.S. and Counterintelligence Strategies

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Functionalism is a theory that primarily expresses the necessity of global cooperation, particularly in complicated situations that require coordinated problem solving (Baker, 2003). This theory became relevant as early on as World War II; the post-war era ushering in a period of accelerated modernization in the fields of science and technology (Baker, 2003). The guiding principle of functionalist theory is that peaceful cooperation enhances levels of achievement concerning “national goals associated with social, political, and economic advancement,” (Baker, 2003). The end goal of harvesting international partnerships is the prospect of alleviating the tension of foreign relations and, ultimately, attaining peace and prosperity (Baker, 2003).

With the tenants of functionalism in mind, a hypothetical scenario involving the exchange of resources and information for the purpose of scientific and technological globalization—such as a UN initiated scholar exchange program—does not actually seem so hypothetical. In fact, such a form of collaboration is explicitly endorsed in the UN system task team’s Post-2015 Development Agenda, which puts critical emphasis on tertiary education and its “role in developing the knowledge intensive skills and innovation on which productivity, job creation and competitiveness depend,” (Vandemoortele, 2012). The agenda further underlines the need for accessible knowledge-sharing platforms and systems—functionalism for the 21st Century (Vandemoortele, 2012). Within this context of a government-funded, university-based exchange program, the United States, Europe, and Asia serve as the physical platforms for sharing knowledge and offering the facilities of participating universities to foreign scientists.

However, while the somewhat idealist notions of functionalism are hard at work in this proposed scenario, it is important to consider the hazards of foreign exchange. In this case the U.S., being a nation of interest that also relies tremendously on electronic systems for the storage of information, is particularly vulnerable to economic espionage: “a foreign government's sponsoring, coordinating or assisting intelligence efforts directed at a domestic government, corporation, establishment, or person that involves the unlawful or clandestine targeting or acquisition of (1) trade secrets or (2) sensitive financial, trade, or economic policy information.” (Danielson, 2009; Fraumann, 1997; Tucker, 1997).

In addition to the reasons cited above, America’s volume of intellectual property, as well as “fluid and accessible” handling of information makes it the “primary target for economic espionage,” (Tucker, 1997). Economic espionage differs from traditional espionage in that the procurement of national security information is not the prime objective, and also from industrial espionage since the latter does not imply government involvement (Tucker, 1997). Successful operations against the U.S. are capable of suppressing the country’s economic advancement, deterring innovation, and interfering with trade (Danielson, 2009).

An FBI survey of 173 countries found that over half had made previous investments in the acquisition of American intellectual property (Tucker, 1997). France, Japan, Germany, Israel, China, Russia, and South Korea are among the countries with significant evidence of having engaged in economic espionage against the United States (Fraumann, 1997). It is no wonder then, that inviting scholars from the latter four countries may incite some concern regarding national security. This concern is particularly pertinent in an academic research setting, as some of the most sought after information is that pertaining to the fields of aerospace, biotechnology, defense, transportation and automobile technologies, telecommunications, energy research, and pharmaceuticals (Tucker, 1997; Pacini & Placid, 2009).

Of course, the aforementioned nations involved in this scenario are not the only threat. Considering the pervasiveness of economic espionage, especially against the U.S., any of the participating countries have the potential to employ clandestine means of obtaining sensitive information. As stated in the 2005 National Counterintelligence Strategy of the United States, the specific motivation for engaging in economic espionage is to, “acquire critical technologies and other sensitive information to enhance… military capabilities or to achieve an economic advantage,” (2005). The rate at which stolen information provides economic advantage to opposing nations is unclear, but it is certain that the U.S. is left at a disadvantage; combining the results of a number of surveys puts American businesses at a loss equaling between $59 and $330 billion per year (Danielson, 2009; Pacini & Placid, 2009).

There are many techniques that could potentially be used to carry out economic espionage against the United States. These techniques are generally categorized as intrusive, versus nonintrusive. Intrusive methods include: computer hacking; wiretapping and other forms of eavesdropping; trespassing; “stealing proprietary information”; “direct illegal observation and photography”; bribing or blackmailing personnel or suppliers for information; forming dishonest intimate relationships with knowledgeable employees; planting agents to work at and learn the trade secrets of competing institutions; and “conducting false employment interviews with competitor’s employees,” (Fraumann, 1997). The collection and distribution of published research and other types of open source information for intelligence purposes constitutes the nonintrusive method of espionage (Fraumann, 1997).

As economic espionage is more likely to occur in areas with “high concentrations of high technology research and corporations” (Tucker, 1997), the proposed international exchange program—which includes 50 participating universities in the United States—provides the ideal circumstances for foreign intelligence agencies to engage in one or more of the aforementioned methods of infiltration. There is compelling evidence that, in the past, Israel has obtained American-based information in the areas of technology, economy, and science by nonintrusive means. Russia, China, and North Korea have been found to favor more aggressive, intrusive methods (Fraumann, 1997). It is likely that, throughout the duration of the exchange program, both forms of espionage will be utilized—though some are likely more viable than others.

Despite the unclassified status of the majority of the information being exchanged in this situation, the interception and surreptitious distribution of trade secrets such as specialized processes, methods, devices, models, formulas etc. are defensible concerns (Pacini & Placid, 2009). Such secrets would be easily obtainable in an academic research setting, without much necessity for any sort of covert operations. Since the object of the exchange is to promote globalization in science and technology, open relations regarding innovative ideas and significant findings is more or less encouraged. Whether or not it is used in cooperative or competitive means is beyond the U.S. government’s control.

One of the intrusive, more clandestine methods that is likely to be utilized is the planting of foreign scientists and professors in the U.S. with the intent of obtaining critical information. China, in particular, has a documented history of engaging frequently in such behavior (Fraumann, 1997). It seems that a measure such as this would be taken to gain access to the classified information possessed by some U.S. university personnel—information that may or may not provide points of focus within the exchange program. All the same, based on the presence of adversarial agents in the program, other modes of espionage are to be expected. Specialized technical operations are among these modes, as well as trespassing and theft.

Again, taking into consideration that the information at stake in these intrusive efforts is probably that related to classified programs not associated with the exchange curriculum, the formation of close relationships with the American individuals in possession of such information would be particularly beneficial to foreign spies. Though this technique may not be the most prevalent in regards to the potential espionage occurring within this scenario, it is the most costly. Risking the security of confidential information meant to promote technological, scientific and economic growth in the United States can result in the detriment of said growth, and provide rivals with the upper-hand should they have more-developed complementary information. Thus, this particular technique is important to monitor and defend against at individual, institutional, and federal levels.

While it is impossible to regulate individual judge of character and something as organic and personal as friendship, it would be incredibly useful for the representatives of American universities to engage in learning modules prior to initiation of the program, aimed at assisting the decision-making processes regarding the disclosure of information. Such modules would train American scientists to enhance their personal control of information, and increase their awareness of economic espionage and the role it may play in the forthcoming international exchange program. Liebeskind (1997) proposes three institutional mechanisms for promoting the protection of costly knowledge, which could be advantageous if applied to the scenario in question: restrictive rules, compensation, and structural isolation. Most pertinent to the construction of a workable strategy against economic espionage the first mechanism suggests the implementation of restrictive rules and monitoring in regards to “the transfer of specified knowledge by specified [participants] to specified others… social interaction by specified [participants] with specified others… and physical access by specified [participants] into specified areas where specified knowledge is stored” (Liebeskind 1997). The second proposal—restrictive social interaction—while particularly relevant to the issue, may not promote the kind of open communication and collaboration like that called for in the Post-2015 UN Development Agenda (Vandemoortele, 2012). The first proposal however, if stringently enforced and closely abided by, could potentially curtail exchanges of sensitive information in social settings.

Liebeskind also proposes sanctions in regards to rules and restrictions, which through coordination of participating universities and the appropriate government agencies, could be included in the contracts associated with the classified research being conducted at any given institution. Those who violate would be at risk of “prosecution under trade secrets laws” and/or obligated to surrender the rights to their intellectual property to the institution. Social sanctions are also among the strategies for secret keeping, and could easily be embedded within training modules, research environments, and work groups to “foster the formation of specific social norms within the [institution]” (Liebeskind, 1997).

Imparting such sanctions is one of the measures that can be taken at an institutional level to prevent infiltration. Of course, this applies specifically to the prevention of person-to-person information swapping, and while this is the most probable intrusive technique that could be utilized within the exchange program, it is certainly not the only one. Participating institutions should be charged with implementing physical and virtual methods of protection against economic espionage (Pacini & Placid, 2009). The latter is surely the more critical of the two, considering again how accessible information is in the United States, especially by virtual means (Fraumann, 1997). Some of the important precautions to be implemented prior to the arrival of foreign associates include encryption, strong—and perhaps ever-changing—computer passwords, and “hibernation defaults” (Pacini & Placid, 2009). The appropriate physical methods to be taken into account regarding university research facilities include self-closing and self-locking doors, limited access, and “geographic separation” of areas handling classified versus unclassified information (Liebeskind, 1997; Pacini & Placid, 2009).

While the above accounts for a strategy to counter the threat of economic espionage on the University level in this foreign exchange scenario, an accounting of the counter espionage techniques on the level of relevant private sector companies should also be taken. In this regard, a very similar approach must be considered, in which, as was stated above, according to Tucker (1997), economic espionage is most likely to occur in areas with “high concentrations of technology research and corporations”. Like the academic research setting in the Universities involved in the exchange, relevant private sector companies are also especially subject to the interception of trade secrets, including “pre-classified” information which is of special economic concern.

This is especially the case since, according to Fraumann (1997) North Korea, China, and Russia have all been found to favor intrusive methods of espionage. Like in the case of research universities, the planting of foreign scientists and academics with the intent of obtaining critical information will be of utmost concern in the private sector as well. As was mentioned above, China in particular has a history of engaging in this type of behavior and as such, should be of particular concern. Such intrusive, clandestine methods of espionage may be taken to gain access to trade secrets, which are particular prevalent in the private sector – especially aforementioned “pre-classified” scientific and technological information.

While the planting of foreign scientists may well be used to gain access to sensitive materials in the private sector, other forms of economic espionage should be expected in the private sector as well. Similar to the research university setting, specialized technical operations and theft as well as trespassing are among those forms, which need to be taken into account in the development of a defensive counter-intelligence schema for the private sectors involved.

As a part of preparing a defensive counter-intelligence schema in the private sector, the consideration of these intrusive espionage efforts must be taken into account and coordination must be made with the relevant federal agencies. In this case, the CIA, NSA, Homeland Security, and FBI are of special relevance, as well as the NSF, DOD and DOE. This will be of significant importance in the training of staff to be aware of measures that may be taken, especially in regards to the formation of close relationships that may be made between the American employees of relevant private sector companies and the foreign espionage plants that will attempt to form such relationships. As was stated previously concerning research universities, this form of espionage may serve as potentially the most costly, and while it may also be a less prevalent form of espionage, it should be taken seriously in the responsibilities of the private sectors to form a defensive counter-intelligence strategy.

The learning modules presented by Liebeskind (1997) above can be especially useful for the responsibilities of relevant private sector companies in the preparation of defensive counter-intelligence activities. As they would with scientists in the research university community, learning modules may be very useful for the staff of private companies in the training of the enhancement of personal control of information, as well as increase in awareness of economic espionage and the role it could play within their companies during the exchange program. Liebeskind’s (1997) first learning module suggesting the implementation of restrictive rules and monitoring in regards to “the transfer of specified knowledge by specified [participants] to specified others…social interaction by specified [participants] with specified others…and physical access by specified [participants] into specified areas where specified knowledge is stored” is the most important to take into account in the private sector, as it is likely that more economically sensitive information is at risk than even in the research university setting.

The learning module of restrictive social interaction is also very important, considering the intrusive espionage techniques known to have been a history of China and Russia in particular, and the particularly high economic risk such intrusive techniques pose on the private sector. The second learning module is not as restrictive in the private sector as it may prove to be in the university setting, as the promotion of open communication and collaboration (such as was called for in the Post-2015 UN Development Agenda (Vandemoortele, 2012) is not as highly regarded in the private sector, and may actually prove counterproductive in the competitive global marketplace. This proves to be the main major difference between the preparation of a defensive counter-intelligence scheme towards economic espionage in the private sector versus the by research universities.

However, like with research universities, Liebeskind’s proposal of sanctions against the violation of particular rules and regulations is one which can be implemented with the help of appropriate government agencies in the private sector (1997). Additionally, these rules and restrictions can be self implemented as well, as the interests of the private companies are potentially at stake in their violation. As with research universities, these rules could be created so that those that violate them will be subjected to “prosecution under trade secret laws”.

In addition to Liebeskind’s (1997) rules and restrictions, social sanctions can also be implemented in the private sector to help in the prevention of economic espionage techniques. Such sanctions can be embedded in staff training and implemented by Human Resources departments, again with the help and coordination of appropriate government agencies, so that they may work to “foster the formation of specific social norms within the [institution]” (Liebeskind, 1997).

On the federal level, the Federal Bureau of Investigations is the central federal agency responsible for developing counterintelligence strategies and investigating criminal activities and foreign intelligence (Fraumann, 1997). Other key players in the war on economic espionage against the United States include the CIA, the NACIC, and the NSA (Fraumann, 1997). Of particular importance to the scenario being discussed, are the Department of Defense and the Department of Energy (Fraumann, 1997). While all of these agencies share the common task of protecting the interests of the United States by safeguarding the nation’s wealth of sensitive information, the positive effect of successful collaborations with participating countries and allies is also a main point of emphasis. The National Security Branch of the FBI, for example, heavily promotes “sharing information, producing joint projects, and conducting joint operations” (FBI, 2011).

With this in mind, the above government agencies may play a significant role in the training and implementation of Liebeskind’s (1997) three learning modules in both the research university and private sector setting. The effective coordination of defensive counter-intelligence activities using the implementation of restrictive rules and monitoring, as well as restrictive social interaction and the proposal of sanctions against particular rules and regulations can be monitored and implemented by the appropriate government agencies here.

This is especially important in regards to the possibilities of two potential obstacles and constraints that face both the relevant private sector companies and their respective research universities. These include the potential for many university personnel that also work with classified information to be working with foreign scientists, as well as the potential for foreign scientists to be exposed to “pre-classified” information, that may not yet lie within the scope of the Espionage Act, and as such may not be subject to the same rules and regulations (and related sanctions) that classified information is.

This can be overcome by the effective implementation of Liebeskind’s (1997) three learning modules for all of the staff and research professionals involved in the exchange. Again, of utmost importance to the implementation of these learning modules, and as such to the overcoming of these major obstacles in the counter-intelligence strategies of research universities and the relevant private sector companies involved, is the coordinated efforts made by the appropriate government agencies involved.

It is with the consulting and training efforts of the appropriate government agencies that these learning modules can be effectively implemented to the degree that they may provide a strong defensive counterintelligence strategy and prevent the undesired outcome of potential economic loss due to espionage. With this effective defensive counterintelligence strategy setup between the interconnected efforts of all three of stated agencies involved; namely research universities, relevant private sector companies, and appropriate government agencies, the exchange program by the United Nations High Commission for Global Science and Technology can best serve its intended purpose to forge an interconnected exchange of scientific and technological understanding between students and scientists across the globe.

References

Baker, C. D. (2003). Tolerance of international espionage: A functional approach. Am. U. Int'l L. Rev., 19, 1091.

Danielson, M. E. (2008). Economic espionage: A framework for a workable solution. Minn. JL Sci. & Tech., 10, 503.

Fraumann, E. (1997). Economic espionage: Security missions redefined. Public Administration Review, 303-308.

Liebeskind, J. P. (1997). Keeping organizational secrets: protective institutional mechanisms and their costs. Industrial and Corporate Change, 6(3), 623-663.

National Security Branch. (2011, August 18). FBI. Retrieved from http://www.fbi.gov/about-us/nsb/national-security-branch-brochure

Pacini, C., & Placid, R. (2009). Importance of state trade secret laws in deterring trade secret espionage, The. Buff. Intell. Prop. LJ, 7, 101.

Tucker, D. S. (1997). Federal government's war on economic espionage, The.U. Pa. J. Int'l Econ. L., 18, 1109.

Vandemoortele, J. (2012). Advancing the global development agenda post-2015: Some thoughts, ideas, and practical suggestions. UN System Task Team on the Post-2015 UN Development Agenda.