The Precise (and Narrow) Limits On U.S. Economic Espionage

By Jack Goldsmith
Monday, March 23, 2015, 7:09 AM

This Intercept story on New Zealand’s surveillance of candidates for director general of the World Trade Organization sparked a related conversation yesterday on twitter about the exact scope of U.S. economic espionage.  There is a lot of confusion about this, I think.  Here is the U.S. position as I understand it, followed by a few comments:

The United States engages in economic espionage and doesn’t deny it.  As former CIA Director Stansfield Turner stated in 1991, “as we increase emphasis on securing economic intelligence, . . . we will have to spy on the more developed countries—our allies and friends with whom we compete economically.”  Former CIA Director James Woolsey acknowledged in 2000 that the United States steals economic secrets from foreign firms and their governments "with espionage, with communications, with reconnaissance satellites.” Woolsey listed three “main areas” (sanctions, bribery, dual-use technologies) where the United States "target[s] foreign corporations and the government assistance to them."  But is no reason to think these areas are exclusive.

The United States’ limits itself in one very narrow context.  After acknowledging that the United States engages in economic espionage, DNI Clapper said in 2013: “What we do not do . . . is use our foreign intelligence capabilities to steal the trade secrets of foreign companies on behalf of – or give intelligence we collect to – US companies to enhance their international competitiveness or increase their bottom line.”  This very carefully worded statement is the only admitted  U.S. limit on economic espionage.  Note what it permits.  It permits economic espionage of foreign governments and institutions.  It even permits theft of trade secrets from foreign firms.   It just doesn’t allow such theft “on behalf of” U.S. firms, and it doesn’t permit the government to give the stolen information to U.S. firms.  Even this limitation is qualified yet further.  The USG says it does not steal trade secrets on behalf of U.S. firms (or give stolen trade secrets to U.S. firms) in order “to enhance their international competitiveness or increase their bottom line.”  But it would be consistent with this statement for the USG to steal trade secrets on behalf of U.S. firms, or to give the stolen trade secrets to U.S. firms, for some other purpose.

Even though the United States does not steal trade secrets to give to U.S. firms to enhance their competitiveness, its economic espionage benefits U.S. firms in the aggregate.  A 1996 NRC Report (p.99) says: “According to the National Security Agency (NSA), the economic benefits of SIGINT contributions to U.S. industry taken as a whole have totaled tens of billions of dollars over the last several years.”  And that was in 1996.         

Two comments:

First, it should not be surprising that the United States engages in economic espionage.  Nor should it be surprising that New Zealand, or the United States, would spy on candidates for Director General of the WTO.  I am confident that many nations tried to get intelligence about those candidates, for the Director General plays a consequential role in global trade and economic policy.  Gathering intelligence from public actors about global economic policy is a very old aim of national intelligence.

Second, Glenn Greenwald asks on Twitter: “why is giving to corps radically diff than advantage in econ negotiations?”  I interpret this question to mean: Why is it acceptable to steal economic secrets to gain advantage in trade negotiations or in global economic affairs more generally, but not acceptable to steal economic secrets from foreign firms to aid particular U.S. firms?  I don’t know the answer for sure.  But I think the answer is simply that the narrow carve-out best serves U.S. interests.

As Woolsey noted:

American industry is technologically the world leader.  It is not universally true.  There are some areas of technology where American industry is behind those companies in other countries, but by and large, American companies have no need nor interest in stealing foreign technology in order to stay ahead.

On the whole the United States doesn’t gain much from stealing trade secrets from foreign firms to give to U.S. firms.  But the United States and its firms have a lot to lose when other nations engage in this discrete form of economic espionage against U.S. firms.  Thus the best rule for the United States is one that tries to limit this form of economic espionage.  However, economic espionage outside this narrow context – not in order to benefit discrete U.S. firms, but rather to advantage the United States economy and U.S. firms generally on the global scale (in trade negotiations, e.g.) – serves U.S. interests, especially since the USG has the most powerful capabilities in this context.  And so the USG thinks this form of economic espionage is acceptable.

It is not surprising that the United States would seek to craft a nuanced rule about economic espionage that serves its interests.  This happens all the time in international affairs.  Nor is it surprising that so many nations are unimpressed with the United States’ attempt to limit the one form of economic espionage (theft of foreign corporate trade secrets to give to a local firm) that so obviously harms U.S. interests, especially since the United States engages in other forms of economic espionage.