rethinking national security strategy priorities

CAROLE A. FORYST

Rethinking National SecurityStrategy Priorities

termite (turmıt). Any one of numerous species of pseudoneoropterousinsects belonging to termes and allied genera; calledalso white ant. Noted for their destructive habits,their large nests, their remarkable social instincts, andtheir division of labour among the polymorphicindividuals of several kinds.1

Among the dangers that prompt quick action by any homeowner,discovering termites would be near the top of the list. Bite by bite termitescould eventually hollow out a structure, threatening its collapse. A fewinsects hiding from view can inflict damage that belies their size and number.That analogy is worth internalizing before considering recommendations

to reexamine United States counterintelligence (CI) strategic priorities thatrank economic and industrial espionage second to counterterrorism on thelist of ten Intelligence Community (IC) priorities.2

AS EVENTS UNFOLDED . . .

Two important events occurred on 11 September 2001 (9=11) that changedthe strategic focus of the U.S. government. The loss of lives and damageto property caused by Islamic terrorists lodge indelibly in the mind ofevery American. With the country and Congress backing him, those

Carole A. Foryst formerly served as an official with several United States federalagencies and public corporations. She is a candidate for an M.A. in StrategicIntelligence Studies at the Institute of World Politics, Washington, D.C.

International Journal of Intelligence and CounterIntelligence, 23: 399–425, 2010Copyright # Taylor & Francis Group, LLCISSN: 0885-0607 print=1521-0561 onlineDOI: 10.1080/08850600903566165

399

actions brought President George W. Bush to declare war on terrorism.Unnoticed, in barely twenty-four hours, the strategic focus of the countryturned away from a ten-year bipartisan effort against economic espionage(EE) and industrial espionage (IE). As distinguished by the EconomicEspionage Act of 1996, EE is espionage conducted to benefit a foreigngovernment; IE is espionage and theft of trade secrets conducted for theenrichment of someone or some other entity than their owners, including aforeign government. Spying for a foreign government carries the prospectof longer incarceration and higher financial penalties than does theft foreconomic motives not instigated by a foreign country. Both EE and IE arecriminalized by the Act.3

Overnight, government officials began to shift people and budgets fromcounterespionage to counterterrorism. Given the rapid change, that thePresident calmly weighed the national security threat from economicspying against the national security threat from terrorism seems unlikely.Foreign countries involved in economic espionage did not salute

President Bush after 9=11 and refocus their efforts on counterterrorism.To the contrary, those countries involved in stealing U.S. secretsintensified their spying on businesses, defense contractors, universities’laboratories, and private sector laboratories. In reality, most nations ofthe world now steal information to bolster their home economies andmilitary capabilities.Their secret activities receive little notice from a distracted political

establishment and indifferent media. The Federal Bureau of Investigation(FBI) has opened more China-related economic espionage cases since 9=11.But prosecutors declined to take all but two to trial, partly due to thedifficulty of determining the value of stolen intellectual assets, thereluctance of corporations to own up to their losses, and prosecutors’perceptions that the media does not treat espionage cases as newsworthyand career-enhancing.4 While preventing and stopping economic espionageis the goal of counterespionage, the absence of personal consequences forcollectors of intellectual property—often trusted company insiders—handsthem free passes to engage in spying. Likewise, the end recipient—foreigngovernment-owned or crony-owned entities—bear no repercussionsfor freebies.In fact, economic and industrial spying are unabated. Companies and

organizations are experiencing losses and damage at levels that require theWhite House and the IC to examine counterintelligence threats andreconsider the rankings on their list of strategic priorities. The IntelligenceCommunity must conduct its reanalysis based on fresh information andanalysis. Only then should the assesment be presented to the NationalSecurity Council, policymakers, the President, and the American people.Nine years after the dramatic policy switch, enough time has passed, and

400 CAROLE A. FORYST

INTERNATIONAL JOURNAL OF INTELLIGENCE

fear and passion have abated enough so that policymakers should be able toobjectively reconsider the results and reevaluate the nation’s CI priorities.

POLICY FORMATION

At National Counterintelligence Executive (NCIX)–sponsored seminarsseeking to strengthen the partnership between the government and theprivate sector, officials and sector experts have urged heightened attentionto both industrial and economic espionage. Without quantifying the lossessustained by U.S. business and industry from IE and EE, former officialssuch as Principal Deputy Director of National Intelligence Donald M.Kerr and Deputy National Counterintelligence Executive Marion ‘‘Spike’’Bowman, and many other CI experts have implied that such espionage andtheft are as damaging, if not more so, than other types of spying duringthe Cold War.5

Capturing the tone of the counterintelligence community’s currentappreciation of economic espionage, as expressed in an FBI briefingdocument for the private sector and speakers at seminars in 2007 andconfirmed in private conversations at a 29 October 2008 CI seminar, is thefollowing statement:

Left unchecked, such economic espionage threatens the foundations ofU.S. prosperity, say current and former counterintelligence officials. Inan era of globalization, competitors in low-wage developing countriescan produce most products less expensively. The United States’economic advantage revolves around the sophisticated technology andunique know-how residing in corporate laboratories and researchinstitutes. So that’s where the corporate thieves and foreign spiesconcentrate their efforts.6

TERRORISM PRESET THE FOG OF WAR

U.S. counterintelligence leadership is increasingly concerned over theseemingly widespread and damaging effects of economic and industrialespionage. Early in 2008, Marion ‘‘Spike’’ Bowman, then Deputy Directorof the National Counterintelligence Executive, in a guest lecture to anintelligence technology class at the Institute of World Politics emphasizedthat he was:

. . .most concerned about economic espionage. All 194 countries wantU.S. technology. Some 3,000 ‘front’ PRC [Peoples Republic of China]companies [are] in the U.S. . . . The Russians are back. From Putin, theSVR got a new lease on life stealing technology. They have moreagents here than at the height of the Cold War . . . also in Canada. Onequarter of R&D money spent in the world is [by the] U.S.7

RETHINKING NATIONAL SECURITY STRATEGY PRIORITIES 401

AND COUNTERINTELLIGENCE VOLUME 23, NUMBER 3

The U.S. constitutes roughly four percent of world population. From thestated perspective of the nation’s then-second highest-rankingcounterintelligence official, the U.S. has lately been experiencing moreeconomic espionage than the total spying experienced during the ColdWar. A few facts support Bowman’s concern:

. In Fiscal Year (FY) 2005, a record 108 countries were collecting all sorts ofproprietary business information, actively trying to import dual-use productsand circumvent U.S. export restrictions.8

. That year, the FBI opened 89 economic espionage cases and had 122 cases ongoing.9

. By 2006, the FBI was pursuing 143 economic espionage cases.10

. Immigration and Customs Enforcement (ICE) initiated more than 1,050 exportinvestigations and investigated 2,400 violations of various arms control andexport laws resulting in 101 arrests, 70 criminal indictments, and 85 criminalconvictions.11

. The Department of Commerce’s Bureau of Industry and Security initiated morethan 1,300 investigations, resulting in 31 criminal convictions.12

Calculating the Costs to the United States

The U.S. sustains annual economic losses of significant magnitude.Commonly quoted losses from official and industry sources might total$300 to $500 billion annually.13 The Attorney General’s office in 2002cited possible losses of up to one trillion dollars.14 A quick surveydocuments the costs as estimated by government and the private sector.Following the collapse of the Soviet Union in 1991, most governments

refocused their spying from political to economic and industrialinformation and technologies. Five years later, the rising level of EEactivity against the U.S. prompted Congress to pass the EconomicEspionage Act of 1996. The Act’s objective was to deter corporate spyingand theft by criminalizing it and to help the FBI investigate and prosecuteoffenders. The White House and corporate America were beginning tounderstand the magnitude of economic damage that spying was inflictingon the private sector, academe, and the defense industry, notwithstandingimprecise dollar estimates. For example,

. The American Society for Industrial Security (ASIC) estimated that between 1993and 1995, economic and commercial espionage cost American industry $63billion.15

. In a 1995 report the White House Office of Science and Technology estimateddamage at $100 billion.16

. The ASIC published an estimate of industrial losses in 1997 of $300 billion.17

. In 1999, that small ‘‘5 percent stuff’’ cost industry an estimated $100 billion inlosses from industrial espionage activity. According to a survey by the ASICand PriceWaterhouseCoopers, that worked out to about $50 million an incident.18



. The Attorney General’s 2002 report said that accurate calculation of monetarylosses directly and indirectly linked to economic espionage on an annual basiscannot be made and is not readily available. Speculations . . . . range from $53billion to $1 trillion. Losses may reflect inventory ‘‘snapshots’’ only on the daythe audit was performed.19

THE SITUATION TODAY

In July 2008, the FBI’s then–Assistant Director, Cassandra Chandler, said:

At the end of the ‘‘cold war’’ the old-fashioned ‘‘spy game’’ did not goaway, in fact there are more players in the mix than ever before. Thenumber of countries engaged in espionage against the United Stateshas actually risen. Our enemies and allies alike covet our technology,our manufacturing processes, and our trade secrets. Economicespionage costs U.S. businesses more than 200 billion dollars a yearjust in intellectual property theft.20

The cited reports estimated national security losses at around $300billion per year and commercial losses of around $200 billion, or acombined $500 billion. That loss of half a trillion dollars came from a$13.77 trillion economy in 2007, of which only thirty percent, or $4.2trillion, came from the production of goods. Seventy percent of theU.S. economy was then, and continues to be, generated by services.21

According to the U.S. Bureau of the Census, non-good-producingindustries include the retail trade, the wholesale trade, and the serviceindustries. Thus, some $4.2 trillion of gross national product (GNP)comes from producing industries, from which as much as $200–500billion is lost to economic theft, or 5–12 percent every year. This guessis based on estimated losses by authoritative sources, as published inthe last eleven years.

ECONOMIC ESPIONAGE SINCE THE COLD WAR

An upsurge in economic and industrial espionage began sweeping over theUnited States as the Soviet Bloc disintegrated. The economic weakness ofthe former Communist states, their emerging economies, and commercialcompetition motivated them to repurpose their spying to bolster theireconomies. Many nations, including U.S. allies, began spying to benefittheir favored domestic companies. Within a few years, President GeorgeH. W. Bush voiced concern in a speech, saying:

We must . . . thwart anyone who tries to steal our technology or otherwiserefuses to play by fair economic rules.22



Likewise, the Central Intelligence Agency’s (CIA) then-Director RobertGates warned in a 1992 speech that:

Some foreign intelligence services have turned from politics to economicsand the United States is their prime target.23

In 1999, the Cox Commission, headed by then-Representative ChristopherCox (R., California) investigated foreign theft of technology since the end ofthe Cold War and brought to public attention that China is behind an EEand IE espionage system that steals vast quantities of intellectual property.While the matter of counterterrorism distracts official Washington, Chinacontinues to enrich itself through industrial and economic espionage at U.S.expense, free of public notoriety or federal sanctions. More than a decadeago, the Cox Report stated that

China pilfered secret design information from national labs on everynuclear weapon the U.S. possesses . . . such secrets gave China nucleardesign information on a par with America’s. . . . the Chinese stoleanti-satellite technology and obtained neutron-bomb secrets. Part ofthe espionage plan [was] a network of 3,000 U.S.-based frontcompanies that swept up publicly available technical information.24

The Cox Report said China was doing most of the spying, but was joined onthe list of top spying countries by Russia, Japan, France, Israel, SouthKorea, and others.

Congress Meets Economic Espionage With Action

By 2008 the mounting espionage showed that Congress and Presidents Bush Iand Bill Clinton took well-considered actions in the 1990s to stymie losses toU.S. companies and institutions. The theft of all categories of businessinformation, products, and methods from U.S. companies had reached alevel that drove bipartisan support in Congress to enact, and PresidentClinton to sign, the Economic Espionage Act of 1996. For the first time,American law criminalized economic and industrial espionage and gavenew anti-espionage law enforcement authority to government agencies. TheAct’s cosponsor, Senator Herbert H. Kohl (D., Wisconsin) succinctlydescribed the issue in a Senate speech in 1996:

We have a problem in America today: The systematic pilfering of ourcountry’s economic secrets by our trading partners which underminesour economic security. It would not be unfair to say that America hasbecome a full-service shopping mall for foreign governments andcompanies who want to jump start their businesses with stolen tradesecrets . . . businesses spend huge amounts of money, time, and thoughtdeveloping proprietary economic information—their customer lists,



pricing schedules, business agreements, manufacturing processes. Thisinformation is literally a business’s lifeblood. . . . But these thefts have afar broader impact than on the American company that is victimizedby an economic spy. The economic strength, competitiveness,and security of our country rely upon the ability of industry tocompete without unfair interference from foreign governments andfrom their own domestic competitors. Without freedom from economicsabotage, our companies lose their hard-earned advantages and theircompetitive edge.25

His cosponsor, Senator Arlen Specter of Pennsylvania (then aRepublican, now a Democrat), summarized the issues to the Senate whenintroducing the bill:

While economic espionage by foreign governments presents a clear issueof national concern, the economic cost of industrial espionage bydomestic and nongovernment-owned foreign corporations may be evengreater.

We have drafted this new provision as an amendment to the NationalSecurity Act of 1947 to emphasize the importance of this issue to thenational security of our Nation. Anyone who doubts that this is anational security issue need only stop to consider why foreigngovernments would devote so much effort to obtaining thisinformation from U.S. companies. The reality is that U.S. economicand technological information may be far more valuable to a foreigngovernment than most of the information that is classified in theUnited States today.

. . . In 1992, then-Director of Central Intelligence Robert M. Gatestold . . . [the Senate Select Committee on Intelligence] the Committee:

We know that some foreign intelligence services have turned frompolitics to economics and that the United States is their primetarget. We have cases of moles being planted in U.S. high-techcompanies. We have cases of U.S. businessmen abroad beingsubjected to bugging, to room searches, and the like. . . . [W]e aregiving a very high priority to fighting it.

Beginning as early as 1990, the Intelligence and CounterintelligenceCommunities have been directed to detect and deter foreignintelligence targeting of U.S. economic and technological interests,including efforts to obtain U.S. proprietary information fromcompanies and research institutions that form our strategic industrialbase.

The FBI tells us that 23 countries are being actively investigated andthat there has been a 100 percent increase in the number ofinvestigative matters relating to economic espionage in the UnitedStates during the past year—from 400 to 800. Thus, this bill is notaimed at any one country, or even a handful of countries. It isdesigned to address a widespread threat from a broad spectrum of



countries, including traditional counterintelligence adversaries andtraditional allies.26

After the Cold War ended, freeing many economies from the constraints ofCommunism and socialism, foreign countries saw the U.S. as a ripe targetfrom which to pluck economic and industrial secrets to accelerate theirindustrial and job growth without the expense of time and capitalinvestment or repercussions from the U.S.

EE AND IE ARE INVISIBLE PROBLEMS

The Cold War may have formed Americans’ concept that EE and EI meanthe theft of state secrets and technology for political and militaryadvantage by the Soviet Union and its allies. With the collapse of SovietCommunism, and its satellites’ rush to join the North Atlantic TreatyOrganization (NATO) and establish free market economies, mostAmericans easily assumed that the era of spying had ended. At the sametime, the Intelligence Community perceived the transformation of foreignspy services to EE and IE, and so informed Congress and the President.Political leaders brought the issue before the public, yet few Americansappreciated the rise of spying against U.S. businesses, industry, academia,and research laboratories, along with the danger to national security fromcountries intent on bolstering their domestic companies and economies onthe backs of American investment, creativity, and labor. Naivete andhopes for a peace dividend overshadowed Americans’ concerns that theyworked for companies that were becoming spy targets. Foreigncompetitors were making competitive use of any kind of companyproprietary information: trade secrets, computer source code, chemicalformulas, research and development (R&D) data, financial information,manufacturing processes, lists of suppliers and customers, and evenmarketing strategies.

GROWTH TRENDS OF U.S. DEFENSE-RELATED FOREIGN ESPIONAGE

The year-by-year growth in the number of countries purloining U.S. economicassets is shown in Figure 1. The Counterintelligence Office of the DefenseSecurity Service (DSS) prepares an annual report, Technology CollectionTrends in the U.S. Defense Industry, that provides insight into foreignespionage directed at the U.S. defense industry. The DSS has multipleoperations to safeguard the country’s security, among them working inpartnership with industry to establish and maintain threat-appropriatesecurity countermeasures.27 Every year, cleared defense industry contractorssubmit Suspicious Contact Reports (SCR), which serves as the basis of thetrends analysis. In fiscal year 2005 reports showed a year-over-year increase



of 43 percent to 971 SCRs. One hundred and six countries were associatedwith suspicious activities, compared with 90 in 2004.The DSS report, while not addressing suspicious activity in companies

outside the defense sector—i.e., companies, startups, universities, andlaboratories—gives a sense of the increase in efforts by unauthorizedpersons to obtain U.S. technical and trade secrets to enrich the spy, andbenefit foreign economies, their domestic companies, and their militarycapabilities.The countries that the DSS found spying in 2005 included U.S. allies and

trading partners like Israel, Germany, and France.28 Learning that theeconomic strength of France has reached a condition that the country hasno compunction against engaging in economic warfare against an ally isjarring. France views it as normal among nations to pursue marketadvantages by all available means. France boldly declares as the policy ofthe Republic what John Locke enunciated in his Second Treatise: that allnations are in a state of war with each other. The French Defense Ministry,through its semi-private Defense Consultancy International, went so far asto establish the Ecole de Guerre Economique (School of Economic Warfare)in 1996 with a faculty of experts. Were it not a brazen threat to U.S.economic strength and criminal behavior, such an action might evoke acynical smile. The school’s director, Christian Harbulot, declared:

The U.S. is the top priority. There is true industrial competition and thereare many fields where we have everything to lose. We cannot let ourselvesbe pushed around. A huge number of companies have disappearedbecause they were bought out or destroyed by the Americans. We haveto protect ourselves.29

Overlooking Economic Espionage in National Security Strategyand Threats Reports

The Intelligence Community, looking for counterintelligence guidance oneconomic espionage from the White House, will not find it in the

Figure 1. Countries Involved in Economic and Industrial Espionage.



National Security Strategy of the United States of America, issued inMar ch 2006 by t h e Na t i ona l E conom i c Counc i l (NEC) . 3 0

Notwithstanding its title, the document does not create a strategy. Itneither enunciates principles on which the President and governmentdepartments will deal with domestic economic issues, nor identifiesconditions and situations that could weaken or strengthen the country’seconomic power and vitality. The document contains no hint ofeconomic and industrial espionage, or any perceived economic threats orvulnerabilities.Although the Assistant to the President for National Security sits on the

council with cabinet members,31 the NEC created a ‘‘strategy’’ withoutmentioning that economic strength is fundamental to U.S. security. Itsfifty-four page report is devoted predominantly to terrorism, with somepassages about AIDS, free trade, etc. It reads like a public relationsrelease enumerating administration accomplishments, not a strategic planto guide government departments and the IC. The report seems atcounterpoint to its mission as envisioned by President Clinton when heissued an Executive Order establishing the NEC as a parallel body to theNational Security Council as economic espionage was accelerating duringthe 1990s.According to its Website, the NEC has the responsibility to advise the

President on matters related to global economic policy, ensure that policydecisions and programs are consistent with the President’s economicgoals, and monitor implementation of the President’s economic policyagenda.32 Two of the four principal NEC functions are ‘‘to coordinatepolicy-making for domestic and international economic issues and tocoordinate economic policy advice for the President.’’33 Apparently,however, the IC leadership’s awareness that EE and IE threateneconomic vitality has not resonated within the national securitycommunities of either Presidents George W. Bush or Barack H. Obama.A like omission of EE and IE continues to occur. For example, Director of

National Intelligence Dennis Blair’s statement about the Annual ThreatAssessment prepared for the Senate Select Committee on Intelligence, anddelivered 12 February 2009, seemed thorough, discussing numerouscategories of threats, but failed to deal with EE and IE matters, whichwould have integrated well into its economic section.34

The Government Accountability Office (GAO) prepared a report inMarch 2008 for the ranking member of a subcommittee on HomelandSecurity, entitled ‘‘Intellectual Property,’’ which examined intellectualproperty enforcement, piracy, counterfeiting goods, and other crimes,but it contained no mention of EE and IE, and the agencies, includingthe FBI, that supplied the researchers with information may also haveignored the subjects.35



Cyber attacks are EE and EI threats that garner attention. The advent ofcyber technologies makes easier than ever one of the most difficult jobs forspies: delivery. Yet government documents seldom connect the threat ofcyber security and threats to the actual products and information at risk,intellectual property and trade secrets, or the value of thefts. Cyber attacksare said to constitute twenty percent of EE and EI threats.

Although current losses due to hacker attacks are significantly smallerthan losses due to insider theft and sabotage, the hacker problem iswidespread and serious. Industrial espionage often involves the use ofhacking techniques and can be perpetrated either by companies seekingto improve their competitive advantage or by governments seeking toaid their domestic industries. Foreign industrial espionage carried outby a government is often referred to as economic espionage.36

Congressional oversight and White House attention or direction areapparently spotty and scant. Curiously, a reluctance to address the EE andIE issue could be detected in DNI Blair’s written responses to SenatorTom Coburn’s (R., Oklahoma) questions for the record after anIntelligence Committee hearing in February 2009, in a transcript obtainedby the Federation of American Scientists through a Freedom ofInformation request. Absent public visibility of the problem and directionfrom the White House and Congress on EE and IE, counterintelligence inthe FBI and other agencies seems to be on its own. CI leaders speak outoccasionally on the issue and report a worsening situation, but without thepolitical megaphone their voices do not carry to the public, corporateofficials, and heads of educational institutions being drained of theirintellectual property by spies. Media coverage of EE and IE is spotty andbrief. The CI community’s concern is stifled by the media and neglected bythe political leadership. Meanwhile, companies, their workforces, and thepublic are uninformed, and therefore remain unaware that their tips aboutsuspicious people and their activities could help CI authorities mitigate orprevent economic damage to their livelihoods.

THE NEED TO REFOCUS

Executive Order 12333 specifies four basic functions of counterintelligencein a democratic society:

1. Identify foreign intelligence and other threats to both the U.S. and U.S. interestsoverseas;

2. Assess them;3. Neutralize them;4. Exploit them.



In the current environment, the U.S. appears to bring full focus toperforming all four functions to prevent terrorism but neglects the issue ofeconomic espionage. Prompted by 9=11, policymakers chose this focus andpursued it for nine years. EE receives little political attention for anynumber of reasons. The President and his foreign policy and nationalsecurity advisors have a different view than the IC. To cite a historicalexample, both Presidents Franklin D. Roosevelt and Harry S Trumanmade policy decisions to quietly support and encourage FBI investigationsof the Communist Party in order to deepen U.S. understanding of theParty and its ‘‘fellow travelers,’’ meanwhile judging the U.S.’s wartimerelationship with Joseph Stalin to be too important to disturb by raisingpublic ire at the Soviets’ spying.Now, nine years into U.S. counterterrorism efforts, with President Obama in

his second year in office, is an opportune time to reevaluate CI and CI threatrankings, and to reconsider EE and IE threats after devising a methodologyfor conquering fuzzy numbers. With fresh numbers in hand, reanalyzingsituations and strategies to inform the current class of policymakers inCongress and the Executive Branch is possible.Consider that EE and IE were priority concerns during the decade of the

1990s, and the swiftness with which counterterrorism and the war againstIslamic extremists became the issue defining the Bush presidency. Afternine years pursuing this national security priority, Obama may haveperceived that the U.S. had found its footing and might welcomepenetrating, fresh analysis and insights to inform his national securitystrategies. This may be an optimal time to produce a National IntelligenceEstimate on economic espionage.After nine years of success in preventing a repeat of 9=11 in the U.S., a

recommendation that the IC reexamine the basis of current domesticnational security and economic security strategies and weigh the merits of thecurrent priority rankings published in the FBI strategy documents is justified.Such reconsideration, based on understanding of the deeper, sustained

threat from EE and EI, might reposition counterespionage with respect tocounterterrorism. The effect would change or raise budget resources,increase personnel, coordinate and sharpen training among the federal CIagencies, enhance outreach to business and industry, and heightenawareness of management and employees that suspicious coworkeractivities on the job may warrant reporting to security personnel.

Intentions—Frankly Speaking

China’s premier Wen Jiabao made a remarkable public declaration of hisgrand vision of Chinese and Indian dominance in information technologyduring a visit to India in April 2005:



We will be able to lead the world in the sector and a day will come whenwe can herald the beginning of the Asian century of informationtechnology.37

Wen was envisioning that result from a combination of China’s hardwareand India’s software. The RAND Corporation commented about Wen in aconference report:

The emergence of China and India as technology innovators not onlyraises the possibility of bitter conflicts over trade, but also that newconsumer markets within Asia may displace the American economy asthe most important final market for technology products.38

China’s aspirations may be achievable in decades or more. Chineseinventiveness remains in the developing phase at present. The RANDpublication on the proceedings showed that in 2003 China granted moredomestic patents to foreigners than to Chinese. In comparing world-classinventions by major technology competitors to the U.S., it found thatChina—including China-based foreign-owned companies—was receiving amodest, but growing number of patents in comparison with world totals.The gap between China’s strategic goal and its current position provokesthe question: how does China plan to achieve its goal? The RANDconference proceedings were a reminder that:

China benefits from the growth of informal knowledge networks,students, and scientists who return to newly established labs in Beijing,and technological entrepreneurs and venture capitalists moving fromSilicon Valley to Shanghai.

In a footnote, the report started:

There are also espionage networks. The national counterintelligencestrategy declares that the key modality is no longer the spy, but thebusinessman, student or academic. . . . The end result is that China canleverage the international system of innovation and that of the UnitedStates in particular, to offset weaknesses in its own national innovationsystem.39

Economic espionage and industrial espionage appear to be importantmeans for China to achieve its vision of information technologydominance. Some 45,000 Chinese students, the many other thousandswork ing in bus ines se s and labora tor i e s , and natura l i z ed orAmerican-born ethnic Chinese are consistently tapped as informationsources by Chinese authorities, employing time-honored techniques ofstroking egos and coercion. China has a view of history in thethousands of years, and has the cunning and patience to plan for abetter future at U.S. expense. China is waiting out the U.S. Meanwhile,



other countries poach on U.S. preserves, employing traditional industrialespionage techniques.A speaker at the RAND Corporation conference questioned the

permanence of U.S. technical preeminence as globalization spreads:

. . . the globalization of S&T [science and technology] complicates thenational security environment . . . three ways . . . technologicalcapability is now more widely diffused to potential competitors. . . . theleading edge of innovation . . .may be difficult to situate as it jumpsaround from country to country . . . even as the United States remainsthe predominant science and technology power, . . . it will haveto . . . think about how to respond when its technological lead ismeasured in months or years, not decades. . . . There is also the realitythat individuals or small groups with access to new technologies cannow do greater damage to U.S. national interests . . .40

Because of the Internet, the biggest obstacle faced by a spy–delivering theinformation to a handler—has become as easy as the click of an e-mail‘‘send’’ button. This makes CI work more difficult and the spy’s task easier.

‘‘Much of Our Strategic Advantage . . . Is Economic.’’–USA Today

Those spying to advance the prospects of foreign companies andcountries concentrate their efforts on the U.S.’s greatest economicadvantage: the technological prowess and unique knowledge developedin university and corporate laboratories. Joel Brenner, a formerNational Counterintelligence Executive in the Bush II administration,said:

The days when everything that was worth stealing, every secret that wasworth stealing in the United States, was a government secret—those daysare long done . . .

Much of what makes the country tick, much of our strategicadvantage in the world is economic.41

Charlene B. Thornton, special agent in charge of the FBI’s San Franciscooffice, announced the conviction of a corporate spy, observing:

The economic—and often national—security of the United States restslargely upon a foundation of technological superiority, and to maintainthat superiority our trade secrets must be protected with the fervencywith which we guard other vital interests. . . . The successful prosecutionof Mr. [Xiaodong Sheldon] Meng is a blow to those who seek tocircumvent the long and costly process of research and development togain a technological advantage through lies, deceit, and theft; it is avictory in the struggle to ensure the economic security of Silicon Valleyand the United States.42



THE UNSETTLED STATE OF AFFAIRS

The state of affairs regarding economic espionage is still not clear, andavailable information lacks the solidity to support fresh analysis forPresident Obama. Not only do most reports appear to use numbers thatmay be outdated, they present mixed messages when comparing officialpublic statements, FBI and other prevention programs, and the extent ofprivate sector effort to prevent EE and IE. For example:

. The National CounterIntelligence Executive (NCIX) expresses deep concern aboutEE and IE in unclassified private briefings; at the same time, top IC leaders’ writtenand oral testimony before House and Senate committees refrains from specificmention of the concern, and committee members raise no questions.

. The Website of the U.S. Chamber of Commerce is full of topics oncounterterrorism, yet mentions counterespionage only once.

. Barely a handful of private companies offer counterespionage services to theprivate sector, and only a quasi FBI-private organization is devoted to raisingawareness for preventing EE thefts.

. The FBI initiated a number of programs to raise awareness in the corporate andacademic worlds. Its News of the Week releases attempt to inform the public aboutincitements, arrests, prosecutions, and sentencing, but the media picks up little ofit. Some, but not all, of its releases mention economic damage estimates, and allseem casual: no release focuses on long-term effects on America’s economic vitality.

. Judge Richard A. Posner, an FBI expert, said in 2005 that the FBI was thendevoting the largest proportion of its personnel and budget to counterterrorismwhile shielding 96 percent of its budget from influence by the NCIX and theODNI. If this figure is accurate, the Justice Department and FBI leadershipand bureaucracies appeared to undervalue EE counterintelligence.43

. FBI management continues to engage in the bureaucratic practice of revising thejob descriptions of personnel to preclude them from being under the authority ofthe Director of National Intelligence.44

. FBI Director Robert S. Mueller III testified in April 2008 that ‘‘We have doubledthe number of intelligence analysts on board, from 1,023 in September 2001 tomore than 2,100 today. We have increased the number of onboard languageanalysts from 784 in September 2001 to more than 1,300 today. We integratedour intelligence program with other agencies under the Director of NationalIntelligence.45

. And the FBI’s 56 field offices have established programs to work with the tenlargest companies it deems most likely to be targeted by spies. Logically, awider effort could hinder more spying.

. The FBI currently sponsors seminars for corporations at which it emphasizes thatthe greatest threat comes from trusted insiders, especially their foreign-bornemployees. An FBI briefing document for the private sector states:

A tiny minority could do devastating damage by stealing secrets for eithera foreign government or more often as part of a purely commercialscheme.



Significant internal and external counterintelligence weaknesses . . .make U.S. companies easy prey for foreign intelligence services, foreignorganizations and foreign competitors.46

If annual losses to U.S. economic strength from EE and IE are mountingto $500 billion, a noteworthy vacuum of attention and mixed messages callsfor attention from the President, his Director of National Intelligence,Science Advisor, Attorney General, FBI Director, and Congress.

ACADEME’S CONCERN: WEAKENING U.S. NATIONAL SECURITYAND ECONOMIC COMPETITIVENESS

Concerns about the risk that the U.S. could lose its technical leadership andsee its national security and economic competitive positions weakened areof deep concern in parts of the academic community. The NationalAcademy of Sciences raised certain issues in a 2007 report concerningthreats to U.S. security and economy.47 The report prompted theUndersecretary of Defense for Personnel and Readiness to fund a RANDCorporation study and conference in November 2008 to gather experts todiscuss the subject:

Concern has grown that the United States is losing its competitive edgein science and technology (S&T). The factors driving this concerninclude globalization, the rise of science centers in developingcountries such as China and India, the increasing number offoreign-born Ph.D. students in the United States, and claims of ashortage of S&T workers in the United States. A loss of prowess inS&T could hurt the U.S. economic competitiveness, standard ofliving, and national security.48

The importance of S&T to U.S. prosperity and security warrants thatpolicymakers pay careful attention to the various high-level reportsissued over the past five years that warn of pressures on the U.S. leadin S&T.49

The Department of Defense (DoD)–sponsored conference proceedings pointout this competitiveness indicator:

The United States is today a net importer of high-technology products.Its trade balance in high technology manufactured goods shifted fromplus $54 billion in 1990 to negative $50 billion in 2001.50

That excerpt is footnoted:

For 2001, the dollar value of high-technology imports was $561 billion;the value of high-technology exports was $511 billion.51



Foundations of Technological Prowess

Several conditions over the years brought the U.S. to undisputed technicalleadership, among them:

. The Founding Fathers protected invention and new ideas in the Constitution,followed by passage by Congress and signing by President George Washingtonof the first U.S. federal law which concerned patent, trademark, and copyright law;

. The U.S. banking system and capital markets supported invention from theearliest years;

. U.S. companies and individuals invested about $35 billion per year in R&Dbetween 1976 and 1998, and about $75 billion per year during the 2000s, for atotal of about $1.1 trillion since 1976.52

. Americans exhibit an innovation gene through which they learn, create, absorb,and apply new ideas and things almost by instinct. The U.S. has been theinnovation leader for decades during which time technology has become thesuperstructure supporting the country.

As a nation, the U.S. has been unique in possessing all the abovecharacteristics; together, they form the base from which it generates ideas,products, jobs, and wealth that support the country’s national security.Every year some 27 billion investment dollars enable the U.S.’s generationof world-class services and products by the country’s best minds andworkforce. U.S. leadership has come to assume that the country’scapabilities are a birthright and infinite. But how long can the countrymaintain its well-being and withstand an economic drain of $200–$500billion of wealth annually—or $1 trillion to $2 trillion over four years? Aprudent government would address this subject urgently.

The Wealth of a Nation

At a 2006 conference of leading academics held to discuss the findings andrecommendations of a study by the three National Academies of Science,Engineering, and Medicine, the source of a nation’s wealth was describedthis way:

Wealth, in scientific terms, is the intellectual property that potentiallycontributes to innovative products and processes and thereby createsreal economic value. In the late 20th century, [U.S.] economists couldattribute half the gains in gross national product and 85 percent of thegains in per capita income to the application and exploitation ofscience and technology research. The scientific investments of nationshave made that growth possible.53

America’s bountiful technology attracts spying by countries that havebeen unable or unwilling to create domestic conditions that foster



innovation. They covet and steal the benefits of U.S. investments andlabor by purloining technologies and business secrets. The U.S. isladen with technology and proprietary information for easy plucking.The results of the National Academies’ analyses point the way to

inform policymakers’ national security priorities. Congress passed newEE and IE laws after probing hearings that made CI a priorityconcern during the decade of the 1990s, only to have counterterrorismreplace them overnight with no real debate. Since 9=11, combatingterrorism appears to have been the IC’s predominant focus. The BushAdministration, and to a lesser extent the Obama Administration, havekept that threat in the forefront of public awareness. Awareness by thepublic, and government urgings to report suspicious activities, helpsupport national security efforts regarding counterterrorism.Quite the opposite is the situation regarding EE and IE. Judging by IC-

and CI-published strategic plans, testimony, news releases, andadministration official statements, EE and IE are not accorded much, ifany, policy attention. With nine years of success in preventing a repeatof 9=11 in the U.S., the time has arrived to reexamine the basis ofcurrent domestic national security and economic security strategies andto weigh the merits of the current priority rankings as published instrategy documents. Such reconsideration, based on fresh analysis of thedeeper , sus ta ined threa t f rom EE and EI , might repos i t ioncounterespionage above or equal to counterterrorism on the nation’spriority list. As a result, the President and Congress might budget andappropriate greater funding, more CI personnel, and better CI trainingfor federal, state, and local efforts. In addition, the public attentionwould heighten awareness on the part of the people who may bebrushing against corporate spies every day without noticing or reportinganomalous behavior. At present, those who notice suspicious activitiesmay have no idea as to whom to report them, and may fear thatmanagers would be dismissive of such reports. That reluctance is instark contrast to the success of the official attention to terrorism thatsensitized the public to report suspicious activities.

Strategic and Tactical Threats

Counterterrorism is a war in which the ‘‘Islamic extremists’’ keep alivetheir threats in people’s minds. In contrast, EE and IE constitute aninvisible war by people masquerading as everyday folks. For honor ormoney they mean to harm the viability of companies and U.S. nationalstrength. The public rarely glimpses this war from statements by thePresident, other elected officials, law enforcement officers, or the media.Routinely, a terrorist bombing in Istanbul that kills a few dozen people



and damages property provides the graphic imagery that the mediarequires to make events worthy of headlines and the evening news. Aneconomic spy who is indicted, tried, or sentenced garners one inch ofcolumn space on an inside newspaper page on a slow news day. Thepublic remains largely unaware of the economic espionage threat. CIleaders express their concerns in annual reports to Congress, and postnews releases about spy apprehensions and prosecutions, but the publicgains little or no insight from political leaders. Likewise, among leadersof academic institutions, companies, and nongovernmental organizations,few pay attention to economic espionage. The lone exception is cyberthreats. Cyber threats now comprise twenty percent of EE, and continueto grow.

MEETING THE THREAT

A fresh analysis to support reconsideration of the FBI’s CI priorities in itsStrategic Plan will require a deeper understanding of the losses to EE andIE. Arriving at a reliable number for the losses may be a demandingrequirement, but it is one nine years overdue. As the 2005 Annual Reportto Congress put it:

Calculating a precise dollar figure for these losses would be difficult.Any such estimate must make fair market value estimates of thetechnologies lost by firms and the value of replacement technologiesnecessary to remain competitive. The figure must also consider factorssuch as lost sales as well as marketing and shipping costs. One of thechallenges that makes calculating the cost of industrial espionageparticularly difficult is that the technology losses often are notreported.54

How can the costs of undermining the vitality of companies and the U.S.economy be accurately included?

Cyber Attacks Proliferate

That 2005 report also stated:

A recent FBI survey provided additional weight to the observation thatInternet espionage may be on the rise. According to the study, nearlynine out of 10 U.S. businesses suffered from a computer virus, spyware, or other online attack in 2004 or 2005 despite widespread use ofsecurity software. The study concluded that viruses, spy ware,computer theft, and other computer-related crimes cost U.S. businesses$67 billion a year, according to an online press report. Detecting theorigins of such attacks—even determining for certain whether theyoriginate outside the United States—is difficult.55



An Unaware America

The prominence of political and law enforcement focus on counterterrorismapparently alerts and motivates the public to notice and report suspiciouspeople and activities. In the absence of a subsequent terrorist act in theU.S. since 9=11, and by relying on open sources, the ongoing CT successcould be attributed to authorities’ vigilance and some to public awareness.But this public–private synergy is absent concerning EE and IE, where itcould be a similarly important resource.Since 9=11, CT has usurped EE and IE as the FBI’s strategic CI priority.

Without diminishing the national imperative of thwarting terrorists’intentions to prevent their success, President Obama should prudentlyorder the IC to reevaluate and rank the nation’s CI priorities. InsteadMr. Obama, his administration, the IC, Congress, and local lawenforcement continue to build one CI capability but no others. With theexception of young children, few if any Americans could possibly remainunaware of the commitment of political leaders and law enforcementagencies to thwarting another terrorist act in the U.S. Aware citizens andfocused leadership are a potent combination to preserve safety against theodds. The time is too early to relax, as terrorists are likely preparing moresurprise attacks. Consistent public comments by IC leadership aboutterrorist threats and the advisability of moving IC elements off the easternpower grid are sobering and worrisome. Clearly, the bipartisan politicalleadership across the country remains concerned and unified againstterrorism, though noticeably less vocal until the failed Christmas 2009attempt to bomb an airliner over Detroit.Notable is the contrast in prominence of the political treatment given the

terrorism threat with that given EE and IE threats. In the absence of politicalpronouncements, the IC, FBI, and the security industry are aware of thisissue, but few among the public. Yet, in the decade preceding 9=11, the issuewas gaining prominence because policymakers and elected officials perceived athreat. EE was considered serious enough to merit criminalization in the EEAct of 1998. As the FBI’s own publication put it:

It was a landmark piece of legislation at that time, showing the foresightof Congress in protecting proprietary information and trade secrets intoday’s global market and wired world . . . and, by extension, the veryhealth, and competitiveness of critical segments of the U.S. economy.56

Irrespective of IC and FBI reports to Congress on EE and IE, espionage inthose areas has continued to increase while the issue’s prominence gave wayto graphic images of terrorist-caused death and destruction that have scarredAmericans. Iconic images of 9=11 and concern about personal safety easilyturn attention away from EE and IE, in which the theft of corporatetechnology and trade secrets appears victimless, lacks graphics that



provoke emotions, and involves esoteric technologies whose importance isunderstood by few.

Lack of Public Awareness Hinders CI

From the perspective of Marion ‘‘Spike’’ Bowman, the former deputy NCIX:‘‘The biggest headache is lack of intelligence awareness in U.S. corporations.[They suffer] mega billion dollar losses.’’57

In the absence of sufficient political prominence, the media comes close toignoring EE and IE. The FBI issues news releases of the arrest, indictment,prosecution, and sentencing of criminals to reporters on the Bureau beatand post them on its Website, although little of this news reaches print,mention on TV and radio, or incites bloggers. News coverage of criminalswho steal information worth millions to the victims—the stockholders ofthe companies—cannot compete with actress Angelina Jolie’s latest familydrama. Yet, media corporations are as vulnerable as any other commercialor industrial sector. Note that in 1998 Bloomberg media accused theAmerican subsidiary of Reuters Holdings, Reuters Analytics, of stealingproprietary information by stealing source codes from its computers.58

In a visual world, where terrorism evokes graphic images of people fleeingcollapsing towers and twisted trains, EE captivates only individuals who areexcited by spreadsheets and CI pursuits. People can identify with danger andmayhem, but not with a spy siphoning technology and trade secrets tostrengthen a hostile country’smilitary service or benefit crony-owned companies.

Findings and Recommendations

The Intelligence Community is long overdue to approach these problems bytaking several measures:

1. Reexamine the basis of current domestic national security and economicsecurity strategies. Weigh the merits of the current priority rankings publishedin strategy documents emphasizing CT over EE and IE. Such reexaminationsrequire fresh and deep comparisons based on new information and economicanalysis.

2. Officially quantify and publicize the annual losses the U.S. suffers from EE andIE. The current dollar estimates of economic damage quoted in unclassifiedreports, officials public statements, and testimony may not have been updatedin 10 years. It is unclear if numbers in official documents are stale or fresh.Currently, various sources estimate damage and losses to national securityaround $300 billion per year,59 and the commercial losses around $200billion.60 Is combining the numbers to aggregate losses around $500 billionvalid? Whether these estimates include cyber crimes is not clear. In fact, EEand IE estimates are ancient guesses, thus unreliable and unusable forpresidential policy consideration.



3. Update the component numbers for EE and IE and explain the methodology fortheir compilation. Only with reliable, updated figures will the IC be able toprepare a comparative analysis of the threats to economic and nationalsecurity from EE and IE, and compare the assessment to the economic andnational security threats from terrorism.

4. Present a fully allocated EE=IE vs. terrorism comparative analysis to theNational Security Council and other policymakers for reconsideration ofstrategic national CI priorities and their rankings.

5. Analyze and publicize the techniques and practices used by EE and IE spies forChina and other countries. In essence, how do EE and IE spies work?

6. The former Deputy NCIX, Spike Bowman, used the same estimate in 2008 as didthe Cox report of 1999 in stating that ‘‘over 3,000 Chinese-owned companies’’ aresuspected of having intentions to acquire U.S. technology and businessinformation illicitly. Did this widely quoted number really remain unchangedfor a decade?

7. Mount a national public awareness campaign to achieve the EE=IE equivalent toCT awareness. Engage in more outreach to help small and medium-sizebusinesses create a visibility for CI to enhance staff understanding of, andrespect for, CI programs throughout the economy.

8. Publicize CI programs to generate public attention, support private businessawareness of espionage, and generate the use of espionage reporting systems.

Elements of this effort can be based on the following:

. The private sector lacks the ability to do CI without FBI and DOD support.

. The Defense Security Service’s (DSS) counterintelligence program may offerinformation and advice that would benefit private sector companies andorganizations. The DSS provides support to the Insider Threat Program, theInformation and Capabilities Protection Program for the early detection andreferral of cases of potential espionage. It assists the defense industry in therecognition and reporting of foreign collection attempts, through its SecurityEducation and Training Awareness Program, and conducts CI=Securityawareness training to industry.

. Awareness efforts should be directed at small and medium-sized companies toreach small centers of innovation where awareness of EE may be minimal orabsent.61

. The FBI offers programs to raise awareness in nondefense organizations, an offeraccepted mainly by the largest companies with security programs and staff, whileoverlooking the individual and small centers of innovation that give birth to mostnew technology.

. Few know about an FBI program that encourages the public to report suspiciousactivity by offering a reward of up to $500,000.62

. The Awareness of National Security Issues and Response (ANSIR) Program is theFBI’s national security awareness program. The program is designed to provideunclassified national security threat and warning information to U.S. corporate



security directors and executives, law enforcement, and other government agencies.It also focuses on the ‘‘response’’ capability unique to the FBI’s jurisdiction in bothlaw enforcement and counterintelligence investigations.63

During the decades of the 1990s and the 2000s collectively, EE and IEbecame a wave washing over the United States, perpetrated mostly byforeign nationals and naturalized citizens who seek and steal for reasons ofpersonal pride or greed, or to gain the respect of ethnic compatriots whostroke them, the full range of proprietary information companies orinstitutions possess.The Cold War was a contest that could have been lost to espionage

termites were it not for the intrinsic unsustainbility of Communism thatled to the collapse of the Soviet experiment. In April 2008, Eugene Poteat,for many years a leading scientist at the CIA, told a class on IntelligenceTechnology that the Soviets were able to apply their long experience ofdomestic and foreign spying to get ‘‘everything’’ from the U.S. during theCold War. Early on, the U.S. was a comparative neophyte in the art ofintelligence, a deficit that continued even after five years of mentoring byGreat Britain during World War II.Now, however, the U.S. better understands foreign espionage threats. If

the threats are as grave as believed by experts, the IC would be negligentin failing to thoroughly understand the current situation, analyze itcontinuously, and communicate its findings to policymakers. This time, theeconomic weaknesses of Communism will not be there to save the U.S.from its lack of commitment to prevention of economic and industrialespionage.

REFERENCES1‘ ‘Termites, ’ ’ def ini t ion, Biology Onl ine , 1 July 2008, http://www.biology-online.org/dictionary/Termites

2The Federal Bureau of Investigation, Strategic Plan 2004–2009, 10 July 2008, p. 9,http://www.fbi.gov/publications/strategicplan/strategicplanfull.pdf

3The Economic Espionage Act of 1996 (EEA) differentiates between definitions ofeconomic espionage and industrial espionage: ‘‘Economic espionage (EE) is thetheft of trade secrets in which the perpetrator acts intending or knowing thatthe offense will benefit any foreign government, foreign instrumentality, orforeign agent. Industrial espionage (EI) is trade secret theft which is theacquisition of sensitive information that has independent economic value andthat the owner has taken reasonable measures to protect, regardless of theperpetrator’s country of origin or whether a foreign government agent can belinked to the theft. The acquisition must be intended for the economic benefitof someone other than the owner.’’



4David J. Lynch, ‘‘FBI Goes on Offensive Against China’s Tech Spies,’’;Steven Spoonamore, panelist, ‘‘Individual Responsibility to ProtectCorporate Assets,’’ conference on National Assets at Risk: Recognizingand Addressing the Threat, sponsored by the Office of the Director ofNational Intelligence, National Counterintelligence Executive, Washington,D.C., 29 October 2008.

5Speakers at conference, National Assets at Risk: Recognizing and Addressing theThreat, Seminar.

6David J. Lynch, ‘‘FBI Goes on Offensive Against China’s Tech Spies.’’

7Marion ‘‘Spike’’ Bowman, Deputy Director, Office of the NationalCounterintelligence Executive, Remarks, Institute of World Politics,Washington, D.C., 19 March 2008.

8Office of the Attorney General, U.S. Department of Justice, Annual Report toCongress on Foreign Economic Collection and Industrial Espionage, 2005,accessed 25 June 2008, p. 1.

9Ibid.

10Ibid.

11Ibid.

12Ibid.

13Office of the Attorney General, U.S. Department of Justice, 2002 Annual Reportto Congress on Foreign Economic Collection and Industrial Espionage, KeyFindings, footer, p. vii.

14White Paper, ‘‘Economic Espionage and Trade Secret Theft: Defending Againstthe Pickpockets of the New Millennium,’’ Dave Drab, Director, InformationContent Security Services, 2004, Xerox Corporation, August 2003, accessed24 July 2008 at http://www.xerox.com/downloads/wpaper/x/xgs_business_insight_economic_espionage.pdf

15Sam Vaknin, ‘‘The Industrious Spies: Industrial Espionage in the Digital Age,’’The American Chronicle, 22 February 2007, accessed 24 July 2008, http://www.americanchronicle.com/articles/21083

16Ibid.

17Ibid.

18John Stanton, ‘‘Industrial Espionage Becoming ‘Big Business,’’’ Business andTechnology Magazine, National Defense Industrial Association, July 2001,accessed on 24 July 2008 at http://www.nationaldefensemagazine.org/issues/2001/Jul/Industrial_Espionage.htm

19Office of the U.S. Attorney General, U.S. Department of Justice, Annual Reportto Congress on Foreign Economic Collection and Industrial Espionage, 1998, U.S.accessed 24 July 2008 at http://www.xerox.com/downloads/wpaper/x/xgs_business_insight_economic_espionage.pdf

20Remarks prepared for delivery, Assistant Director Cassandra Chandler,Federal Bureau of Investigation, J. Edgar Hoover Foundation, 23 April2004 , acce s s ed 6 Ju ly 2008 a t www. fb i . gov/pre s s r e l/ speeches/chandler042304.htm



21Wikipedia, ‘‘Economy of the United States,’’ accessed 30 October 2008, http://www.ask.com/we?q=Size+US+economy

22‘‘Economic Espionage: The Threat to U.S. Industry,’’ 29 April 1992, GeneralAccounting Office, Washington, D.C., Office of Special Investigations, DefenseTechnical Information Center, Accession Number: ADA290904, Handle=proxyUrl: http://handle.dtic.mil/100.2/ADA290904, 29 April 1992, accessed 6 July2008, http://stinet.dtic.mil/oai/oai?verb=getRecord&metadataPrefix=html&identifier=ADA290904

23Ibid.

24‘‘The New China Syndrome, The Cox Report Casts a Pall Over the Political andBusiness Climate,’’ Business Week Online, New Analysis and Commentary, 7 June1999, accessed 7 July 2008, http://www.businessweek.com/1999/99_23/b3632100.htm

25Statements on Introduced Bills and Joint Resolutions, ‘‘The Economic EspionageAct of 1996,’’ United States Senate, Senator Arlen Specter, Sen. Herbert H. Kohl,Global Security Organization, p. S742: 1 February 1996, accessed 8 July 2008,http://www.globalsecurity.org/intell/library/congress/1996_cr/s960201a

26Ibid.

27‘‘FY 2008=FY 2009 Budget Estimates,’’ Defense Security Service, U.S.Department of Defense, accessed 5 July 2008, p. 455.

28Ibid.

29Susan W. Brenner and Anthony C. Crescenzi, ‘‘State-sponsored Crime: TheFutility of the Economic Espionage Act,’’ Houston Journal of InternationalLaw, Winter 2006, accessed 24 June 2008 at http://entrepreneur.com/tradejournals/article/print/146272029.html

30National Security Strategy of the United States of America, National EconomicCouncil, Executive Office of the President, White House, March 2006, accessed15 July 2008 at http://www.whitehouse.gov/nsc/nss/2006/

31‘‘National Economic Council,’’ Wikipedia, accessed 15 July 2008 at http://en.wikipedia.org/wiki/National_Economic_Council

32National Economic Council, The White House, accessed 15 July 2008 at http://www.whitehouse.gov/nec/

33Ibid.

34Annual Threat Assessment of the Intelligence Community for the Senate SelectCommittee on Intelligence, unclassified Statement for the Record, Dennis C.Blair, Director of National Intelligence, 12 February 2009, before the SenateSelect Committee on Intelligence, accessed 2 October 2009, at http://intelligence.senate.gov/090212/blair.pdf

35Intellectual Property, Federal Enforcement Has Generally Increased, butAssessing Performance Could Strengthen Enforcement Efforts, The GeneralAccounting Office (GAO), Report to the Ranking Member, Subcommittee onOversight of Government Management, the Federal Workforce, and theDistrict of Columbia, Committee on Homeland Security and governmentAffairs, March 2008, October 2009, http://www.gao.gov/new.items/d08157.pdf



36Computer Security For Everyone, Chapter 18: ‘‘Threats=Attacks=Hackers &Crackers, ’ ’ Intel l igentedu.com accessed 3 October, 2009 at http://www.intell igentedu.com/computer_security_for_everyone/graphics/threats%20and%20attacks.gif

37David Kang and Adam Segal, ‘‘The Siren Song of Technonationalism,’’ FarEastern Economic Review, March 2006, accessed 4 October 2009 at http://www.feer.com/articles1/2006/0603/free/p005.html

38Ibid.

39Conference Proceedings, Perspectives on U.S. Competitiveness in Science andTechnology, Titus Galama and James Hosek, eds., prepared for the Office ofthe Secretary of Defense, approved for public release; distribution unlimited,http://www.rand.org/pubs/conf_proceedings/2007/RAND_CF235.pdf,pp. 40–41.

40Ibid.


42‘‘Former Chinese National Convicted for Committing Economic Espionage toBenefit China Navy Research Center in Beijing and for Violating the ArmsExport Control Act, First Conviction in the Country Involving Source CodeUnder the Arms Export Control Act; and Second Conviction in the CountryUnder the Economic Espionage Act of 1996,’’ FBI, accessed 8 July 2008,http://www.usdoj.gov/criminal/cybercrime/mengPlea.htm

43Richard A. Posner, Remaking Domestic Intelligence (Stanford, CA: Hoover Press,2005), p. 31.

44Ibid.

45Congressional Testimony, Robert S. Mueller, III, Director, Federal Bureau ofInvestigation, Statement Before the House Judiciary Committee, 23 April 2008,accessed 16 July 2008 at http://www.fbi.gov/congress/congress08/mueller042308.htm


47‘‘Perspectives on U.S. Competitiveness in Science and Technology,’’ 8 November2006, Meeting publication Rising Above the Gathering Storm: Energizing andEmploying America for a Brighter Economic Future, Titus Galama and JamesHosek eds., prepared for the Office of the Secretary of Defense, NationalDefense Research Institute, RAND Corporation, Washington, D.C., 2007,Preface, p. iii.

48Ibid.

49Ibid., p. 1.

50Norman R. Augustine, Retired Chairman and Chief Executive Officer, LockheedMartin Corporation, Chair, Committee on Prospering in the Global Economy ofthe 21st Century, Committee on Science, Engineering, and Public Policy, Divisionon Policy and Global Affairs, The National Academies: National Academy ofSciences; National Academy of Engineering, Institute of Medicine, Testimonybefore the Committee on Commerce, Science, and Transportation, U.S. Senate,15 March 2006, accessed 4 October 2009, at http://www7.nationalacademies.org/



ocga/testimony/Innovation_and_Competitiveness_Rising_Above_the_Gathering_Storm.asp

51Ibid. For 2001, the dollar value of high-technology imports was $561 billion; thevalue of high-technology exports was $511 billion. See National Science Board,2004. ‘‘Science and Engineering Indicators 2004’’ (NSB 04-01). Arlington,Virginia. National Science Foundation. Appendix Table 6-01. Page A6-5provides the export numbers for 1990 and 2001 and page A6-6 has the importnumber s . h t tp ://www7.na t iona l academie s .o rg/ocga/ te s t imony/Innovation_and_Competitiveness_Rising_Above_the_Gathering_Storm.asp

52Research and Development in the FY 2006 Budget, Selected Trends in NonDefense R&D, Figure 5, AAAS R&D Budget and Policy Program, AmericanAssociation for the Advancement of Science, 2006, accessed 24 July 2008 athttp://www.aaas.org/spp/rd/trnon06c.pdf

53Jonathan Adams, ‘‘Science, Wealth and the Scientific Investments of Nations,’’Conference Proceedings, Perspectives on U.S. Competitiveness in Science andTechnology, Meeting on Rising Above the Gathering Storm: Energizing andEmploying America for a Brighter Economic Future, p. 37.

54Annual Report to Congress on Foreign Economic Collection and IndustrialEspionage, 2005, p. 10.

55Ibid., p. 10.

56FBI Headline Archives, ‘‘Protecting Trade Secrets: FBI Cracks Down onEconomic Espionage,’’ accessed 8 July 2008 at http://www.fbi.gov/page2/oct03/secrets101003.htm

57M.E. (Spike) Bowman remarks, 19 March 2008.

58Sam Vaknin, ‘‘The Industrious Spies,’’ Global Politician, 6 June 2006, accessed 16July 2008 at http://www.globalpolitician.com/21824-military-intelligence

59American Society for Industrial Security, accessed 1 July 2008 at http://www.ctcintl.com/facts.shtml

60Remarks of Cassandra Chandler, Assistant Director, Federal Bureau ofInvestigation, 23 April 2004.

61FY 2008=FY 2009 Budget Estimates, Defense Security Service, Department ofDefense, p. 459.

62‘‘Spies on the Inside, Foreign Intrigue on American Soil,’’ Headline Archives,FBI, accessed at 8 July 2008 at http://www.fbi.gov

63National Foreign Intelligence Program, ANSIR Program, 22 October 2002,accessed 8 July 2008 at http://indianapolis.fbi.gov/pgnatforintell.htm



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