Why Pinstripes Don't Suit The Cloak And Dagger Crowd

Intelligence sources allege that the French government has targeted a "hit list" of U.S. aerospace companies for industrial espionage. Capitol Hill lawmakers scream in outrage. And a senior American intelligence official responds by promising countermeasures, vowing, "no more Mr. Nice Guy." What's going on? To some, it's just another instance of "friendly spying." But to many business executives and political leaders, the April episode underscores the need for the Central Intelligence Agency to take on a controversial new mission: helping to keep Corporate America competitive.

It's a tantalizing idea. And some supporters of the intelligence community see it as a way to shield the CIA and the rest of the $30 billion-a-year U.S. spy establishment from post-cold war budget cuts. But before U.S. spies shed their trenchcoats for pinstripes, policymakers should consider this: There are serious limits to what the CIA and the rest of the cloak-and-dagger crowd can do for American business. Using the CIA to analyze economic data for use by government officials is laudable. And it's appropriate for the CIA to thwart attempts by foreign governments to steal U.S trade secrets. But asking the agency to ferret out foreign business secrets is neither realistic nor advisable.

BARRIERS. The CIA has been uncovering foreign industrial-espionage schemes for decades. Unfortunately, it hasn't often tipped off the target companies. There are reasons it has not. For one thing, there's the fear of jeopardizing intelligence sources. Custom and antitrust law often make it taboo for the government and companies to cooperate. And in an industry with many players, it's difficult for the CIA to decide who should get the information it uncovers.

These barriers aren't insurmountable. The Administration's embrace of industrial policy is making it easier for companies and the government to cooperate. And the critical industries most often targeted by foreign spy services tend to have few players. The agency passed on its tip about French efforts to tap into U.S. aerospace secrets, for instance, because the players were few and the information was fairly straightforward.

The White House could help combat industrial espionage by foreign agents by punishing the worst offenders. "If you really want to hurt the French, you limit their access to technology in general and counterattack," says Michael Sekora, president of Technology Strategy Planning Inc. and a former Defense Intelligence Agency official. "You sever some U.S. research agreements with them and deny access to U.S. labs."

But the CIA shouldn't be in the business of spying on behalf of Corporate America. For one thing, there's the matter of culture. American intelligence agents, unlike their French or Israeli counterparts, simply have no tradition of spying for commercial advantage. What's more, industrial espionage isn't only a matter of finding out all there is to know about Japan's NEC Corp. or France's Alcatel. You have to know what you're looking for. Despite the new American enthusiasm for business-government partnerships, the U.S. government doesn't have a strategy to pinpoint key foreign technology.

Besides, it's not clear how helpful it would be to massively expand the CIA's ties to business. The agency has been sifting economic data for years--and its track record is mixed. In the 1980s, for instance, the agency was way ahead of the Treasury Dept. in predicting potential defaults of Third World debt, says a former Reagan Administration official. And it has done a good job of tracking the semiconductor, optoelectronics, and machine-tool industries of foreign competitors. "If you wanted to know what was happening in the electronics industry in Japan, CIA was the agency to go to," says Clyde V. Prestowitz Jr., a former top Commerce Dept. official. He also found agency information useful during trade talks. "They tended to have pretty good knowledge of what the other side's negotiating position was," says Prestowitz.

TARGETS. But the CIA has also missed some big targets. For years, its legions of analysts woefully overestimated the Soviet Union's economic might. And it wasn't much help to U.S. prosecutors investigating the billions in allegedly fraudulent bank loans to Iraq made by the Atlanta branch of Italy's Banca Nazionale del Lavoro.

In the end, any effort to put the CIA to work in an offensive way for American business would face one formidable hurdle: For all the clamor from some quarters on Capitol Hill about getting the CIA to spy for Corporate America, many legislators oppose the idea. And given the openness of the U.S. political system, it's a safe bet that any attempt at industrial spying wouldn't stay secret for long. If the U.S. is to blast its allies for their corporate-espionage forays, it will be devilishly hard to justify its own.

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