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ECONOMIC
WARFARE


The FBI reports that since 1992, it has identified spies from 23 different countries working in the U.S. Their mission, to make off with American research, advanced technologies, and corporate strategies. Foreign companies, and even governments plant agents inside U.S. companies and universities. How effective are these economic spies? A 1995 survey by the American Society for Industrial Security estimating that each year U.S. companies lose $5.1 billion worth of intellectual property and costs the US economy $24 billion. James Chandler, president of the National Intellectual Property Law Institute has directed a government study estimating that so far this decade economic espionage has cost America millions of jobs.


John Fialka, a reporter for the Wall Street Journal, is the author of War By Other Means.

MR. FIALKA: "When it comes to stealing ideas, you're basically talking about the shape of our economy 20 years from now. And what I say in my book, War By Other Means, is that there's no guarantee that basic industries that we assume will stay here, like aerospace, will be here 20 or 30 years from now, once Japan and especially China begins cranking up with this enormous base of talent at low cost people."

MR. FIALKA: "During the Cold War, we mortgaged our children and our grand-children to build up this huge pile of science and technological learning, and it would be nice if we had something left after all this to give them."


ECONOMIC ESPIONAGE

"The object of economic espionage is not simply to gain some secret advantage over a competitor. Steps must then be taken to slow the competitor's attempt at recovery," says Fialka.

These thefts are perpetrated not just by America's adversaries, but by our purported pals and allies as well.

The worst offender is China.
The GAO says Israel "conducts the most aggressive espionage operation against the United States of any U.S. ally."

In 1988, the FBI accused a former Amgen Inc. researcher of peddling secret documents concerning the wonder drug Epogen. In 1989, U.S. agents tracked down three moles working at an IBM affiliate in France after they supposedly botched a sale of confidential documents. In 1990, British authorities apprehended a Swiss spook who was allegedly attempting to buy information on Exxon's oil-drilling-equipment purchases.

Chapter four ("A Yen to Know") recounts the effort by Japanese corporations to steal U.S. research into tilt-wing aircraft that represented four decades' worth of Bell Helicopter experimentation, $3.5 billion of U.S. government investment, and $17.8 billion in potential U.S. exports. The spy technique employed was "tunneling," wherein company A, seeking to avoid the cost of research, sets up an anonymous-looking subsidiary and hires away company B's disgruntled (but knowledgeable) employees.


RECOMMENDATIONS

The FBI is strectched thin. Executives must balance more carefully the costs and benefits of hiring foreign nationals and disclosing data. They should go on the offensive and, like the Japanese, spend more energy studying markets and competitors. And they must sensitize workers to the possible consequences of leaking information--the loss of jobs if the employer loses markets. The No.1 goal is clear: Make the work of all economic spies as tough as possible.

There are several ways the U.S. can fight back. First, research ideas at universities can be protected, if we scale back on the number of visas granted to foreign students. Second, its time to amend the Freedom of Information Act created to allow American citizens to find out what their own government is doing. The act has now become a tool for foreign countries operating under the cover of U.S. law firms to pry open the files of industrial secrets. Third, Stop covering up for countries that spy - name them. Fourth, make offenders pay the price - seizure of assets, sanctions against their products and prison for their agents. Fifth, stop sending offenders foreign aid. It makes no sense to support countries that are destroying US.

The ultimate protection against spies, Fialka argues, is attitudinal: Americans need to drop the smug assumption that top technology always originates here. Like the French, Koreans, Russians, Japanese, Israelis, and others, we need to institutionalize curiosity, keeping tabs on the doings of our peers abroad, scouring the world for the latest and best technology. It's a case of the best defense being a good offense.