The CIA should stay out of economic spying.

• Author: Kober, Stanley

With the end of the Cold War, the U.S. national security community has been re-examining its future. Casting about for a new threat to replace the Soviet Union, it has seized upon the idea that economic competitors could pose a potential danger. "The national security review highlighted the dramatic[ally] increased importance of international economic affairs as an intelligence issue," Robert Gates, director of the Central Intelligence Agency, stated in a 1992 speech to the Economic Club of Detroit. "Nearly 40% of the new requirements are economic in nature. The most senior policymakers of the government clearly see that many of the most important challenges and opportunities through and beyond the end of this decade are in the international economic arena." In an earlier interview with Time, Gates had insisted that, although the CIA would "not do commercial spying," the agency could "be helpful on economic intelligence, by identifying foreign governments that are involved in unfair practices," including cases "where they are colluding with businesses in their country to the disadvantage of the U.S."

Gates is not the only one to flirt with the idea of economic intelligence as the major CIA mission in the post-cold War era. In the summer of 1992, the Senate Select Intelligence Committee met with a group of top American corporate executives and intelligence experts to discuss whether US. intelligence agencies should share information with American businesses to help give them an advantage in an increasingly competitive global market. Although opinion was divided on the wisdom of such a strategy - and the lengths to which the CIA should go to obtain and disseminate information if it did undertake that mission - there was considerable enthusiasm for general economic espionage. Most participants embraced the logic expressed by former CIA director Stansfield Turner, who told the committee that economics "is a primary area of intelligence in the 1990s." He asked rhetorically, "If we spy for military security, why shouldn't we spy for economic security?" Sen. John Danforth (R.-Mo.) echoed those sentiments, maintaining that "Economic intelligence is going to be increasingly important to our country."

The premise of Turner, Danforth, and others appears to be that international economic competition inherently poses a national security threat. Such an assumption betrays a fundamental misunderstanding of economics and will distract U.S. intelligence agencies from their proper function - gathering information about genuine security threats. It also could lead to an unhealthy and potentially corrupt liaison between those agencies and American corporations. Finally, it has the potential to poison relations with other democratic capitalist countries.

To be sure, the people entrusted with national security must be alert to any potential danger, and the idea of economic vulnerability is not new. Even Adam Smith, in his famous argument for free trade, acknowledged that "it will generally be advantageous to lay some burden upon foreign, for the encouragement of domestic, industry ... when some particular sort of industry is necessary for the defense of the country." Given Britain's dependence on the sea for its security, Smith thought measures to protect its seagoing capability unavoidable despite the costs they imposed. "Defense," he insisted, "is of much more importance than opulence."

Smith's arguments are heard today. The oil shocks of the 1970s and the Persian Gulf War have convinced many Americans that national security is endangered by dependence on foreign sources of energy. Moreover, the widely publicized decline in American competitiveness has raised questions about the U.S.'s ability to provide for its citizens' security in the future. The Defense Department, for example, annually produces a list of critical technologies deemed "the most essential to develop in order to ensure the long-term qualitative superiority of U.S. weapon systems." The clear implication is that the U.S. can not rely on foreign suppliers for any of those technologies. Therefore, competition, even by firms in friendly democratic capitalist countries, is regarded as a threat to national security, especially if that competition is considered unfair or predatory.

Not only are such concerns exaggerated, the timing is suspicious. With the end of the Cold War, the American people were looking forward to a peace dividend as a result of a reduction in the budgets of the military establishment and the intelligence bureaucracy. Now they are told that national security is jeopardized by nations we thought were our friends and allies. Moreover, the Bush Administration's methodology was suspect. According to Gates, it asked "some 20 policy agencies and departments to identify their intelligence needs to the year 2005." The question that should have been posed was not what kind of intelligence government agencies thought was desirable, but what was so important that they would be willing to support it financially from their existing budgets. It is, after all, not surprising that consumers will not reduce their consumption of a product if they do not have to pay for it. Similarly, it is not surprising that the intelligence community, having lost its most important mission, should be seeking others that would allow it to maintain its position.

Nevertheless, the concerns expressed by Gates and the proponents of economic espionage can not be dismissed simply. Two questions, in particular, need to be addressed. First, does the U.S. face an economic threat? Second, is the CIA the proper institution for gathering and analyzing information on foreign economic matters, or should it focus on other subjects?

Are economic threats real?

At the beginning of the post-World War II era, the U.S. was the greatest power in the world. Militarily, the American navy dominated the seas and the army occupied the territories of its recent enemies. Perhaps even more important, only the U.S. possessed the atomic bomb and the capability to deliver it against any potential adversary. Its territory undamaged by World War II, the U.S. became the arsenal of democracy. Its economic advantages were equally impressive. At the end of the war, more than half the total manufacturing production of the world took place within the U.S.

That extraordinary supremacy was unnatural, a product of the war's devastation of ally and adversary alike. As the other countries rebuilt, American economic dominance declined, even as the nation became steadily wealthier. The restoration of the economic vibrancy of the other industrialized nations contributed to the growing quality of life in the U.S., as Americans were provided with new, high-quality products. Some of those displaced domestically manufactured goods, thereby putting Americans employed in those industrial sectors out of work. By the 1980s, the U.S. found itself running enormous trade deficits year after year. Some Americans, unaccustomed to such a situation, found it threatening and reacted accordingly.

"America's military allies are economic adversaries," wrote Selig Harrison, a senior associate at the Carnegie Endowment for International Peace, and Clyde Prestowitz...