Friction over 'friendly' spying

With communist threat over, trade secrets increasingly become a focus

You are not supposed to spy on your friends. As details emerge of US intelligence agencies eavesdropping on the e-mail, faxes, and phone calls of European businesses, politicians here are calling for better ways to safeguard industrial secrets.

The most contentious source of trenchcoat contretemps among transatlantic allies: Internet encryption.

The United States is trying to persuade the European Union to allow only Internet codes for which law enforcement and national security agencies would have a "key." That would help to combat terrorists and drug smugglers. But it would also give US officials potential access to foreign companies' commercial secrets.

"Unless we have guarantees of safeguards, controls over who listens to whom and what for, Europe is not going to leave the key under the doormat so that the Americans can walk in and steal the family silver," says Glyn Ford, a member of the European parliament.

But with no communist threat to occupy them, Western intelligence agencies in the 1990s appear to be devoting more of their time and resources to industrial espionage against each other. And, says Michael Hershman, chairman of DSFX, the world's largest private investigative agency, "Industrial espionage is going up steadily" because of "globalization and increased competition."

Before the end of the year, the European Parliament is due to discuss a series of reports detailing the manner in which the US National Security Agency (NSA) intercepts international electronic communications.

The operation, which uses an international network of listening posts and supercomputers known as "Echelon," was described last year as "an intolerable attack against individual liberties, competition, and the security of states" by Martin Bangemann, outgoing European commissioner for industry.

The latest report, issued earlier this summer, described how the top-secret system scoops up electronic signals from satellites, undersea cables, and microwave relay stations all over the world and scans them for key words of interest to participating intelligence agencies. Echelon includes Britain, Canada, Australia, and New Zealand, as well as the US, in a grouping called UKUSA.

"There is wide-ranging evidence" the report found, that Washington is "routinely using communications intelligence to provide commercial advantages to companies and trade."

The report cited a number of examples, including the NSA's interception of phone calls in 1994 between the French firm Thomson-CSF and Brazilian officials concerning a $1.4 billion satellite surveillance system for the Amazon jungle. The eavesdropping allegedly revealed that the company was bribing Brazilian officials. Washington informed the Brazilian government, and Lexington, Mass.-based Raytheon Corp. won the contract instead.

The US government is also said to have used communications intelligence to ferret out Tokyo's positions during past trade talks, and to help Seattle-based Boeing beat out the European Airbus consortium in a 1994 battle to sell $6 billion worth of airplanes to Saudi Arabia.

"There are serious allegations in the report ... that need investigating," says Mr. Ford.

The NSA refuses to comment on the claims. "We will not confirm or deny the existence of any system called Echelon," says NSA spokeswoman Judy Emmel. The Central Intelligence Agency (CIA) denies that it engages in industrial espionage. "We are not in the business of spying for private firms," said then-CIA director James Woolsey in January 1995. "We assess international economic trends ... and support trade negotiations."

That is presumably what CIA agents were doing in Paris a month later, when they were expelled by the French government for spying. The agents had been seeking information on the French position at international telecommunications negotiations.

They also illustrated one of the major drawbacks to economic espionage. "The main problem is you don't want to get caught with accusations of espionage against your friends," says Adm. Stansfield Turner, CIA chief under President Jimmy Carter.

Admiral Turner launched a program to hand over to the Commerce Department such CIA intelligence as might be useful to US firms bidding for international contracts - such as the value of opposing bids - but his successors have insisted the agency now gathers only general economic information with which to brief US policymakers.

Intelligence experts say that all major governments engage in economic espionage of one sort or another. Some even boast about it: In his 1993 memoirs, a former French spy chief claimed his agents discovered the US was about to devalue the dollar in 1971, allowing Paris to make a large profit by currency speculation.

Certainly, Washington is worried by the threat of foreign industrial spies.

In 1996, President Clinton signed the Economic Espionage Act, the first nationwide US statute prohibiting the theft of trade secrets. Eleven cases have been brought under the act so far, and a Taiwanese businessman has been convicted. The Justice Department is preparing other cases, some of them against foreign governments, according to knowledgeable sources.

The Clinton administration has attached especial importance to economic intelligence, setting up the National Economic Council (NEC) in parallel to the National Security Council. The NEC routinely seeks information from the NSA and the CIA, officials say. And the NSA, as the biggest and wealthiest communications interception agency in the world, is best placed to trawl electronic communications and use what comes up for US commercial advantage.

The European Parliament reports have sparked Continent-wide anger. Questions have been raised by parliamentarians in Denmark, Germany, Norway, and Holland, while the Swedish government has launched an investigation into whether Swedish companies have been victims of covert NSA surveillance.

In Italy, a Rome deputy district attorney has opened an inquiry to determine whether NSA activities violate Italian privacy law.

More important, perhaps, the reports encouraged France and Germany to lift their restrictions on the use and sale of strong encryption software, which Washington has been trying to limit.

Arguing that strong encryption will allow international criminals to conduct electronic business unhindered, Washington has long been seeking to persuade European governments to regulate the use of such software.

Specifically, the US has demanded that Europe should adopt a "key escrow" system, whereby a third party would have a "spare key" to all code systems. The recent revelations of the NSA's activities have only deepened European suspicions that this demand has more to do with US intelligence needs than law enforcement.

"The reports provide another argument to confirm our position that high level encryption should be freely allowed to protect perfectly legal confidential messages," says Joachim Kubosch, spokesman for Commissioner Bangemann.

"I am in favor of using all these technologies to catch people like the Oklahoma bombers," adds Ford. "But we cannot allow the United States to use them to steal tens of thousands of jobs from Europeans."

(c) Copyright 1999. The Christian Science Publishing Society