Analysis: Should government spies target foreign firms?

CyberespionageBy JOSEPH FITSANAKIS |
Last month, the government of the United States indicted five officers of the Chinese People’s Liberation Army with conspiracy to commit computer fraud, economic espionage, and theft of trade secrets, among other charges. In indicting the five PLA officers, the US Department of Justice went to great pains to ensure that it did not accuse the suspects of engaging in cyberespionage in defense of China’s national security. What sparked the indictments was that the accused hackers allegedly employed intelligence resources belonging to the Chinese state in order to give a competitive advantage to Chinese companies vying for international contracts against American firms. In the words of US Attorney General Eric Holder, the operational difference between American and Chinese cyberespionage, as revealed in the case against the five PLA officers, is that “we do not collect intelligence to provide a competitive advantage to US companies, or US commercial sectors”, whereas China engages in the practice “for no reason other than to advantage state-owned companies and other interests in China”. I recently authored a working paper that was published by the Cyberdefense and Cybersecurity Chair of France’s Ecole Spéciale Militaire de Saint-Cyr, in which I argued that the American distinction between public and private spheres of economic activity is not shared by PLA. The Chinese see both state and corporate cyberespionage targets as fair game and as an essential means of competing globally with the United States and other adversaries. In the paper, I argue that Beijing sees the demarcation between state and private economic activity as a conceptual model deliberately devised by the US to disadvantage China’s intelligence-collection ability.

Take, for instance, the Chinese defense sector. Although China’s private sector accounts for the vast majority of its gross domestic product, the country’s economic life remains structured around approximately 200 large state-owned companies, which dominate areas such as heavy industry, including weapons-design and production. By contrast, the American defense industry is comprised of commercial entities that are simultaneously part of the national defense apparatus. In other words, America’s national-defense infrastructure is manufactured and maintained by private enterprise operating in the service of national security. In May 2014, while announcing the indictments against the PLA officers, Attorney General Holder reproached Beijing for deploying “military or intelligence resources and tools against […] American executive[s] or corporation[s] to obtain trade secrets or sensitive business information for the benefit of its state-owned companies”. But this distinction appears nonsensical when applied within the real-life context of the Chinese and American defense industries. If observed, Attorney General Holden’s quasi-legal distinction between state-owned and private-sector cyberespionage targets would forbid China from spying on American defense contractors, since they are technically privately owned, as well as from sharing its intelligence product with its state-owned defense manufacturers. But it would not forbid American intelligence agencies from spying on Chinese state-owned defense manufacturers for the benefit of the US core defense industry.

I conclude by arguing that that American conceptions of intelligence-targeting in cyber operations are arguably influenced by the country’s cultural practices, which tend to vividly distinguish between state and private economic activity. In contrast, Chinese macroeconomic attitudes can be said to favor the supremacy of state authority and national security over the requirements of private industry. Washington’s vocal efforts to place clear distinctions between the two should be applauded by all those who favor legal standards in international relations. But the expanding privatization of the American state apparatus does not mean that Washington can shield itself from foreign cyberespionage. It simply entails that the privatized segments of America’s national-security structure will be seen as fair game by international spies.

3 Responses to Analysis: Should government spies target foreign firms?

  1. To draw any quasi-legal distinction is crazy. A person spying is a spy even when dressed as a lollipop lady.

  2. Industrial espionage arises when the benefits of stealing intellectual property outweigh the costs of undermining the purposes of state sanctioned IP systems. Perhaps the US should also re-examine whether it’s IP laws could be modified so as to give countries like China a greater incentive to respect the system?

  3. Pete says:

    And US lawmen shouldn’t suffer amnesia about America’s economic espionage indiscretions. – “NSA accused of spying on Brazilian oil company Petrobras” 10 September 2013, ,

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