Scrap the industrial spy

THE FLIRTATION by Western intelligence agencies with the concept of a new era of industrial espionage to give their nations competitive edge should be nipped in the bud.

Reports that French agents have targeted dozens of US defence and aerospace companies, with the aim of extracting top-secret commercial information, seem hopelessly outdated. Will they succeed any better than Russian KGB agents who, at the height of the Cold War, attempted both to sabotage and steal vital Western technology, and with what practical result? When the Iron Curtain came down, it became clear that the former Soviet Union lived not on the cutting edge but in a technological time warp, despite its efforts to overtake or stay even with the West.

The entire episode would be easy to dismiss were it not for the growing defensiveness of some powerful corporations and similar musings in other big intelligence establishments, notably the US Central Intelligence Agency.

The CIA recently took the unusual step of giving private briefings to companies that, according to a leaked French intelligence memo, had been targeted for espionage. According to Defense Week, an industry publication, 49 US companies and 24 top American financial institutions were picked out as targets for industrial secrets and technologies in which French companies were interested.

The information so enraged C Michael Armstrong, chairman of Hughes Aircraft, that he cancelled the company's participation in the Paris Air Show. The Washington Post reported that Mr Armstrong had doubts about the trip based on costs but that the CIA information was the last straw.

Apparently, Hughes learned that the French memo specifically mentioned its HS601 communications satellite, which recently lost in a competition with French firms to supply dollars 285m ( pounds 181m) in communications spacecraft to Arab countries. These are not the sort of practices that lead to harmonious trade relationships.

The CIA is also debating whether to escalate industrial intelligence on behalf of American companies operating in a global environment in which 'economic security' is now a big concern. James Woolsey, the new CIA director, said in his confirmation hearing that proposals to gather foreign commercial secrets were 'the hottest current topics in intelligence policy'. He testified to Congress that he is reviewing the idea but finds it fraught with difficult foreign policy and legal implications. For example, is it really fair to share foreign commercial secrets with a select few firms while excluding others?

Robert Gates, Mr Woolsey's predecessor, also considered the idea but rejected it. CIA officials hasten to add that there would be nothing new in the sharing of information with private companies. This has always been US practice when government uncovers attempts to compromise their security.

What is at issue here is the question of tone and scale. Does it really make sense for intelligence agencies to add to growing national tensions by engaging in industrial espionage? The spectre of scores of under-employed agents laying siege to the research and development facilities of the world's corporations is too reminiscent of James Bond to be taken seriously. But it is not beyond reach, as the French and US deliberations point out. Michael Crichton's new best-seller, The Rising Sun, which portrays sinister Japanese intent to undermine American industrial might, is yet another example of growing economic insecurity that intelligence agencies are trying to exploit.

In any case, the idea of industrial espionage to help national companies is increasingly obsolete in a world of global corporations that are entering into cross-border alliances in order to exploit market opportunities.

For example, the world's largest telecommunications firms have formed an alliance to provide a global network of fibre-optic submarine cables; General Motors and Toyota are discussing a venture in which the Japanese company would build light trucks in GM plants; and the aircraft giant Boeing, the Airbus consortium, Mitsubishi, Fuji and others are discussing plans for joint development of a super jumbo jet.

Cyrus Freidheim, vice-chairman of Booz, Allen & Hamilton, the consultancy firm, has gone a step further in predicting that the concept of global corporations is already obsolete. The new trend, he says, is towards 'relation-enterprises'. These are comprised of big companies that act as a single organisation in the pursuit of common commercial goals.

These mega-cartels will be driven by the need to go beyond the technological reach of any one firm, and by the political necessity of having more than one domestic base. Let us not raise new curtains of suspicion and defensive security until we see how these new ventures develop.