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Mr. COHEN. Mr. President, when Russian President Boris Yeltsin addressed a joint session of Congress last week, embracing the principles of democracy and free markets, the final icecaps of the cold war melted, releasing in all of us a sense of joy and exhilaration.

But even as we welcome these dramatic improvements, let us not be lulled into complacency. Our bipolar world has fragmented into a kaleidoscope of parochial interests, alliances, and threats that can change rapidly and unpredictably. Our cold war

scope--formerly fixed on one target--is not going to serve us in today's complex geopolitical landscape.

In the economic sphere especially, the competition is fierce and the challenges severe. Our competitors--even our closest allies--do not always play by the rules. Indicative of this is the alarming rate at which foreign governments are spying on U.S. businesses and economic interests. According to the Director of Central Intelligence, Bob Gates, at least 20 nations from Europe, Asia, the Middle East, and Latin America are involved in intelligence activities that are detrimental to our economic interests.

Some of the specific cases are shocking. According to a recent New York Times article by Peter Schweizer, `between 1987 and 1989, French intelligence planted moles in several U.S. companies, including IBM. In the fall of 1991, a French intelligence team attempted to steal `stealth' technology from Lockheed.' Other accounts report that French intelligence units conduct 10 to 15 break-ins every day at large hotels in Paris to copy documents that belong to businessmen, journalists, and diplomats. According to other accounts, the French have been hiding listening devices on Air France flights in order to pick up useful economic information from business travelers.

The French are not alone among our friends who spy on us. Two months ago, rocket scientist Ronald Hoffman began serving a prison sentence for selling strategic defense initiative and rocketry technology for more than $700,000 to four Japanese companies. According to Schweizer, these four companies have vowed to capture 20 percent of the aerospace market by the year 2000.

And in 1991, IBM lost several important European bids after company officials discovered that German intelligence had been eavesdropping on its telecommunications and passing stolen information on to German companies.

These crimes by our friends not only betray our friendship; they cost America jobs. According to IBM Vice President Marshall Phelps, IBM has suffered losses in the billions as a result of espionage being carried out against the company. Foreign intelligence agents are draining our country of its ideas like sap from a tree. For a country that professes to be a fountainhead of scientific knowledge, nothing could be more damaging.

Only recently has our Government begun to look beyond its cold war blinders to respond to this growing threat. We have taken steps to improve our defenses against economic espionage, and the Federal Bureau of Investigation and Central Intelligence Agency deserve credit for stepping up their efforts in this area.

But in many respects we still seem to look out at the world through a diplomatic greenhouse, afraid to lodge criticism at our allies for fear of a return volley that might shatter one of the delicate panes.

There is something to be said for diplomatic cordiality, but we must never be afraid to take a firm stand when our cause is just. We did not win the cold war by appeasing a bankrupt ideology, and we will not win on the economic battlefield by ignoring friends engaging in theft. We must not let our reluctance to offend outweigh our responsibility to defend our Nation's vital interests.

I hope my colleagues will join me in examining this issue in more detail in the months ahead. While we can improve our defenses, it is clear that foreign countries will not be deterred from engaging in economic espionage as long as the rewards outweigh the punishment. It is my hope that the Intelligence Committee and other committees will hold hearings, consult Government and business leaders, and introduce legislation that will enhance our tools to attack this problem head on so that we may protect our Nation's greatest resource--the ingenuity and intellectual resources of the American people.

Mr. President, I ask unanimous consent that I be allowed to insert two articles in the Record.

There being no objection, the material was ordered to be printed in the Record, as follows:

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From the New York Times, June 23, 1992


Our Thieving Allies


McLean, VA--If most Americans thought the end of the cold war meant an end to spying, they should think again. Industrial espionage against the U.S. by its friends and allies is on the rise.

John Davitt, the former director of Internal security at the Justice Department, says our allies are increasingly using spy methods `every bit as sophisticated as those of the K.G.B. in order to gain access to American high-tech secrets.'

Among the countries most often cited by U.S. intelligence agencies as seeking technological and financial secrets are France, Germany, Japan, South Korea and Israel.

Pierre Marion, the former director of French intelligence, told me this year that in 1981--at the request of President Franc˙AE9ois Mitterrand--he established a branch to spy on U.S. high-technology companies. The branch still exists.

In April, Ronald Hoffman, a rocket scientist in California, was sent to prison for selling Strategic Defense Initiative and rocketry technology to four Japanese companies for more than $700,000 between 1986 and 1990. The four companies, Mitsubishi, Nissan, Ishiawaji-Harima and Toshiba, have pledged to capture 20 percent of the aerospace market by the year 2000.

During the summer of 1991, I.B.M. accused the German intelligence service of eavesdropping on its telecommunications and passing stolen information to German companies. I.B.M. lost several important bids in Europe around this time, possibly because of inside knowledge obtained by its German competitors.

Last year, an Illinois-based aeronautics company, Recon Optical, accused the Israeli Air Force of espionage. An independent arbitration board in New York sided with Recon, and the Israeli Government quietly agreed to pay the company for damages.

Between 1987 and 1989, French intelligence planted moles in several U.S. companies, including I.B.M. In the fall of 1991, a French intelligence team attempted to steal `stealth' technology from Lockheed. Only the Federal Bureau of Investigation's persistence ended these operations.

U.S. trade negotiators complain that our trading partners are increasingly targeting them for `friendly' espionage in the hopes of getting a peek at the U.S. negotiating position. One former negotiator claims he repeatedly found electronic bugs in his room whenever he visited Toyko.

During the cold war, the U.S. was reluctant to discuss friendly spies. `We tended to look the other way,' says Herb Meyer, a former special assistant to the Director of Central Intelligence, `they were taking advantage of us while we felt we had a larger interest.' But that attitude is changing.

The F.B.I.'s cold war `country criteria list' of enemy countries whose personnel in the U.S. needed close scrutiny was recently replaced by the `New Security Threat List' that encourages bureau agents to go after any intelligence agent, foe or friend, who conducts espionage operations in the U.S. or against U.S. interests overseas.

Although the C.I.A. Director, Robert Gates, has pledged that the U.S. `will not get into the industrial espionage business,' his Science and Technology Advisory Panel is quietly discussing the topic. However, Federal economic espionage is unlikely to happen. Because American business culture is dead set against governmental industrial planning, the C.I.A. would not be free to pass any secrets it might obtain to one American company at the expense of its domestic competitors.

The most sensible recourse for the U.S. is to make economic espionage costly to its practitioners. Currently, they face no legal penalties. If a foreign company or country gets caught, it should face stiff, mandatory trade sanctions. As political allies are increasingly viewed as economic rivals, the U.S. must come to grips with this facet of the post-cold-war world.



From Time magazine, May 28, 1990


When `Friends' Become Moles


The dangers of Soviet military espionage may be receding, but U.S. security officials are awakening to a spy threat from a different quarter: America's allies. According to U.S. officials, several foreign governments are employing their spy networks to purloin business secrets and give them to private industry. In a case brought to light last week in the French newsmagazine L'Express, U.S. agents found evidence late last year that the French intelligence service Direction Generale de la Securite Exterieure had recruited spies in the European branches of IBM, Texas Instruments and other U.S. electronics companies. American officials say DGSE was passing along secrets involving research and marketing to Compagnie des Machines Bull, the struggling computer maker largely owned by the French government.

A joint team of FBI and CIA officials journeyed to Paris to inform the French government that the scheme had been uncovered, and the Gallic moles were promptly fired from the U.S. companies. Bull, which is competing desperately with American rivals for market share in Europe, denies any relationship with DGSE. Last year the company made a legitimate acquisition of U.S. technology when it agreed to purchase Zenith's computer division for $496 million.

U.S. officials say the spy ring was part of a major espionage program run against foreign business executives since the late 1960s by Service 7 of French intelligence. Besides infiltrating American companies, the operation routinely intercepts electronic messages sent by foreign firms. `There's no question that they have been spying on IBM's transatlantic communications and handing the information to Bull for years,' charges Robert Courtney, a former IBM security official who advises companies on counterespionage techniques.

Service 7 also conducts an estimated ten to 15 break-ins every day at large hotels in Paris to copy documents left in the rooms by visiting businessmen, journalists and diplomats. These `bag operations' first came to the attention of the U.S. Government in the mid-1980s. One U.S. executive told officials about a trip to Paris during which he had made handwritten notes in the margin of one of his memos. While negotiating a deal with a French businessman, he noticed that the Frenchman had a photocopy of the memo, handwritten notes and all. Asked how he got it, the Parisian sheepishly admitted that a French government official had given it to him. Because of such incidents, U.S. officials began a quiet effort to warn American companies about the need to take special precautions when operating in France.

While France can be blatant, it is by no means unique. `A number of nations friendly to the U.S. have engaged in industrial espionage, collecting information with their intelligence services to support private industry,' says Oliver Revell, the FBI's associate deputy director in charge of investigations. Those countries include Britain, West Germany, the Netherlands and Belgium, according to Courtney. The consultant has developed a few tricks for gauging whether foreign spies are eavesdropping on his corporate clients. In one scheme, he instructs his client to transmit a fake cable informing its European office of a price increase. If the client's competitor in that country boosts its price to the level mentioned in the cable, the jig is up. `You just spoof 'em,' Courtney says.

Most U.S. corporations could protect their sensitive communications simply by sending them in code. But many companies are reluctant to do this, even though the cost and inconvenience might be minor. One reason may be that the effects of spying are largely invisible. All the company sees is that it has failed to win a contract or two. Meanwhile, its competitor may have clandestinely learned all about its marketing plans, its negotiating strategies and its manufacturing secrets. `American businesses are not really up against some little competitor,' observes Noel Machette, a former National Security Agency official who heads a private security firm near Washington. `They're up against the whole intelligence apparatus of other countries. And they're getting their clocks cleaned.'

As U.S. national-security planners increasingly focus on American competitiveness, many of them fear that U.S. corporations are operating at a severe disadvantage. America's tradition of keeping Government and business separate tends to minimize opportunities for the kind of intelligence sharing that often occurs in Europe. `I made a big effort to get the intelligence community to support U.S. businesses,' recalls Admiral Stansfield Turner, who headed the CIA in the late 1970s. `I was told by CIA professionals that this was not national security.' Moreover, it would be hard for the Government to provide information to one U.S. firm and not to another. Yet if sensitive intelligence is shared too widely, it cannot be protected.

One thing the U.S. Government can do is make sure business leaders understand the threat. When the late Walter Deeley was a deputy director at NSA in the early 1980s, he began a hush-hush program in which executives were given clearances and told when foreign intelligence agencies were stealing their secrets. `He considered it a real crusade,' a former intelligence official says. `If American business leaders could see some of these intelligence reports, I think they would go bananas and put a lot more effort into protecting their communications.'

`It may not be possible to level the playing field [with foreign companies] by sharing intelligence directly' with their U.S. rivals, observes deputy White House science adviser Michelle Van Cleave. `But it should be possible to button up our secrets.' That argues for much more use of secret-keeping techniques and far less naivete on the part of American business as it enters the spy-vs.-spy era of the 1990s.

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Mr. COHEN. I suggest the absence of a quorum, Mr. President.

The PRESIDING OFFICER. The clerk will call the roll.

The assistant legislative clerk proceeded to call the roll.

Mr. DODD. Mr. President, I ask unanimous consent that the order for the quorum call be rescinded.

The PRESIDING OFFICER (Mr. Robb). Without objection, it is so ordered.