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The U.S.-EU Spying Fiasco: Why Commercial Espionage is a Bad Idea for the United States

by Edward Alden
July 3, 2013

Security cameras near the main entrance of the European Union Council building in Brussels (Francois Lenoir/Courtesy Reuters) Security cameras near the main entrance of the European Union Council building in Brussels (Francois Lenoir/Courtesy Reuters)


When I was a young reporter in 1993 covering the final days of the Uruguay Round world trade negotiations in Geneva, I got a strange phone call in my hotel room from one of the lobbyists for a big U.S. engine manufacturer. The question of whether government subsidies for aircraft engines would be restricted under the new World Trade Organization rules was one of the big, outstanding issues for the United States and the European Union nearing the end of the negotiations. The U.S. companies – Pratt & Whitney and General Electric – were worried that new rules favored by the EU to curb subsidies could restrict their ability to spin off commercial products from work on Pentagon military contracts, and benefit rival Rolls-Royce, the UK engine maker.

The caller told me in a slightly threatening voice that “we know you’ve been talking to X”, a reference to a senior WTO official who had indeed been an anonymous source of mine. I neither confirmed nor denied, and later shrugged it off, assuming that he had simply inferred the source from my reporting, which had explained in some detail the substance of confidential negotiating documents whose content was not widely known. But it occurred to me later that perhaps my telephone conversations had been monitored, and that he really did “know” my source. After all, billions of dollars in commercial contracts could have been affected by the outcome of the trade negotiations.

I was thus not terribly surprised by revelations this week, apparently based on new leaks from Edward Snowden, that U.S. intelligence agencies may have bugged the Washington and New York delegations of the European Union, as well as EU headquarters in Brussels. EU leaders are warning that the spying may throw a wrench into ambitious plans for the Transatlantic Trade and Investment Partnership (TTIP) to lower trade and regulatory barriers to U.S.-EU commerce. German Chancellor Angela Merkl said that if the reports were true, such spying was “unacceptable Cold War behavior.”

My first reaction to this was to be to skeptical of the European protests. Michael Hayden, the former head of both the CIA and the National Security Agency, chided that “any European who wants to go out and rend their garments with regard to international espionage should look first and find out what their own governments are doing.” President Obama agreed: “That’s how intelligence operations work,” he said. “We should stipulate that every intelligence service – not just ours, but every European intelligence service, every Asian intelligence service, wherever there’s an intelligence service … here’s one thing that they’re going to be doing: they’re going to be trying to understand the world better and what’s going on in world capitals,” he told a press conference during his African trip. “If that weren’t the case, then there’d be no use for an intelligence service.”

But on reflection, outrage is the more the appropriate response. First, the Europeans are among the closest of U.S. allies, and such spying compromises the trust on which that relationship is based. The current trade negotiations are going to involve difficult, sensitive issues in which the leaders of each country are going to have to overcome domestic protectionist interests and considerable public skepticism. The erosion of trust that has now occurred will make that job harder, and make a successful conclusion of the talks less likely.

Second, since the United States and Europe do not threaten each other’s security, the rationale for the spying was presumably economic and commercial. It is one thing to gather clandestine intelligence to thwart threats to national security; it is quite another to spy in order to gain commercial advantage. This is not a game the United States should be playing. Other countries, notably China, have far more to gain from this sort of espionage than does the United States. The United States remains the world’s economic and technological leader, and rising economies have much to gain by stealing trade secrets or other information of commercial value. President Obama’s “everyone does it” response utterly undercuts efforts by U.S. companies and his own government to discourage such espionage by China and other countries. The United States should be taking the lead internationally in trying to stop commercial espionage, not using its advanced capabilities to carry it out. But following these revelations, the Chinese can be expected to ignore future U.S. complaints as rank hypocrisy.

Finally, even if real commercial intelligence is gathered, the U.S. government has limited ability to make use of it. For a country like China, which is still dominated by state-owned enterprises, the fruits of spying can fairly easily be passed along to state companies. But what is the U.S. government to do with such information, in an economy dominated by competing private companies whose national ties are growing looser and looser? Two decades ago it might have made sense, for example, for the government to bug a reporter’s telephone in order to gain intelligence that might help the American companies (GE, Pratt) against a European rival (Rolls-Royce). But today, Rolls-Royce builds more products in the United States than it does anywhere else in the world. And GE now earns 60 percent of its sales revenue outside the United States. So which companies should be the beneficiary of U.S. commercial espionage?

It’s quite possible, of course, that my telephone was never bugged; it’s also plausible that there is less than meets the eye in Snowden’s latest revelations. But the U.S. government response is troubling. Instead of defending its actions, if the allegations are true the United States should apologize to the Europeans, and get out of the game of commercial espionage.

Post a Comment 3 Comments

  • Posted by Luke Peterson

    Ted, It’s timely to note that East Timor is, at this very moment, seeking to persuade an international panel of arbitrators that alleged spying by Australia during an earlier international negotiation should invalidate a resulting treaty that governs certain offshore energy issues between the two countries. Hard to say what arbitrators will make of this issue in the Timor-Australia case, and whether they will agree that Australia’s alleged conduct should serve to unravel the results of the earlier negotiations, but we shall see in coming months. Doubtless we could see other similar disputes erupt as parties discover that they were spied upon by their counter-parties in these contexts.

    Luke Peterson

    Recently, Australia’s Department of Foreign Affairs and Trade revealed that East Timor has initiated arbitration against Australia, pursuant to a 2002 treaty, the Timor Sea Treaty, that governs energy exploitation in certain offshore territories. At the crux of the dispute is a claim by East Timor that another treaty – the 2006 treaty on Certain Maritime Arrangements in the Timor Sea (CMATS) – also governing off-shore resources is “invalid” due to alleged spying by Australia during the negotiation of that latter treaty.

  • Posted by LLLYYYOOO

    Its a joke for you to differentiate the various types of spying, commercial, military, etc. US hacked everything and anything and it so simple to say that US government has had not much use of the hacked commercial info whilst its the converse for developing countries. Google said more or less the same thing that it profess no censorship and freedom of the press. Now what is actually google doing – feeding info to the US!! One thing is clear, US has the ability to make you believe what it does is the correct thing despite being a hypocrite. Until now of course. Its superability to demonise other countries will make you write good things about US. Eventually just could not imagine that US could scoop so low to hack into universities and highly regarded institutions and at the same time blame others for hacking as if it so afraid of itself. It even went to the extent to inform the world that its not safe to use other countries’ equipment and technology so that it can monopolize the hacking using US made products. A hack is a hack and the US at this point of time is the most villainous of all. So stop the condemnation through differentiating the different kind of hack, you only know as much as I do what actually is US hacking all about. Mandiant had already made a fool of itself and surely you don’t want to be the next one as foolish as Mandiant.

  • Posted by Kishore Kumar

    Well written. Certain these phone taps had nothing to do with anti-terrorist measures and were entirely old fashioned industrial, political espionage. When it is directed against your closest allies,that says a lot about how un-trusting and how consequently how untrustworthy the US has become.

    Also disturbing is Obama’s claptrap about “trying to understand the world better”. This is clearly tap dancing around the issue, and pretty poor footwork at that. Shows the USA in very poor light. This near continuous erosion of US prestige (which started with the WMD lies and keeps getting worse) is no good for anybody.

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