[Congressional Record Volume 142, Number 10 (Thursday, January 25, 1996)]
[Senate]
[Pages S377-S378]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. COHEN:
  S. 1525. A bill to amend title 18 of the United States to prevent 
economic espionage and to provide for the protection of United States 
proprietary economic information in interstate and foreign commerce, 
and for other purposes; to the Committee on the Judiciary.


     the economic espionage and protection of proprietary economic 
                        information act of 1995

  Mr. COHEN. Mr. President, when France, Germany, Japan, and South 
Korea are included in a list of nations, we automatically assume that 
this must be a list of America's allies--our military and political 
partners since the end of the Second World War. Unfortunately, this is 
not only a list of America's trustworthy friends, it is also a list of 
governments that have systematically practiced economic espionage 
against American companies in the past--and continue to do so to this 
day.
  The term ``espionage'' evokes images of the cloak-and-dagger side of 
the United States-Soviet confrontation in the cold war. Since the end 
of the East-West struggle, however, an equally damaging and pervasive 
form of spying has received increasing attention--the spying that 
nations undertake against foreign-owned corporations in order to give 
their own firms an advantage in the increasingly cut-throat world of 
international business.
  Unlike the politico-military espionage of the cold war, economic 
espionage pits friendly nations against each other. Instead of military 
strategy and weapon technologies, the sought-after secrets in economic 
espionage are marketing strategies and production technologies. While 
the cost of politico-military espionage was reduced military security, 
and damage from economic espionage comes in the form of billions of 
dollars annually in lost international contracts, pirated products and 
stolen corporate proprietary information. The direct cost of this 
espionage is borne by America's international corporations. The 
indirect costs are borne by the American economy as a whole--jobs and 
profits are lost; the competitive edge is stolen away.
  The 103d Congress adopted an amendment I sponsored requiring the 
President to submit an annual report on foreign industrial espionage 
targeted against U.S. industry.
  The unclassified version of the President's first annual report, 
which is very understated compared to the classified version, 
acknowledged ``the post-cold-war reality that economic and 
technological information are as much a target of foreign intelligence 
collection as military and political information.'' The report goes on 
to state:

       In today's world in which a country's power and stature are 
     often measured by its economic/industrial capability, foreign 
     government ministries--such as those dealing with finance and 
     trade--and major industrial sectors are increasingly look 
     upon to play a more prominent role in their respective 
     country's (economic) collection efforts. While a military 
     rival steals documents for a state-of-the-art weapon or 
     defense system, an economic competitor steals a U.S. 
     companies proprietary business information or government 
     trade strategies. Just as a foreign country's defense 
     establishment is the main recipient of US defense-related 
     information, foreign companies and commercially oriented 
     government ministries are the main beneficiaries of US 
     economic information. That aggregate losses that can mount as 
     a result of such efforts can reach billions of dollars per 
     year, constituting a serious national security concern.

  According to Joseph Recci of the American Society for Industrial 
Security, ``American corporations are losing billions of dollars each 
year in valuable technology and proprietary information to foreign 
espionage.'' In a recent survey of Fortune 500 companies, the society 
notes that the number of corporations reporting that they have been 
victims of economic espionage has grown by 260 percent since 1985. 
Peter Schweizer, in his 1994 study of state-sponsored economic 
espionage, ``Friendly Spies,'' estimated that such espionage costs 
American business upwards of $100 billion annually.
  This alarming trend in foreign corporate and state-sponsored economic 
espionage will continue in coming years. Intelligence agencies in 
industrialized nations have found themselves with a lot of time on 
their hands since the end of the cold war, and the governments of these 
nations have come to see economic competition as the new central threat 
to their national security. In testimony before the Senate Select 
Intelligence Committee earlier this year, then acting Director of 
Central Intelligence Adm. William Studeman predicted, ``the threat to 
U.S. economic interests will absolutely increase as foreign governments 
attempt to ensure the success of their companies.''
  A few examples of actual cases should illustrate how pervasive the 
problem has become:
  Pierre Marion, the former head of the French intelligence agency, the 
DGSE, has admitted that up to 15 hotel rooms of foreign business 
executives are broken into in Paris every day by DGSE agents. 
Proprietary papers are copied, and this information is then passed on 
to French companies to give them an edge in competition and 
negotiation.

  Japanese, Korean, and German intelligence agents and corporations 
have 

[[Page S378]]
been known to recruit as spies midlevel managers and scientists at 
American high-technology corporations. In exchange for money, these 
Americans have provided the foreign agents with valuable trade secrets 
and formulas, destroying American companies' market leadership.
  The foreign offices of American corporations are often subjected to 
wiretaps on their phones and infiltration of their foreign national 
staff by agents of the host country's intelligence service. American 
competitiveness, profits, and jobs are the cost.
  I refer my colleagues to a statement I made on March 10, 1994--140 S 
2731-38--for further examples of the foreign corporate and state-
sponsored economic espionage that American firms face.
  The United States has taken some steps to counter this pervasive 
problem, but action has been neither strong enough nor smart enough to 
make a real dent in foreign corporate and state-sponsored economic 
espionage in the United States and against Americans abroad. Admiral 
Studeman testified in January, ``the private sector's concerns about 
increasing signs of `economic espionage' * * * are well founded. 
Despite the continuing necessity to protect sensitive sources and 
methods, more can and must be done against state-sponsored economic 
espionage.'' As the President's report delicately puts it: ``efforts 
across the government to investigate and counter economic and 
industrial intelligence collection activities were fragmented and 
uncoordinated * * * resulting in many partially informed decisions and 
diverging collection and analytical efforts.'' U.S. efforts, in plain 
English, are chaotic and largely ineffective, which is why I wrote last 
year's legislation requiring the President to report not only on the 
threat but also on how the Federal Government is organized to counter 
the threat and what changes in Federal organization and law could 
improve that effort.
  In the closing days of the Bush administration, the Justice 
Department confirmed to me that legislation was required to improve law 
enforcement officials' ability to investigate and prosecute foreign 
industrial espionage. But it was not until this past year that Federal 
officials, after consulting with industry representatives, were able to 
identify for me specific legislative changes to accomplish this 
objective, and we have spent several months refining bill language.
  I rise today, Mr. President, to offer the product of these efforts, 
the Economic Espionage and Protection of Proprietary Economic 
Information Act of 1995.
  The act is designed to counter this threat by creating a criminal 
offense for engaging in foreign corporate or state-sponsored economic 
espionage. The bill also clarifies existing provisions of criminal 
statutes relating to stolen property and racketeering to make clear 
that they apply to foreign corporate and state-sponsored economic 
espionage. Finally, the bill punishes individuals and/or corporations 
found guilty of practicing foreign-sponsored economic espionage by 
fining them and banning them from import-export activity in the United 
States for 5 years following their conviction.
  This bill has been carefully crafted in coordination with Federal law 
enforcement authorities and industry representatives. In establishing 
this criminal offense, the bill provides for those officials ordering 
the espionage to be held liable, as well as those who commit the act. 
It provides for forfeiture of any proceeds of and assets used in such 
espionage in accordance with the provisions of the Comprehensive Drug 
Abuse Prevention and Control Act of 1970. These provisions would apply 
to espionage committed outside the United States if committed by a U.S. 
citizen or if committed against an American and resulting in an affect 
in the United States. Finally, the bill would allow a court to take 
appropriate measures to ensure that protection of proprietary 
information during the prosecution of economic espionage cases.
  Mr. President, it is imperative that the United States send a clear 
message to individuals and foreign governments and corporations--both 
our friends and our foes--that this country does not accept 
international corporate and state-sponsored economic espionage as a 
legitimate business practice. We must demonstrate our resolve to combat 
this unfair economic practice, regardless of who engages in it.
  The free market system has been the source of America's prosperity 
and her world economic might. I ask you all to join me in supporting 
this legislation to fight a practice which is polluting the 
international free market and robbing our Nation's firms and workers of 
the success that their technological innovation and marketing know-how 
has earned them.
  In a report entitled ``Economic Espionage: a Threat to U.S. 
Industry,'' the GAO stated the situation clearly: ``The loss of 
proprietary information and technology through espionage activity will 
have broadening detrimental consequences to both U.S. economic 
viability and our national security interests.''
  I urge my colleagues to support the Economic Espionage Act to send a 
message to nations around the world that America will not tolerate 
unjust practices in international trade and the subverting of American 
firms' ability to compete fairly in the world marketplace.
                                 ______