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Deterring Economic Espionage

Posted By Derek Scissors, Ph.D. On July 10, 2012 @ 12:15 pm In Economics | Comments Disabled

The House is considering new legislation concerning economic espionage. While the private sector should play the key role in combating this, there is bipartisan support for policy measures—and with good reason.

The U.S. relies on innovation. It has become more important in driving internal growth and, externally, America’s comparative advantage is in technology. Theft of technology and our new ideas thus reduces gains from trade and erodes prosperity.

The problem is starting to get the attention it deserves—for example, attention to the need for harsher penalties. Awareness is focused, perhaps unsurprisingly, on the People’s Republic of China. The PRC is hardly the first nation to conduct economic espionage, but the scope of actions by Chinese individuals and firms is in many ways unprecedented. Worse, the trend is unpleasant: Economic espionage seems to be intensifying [1] rather than easing as China develops.

A solution, though, faces pitfalls. The process of improving American policy should start immediately, but it needs to be a thoughtful process, anticipating that perpetrators of espionage will change their behavior as policy changes. Simple steps can and should be taken first. Adding complex regulations or criminal statutes without fully consulting the private sector could make both corporate security and legal enforcement more challenging.

There are principles to shape this improved policy. Enforcement is necessary, but the reality can be discouraging. Punishments can even cause additional harm if confrontations are required with countries that reject the rule of law.

From a policy standpoint, deterrence is superior to punishment. The prevalence of economic espionage indicates in part that deterrence is lacking. Raising the costs anticipated by those contemplating espionage will reduce the espionage itself and may help avoid the problems involved in enforcement.

Deterrence alone, however, will not cure the disease of economic espionage. Private actors must take the lead for truly satisfactory solutions to be found. But enhanced deterrence is a sound goal for Congress to pursue at the outset.


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URL to article: http://blog.heritage.org/2012/07/10/deterring-economic-espionage/

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[1] Economic espionage seems to be intensifying: http://www.heritage.org/research/reports/2012/04/chinese-commercial-espionage-us-policy-recommendations

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