What Is Economic Espionage?

Economic espionage is the unlawful targeting and theft of critical economic

intelligence, such as trade secrets and intellectual property. The term refers
to the clandestine acquisition or outright theft of invaluable proprietary
information in several areas, including technology, finance, and
government policy. Offenders get cheap access to critical information,
leading victims to suffer steep economic losses.

KEY TAKEAWAYS

 Economic espionage is the unlawful targeting and theft of critical

economic intelligence, such as trade secrets and intellectual property.
 It is likely to be state-sponsored, and have motives other than profit or
gain—such as closing a technology gap.
 The Economic Espionage Act was signed into law in October 1996,
criminalizing misappropriation of trade secrets and giving the
government the right to pursue such cases in the courts.
 Economic espionage is estimated to cost the U.S. between $225-
$600 billion annually.
 China has been accused of being the world’s “most active and
persistent” perpetrator of economic espionage.
Understanding Economic Espionage
Economic espionage differs from corporate or industrial espionage in
several ways. It is likely to be state-sponsored, have motives other
than profit or gain (such as closing a technology gap), and be much larger
in scale and scope.

The U.S. recognizes the threat from such activity and responded by signing
the Economic Espionage Act into law in October 1996, criminalizing
misappropriation of trade secrets and giving the government the right to
pursue such cases in the courts.

 
Many cases of economic espionage may go unreported, as companies who
fall victim to it may suffer a loss in stock value if they report such a breach.

The Federal Bureau of Investigation (FBI) defines economic espionage in

the following way:
“Economic espionage is foreign power-sponsored or coordinated
intelligence activity directed at the U.S. government or U.S. corporations,
establishments, or persons, designed to unlawfully or clandestinely
influence sensitive economic policy decisions or to unlawfully obtain
sensitive financial, trade, or economic policy information; proprietary
economic information; or critical technologies. This theft, through open and
clandestine methods, can provide foreign entities with vital proprietary
economic information at a fraction of the true cost of its research and
development, causing significant economic losses.”1

Economic Espionage Methods

According to the FBI, foreign competitors conduct economic espionage in
three main ways:

 By recruiting insiders working for U.S. companies and research

institutions that typically share the same national background.
 Using methods such as bribery, cyber-attacks, “dumpster diving”, and
wiretapping.
 Establishing seemingly innocent relationships with U.S. companies to
gather economic intelligence, including trade secrets.

To counter this threat, the FBI advises companies to stay alert. Some steps
are recommended, including implementing a proactive plan to safeguard
trade secrets, securing physical and electronic versions of intellectual
property, and training employees.

Real-World Example
The Intellectual Property Commission Report estimates that between $225
billion and $600 billion is lost to economic espionage, while the Office of the
Director of National Intelligence believes somewhere in the middle—$400
billion—is more accurate.2 However, all agree that more than 80% of this
loss is attributed to Chinese economic espionage.

$320 billion
The amount the U.S. loses annually due to Chinese economic espionage.
In November 2011, the U.S. accused China of being the world’s “most
active and persistent” perpetrator of economic espionage. A report by the
U.S. International Trade Commission claimed that intellectual property-
intensive firms in the U.S. lost $48 billion in 2009 because of Chinese
infringements. Russia was also identified as one of the most aggressive
collectors of U.S. economic information and technology. 

The problem's scale was evident in subsequent media reports that said

hundreds of leading U.S. companies had been targeted by overseas
entities for economic espionage. 

Criticism of Economic Espionage 

In recent years, the number of defendants indicted under the U.S.
Economic Espionage Act has surged, and many of those charged are
Chinese. From 2000 to 2020, 152 cases of Chinese economic espionage
were reported.3  Of those cases, 45% were government or military
personnel, 33% were U.S. citizens recruited by Chinese nationals, and
30% were private citizens.

According to a Cardozo Law Review study, 21% of Chinese defendants are

never proven guilty. For those convicted, their sentences are twice as long
as Western society defendants. The study also found that approximately
48% of defendants with Western names receive probation, whereas only
22% of Chinese or Asian defendants receive probation. These findings
have fueled allegations that federal agents and prosecutors are unfairly
profiling ethnic Chinese people as spies and issuing stiffer punishments.

Economic Espionage FAQs

In What Industries Is Economic Espionage Most Likely to Occur?
Economic espionage most often occurs in the private sector. The most
vulnerable industry is the technology sector, followed by industries that
heavily rely on technology: computer, biotechnology, energy, and chemical.

Why Is China Considered to Be the Most Active Perpetrator of Economic

Espionage?
The U.S. Department of Justice reports that China is involved in more than
90% of economic espionage cases and costs the U.S. more than $320
billion annually.4 Over the years, the Chinese government has advanced its
economy with Western technology and resources. It is believed that
Chinese economic espionage is fueled by China's desire to be the
economic and technological leader of the world, displacing the United
States.
Why Should Academic Institutions Be Concerned About Economic
Espionage?
The FBI claims that there are attempts to steal research findings and other
intellectual property from U.S. colleges and universities. 5 They urge these
institutions to have a watchful eye over what they share, including their
research findings, and work with the FBI to address threats. The FBI
director Christopher Wray believes that China uses graduate students and
researchers to steal innovation from universities.

What Is the Punishment for Economic Espionage?

The punishment for economic espionage varies but is severe. For example,
stealing trade secrets for the benefit of a foreign government could cost the
perpetrator up to $500,000 and 15 years of their time in federal prison. 6
Companies found guilty of economic espionage could face monetary
penalties of up to $10 million.