2011 November 06 Sunday
Foreign Computer Espionage Costing Billions

We would have higher living standards of US companies could earn returns on technology for as long as legally allowed. But China especially is sucking billions of dollars of trade secrets and technology out of US corporations every year.

Tens of billions of dollars of trade secrets, technology and intellectual property are being siphoned each year from the computer systems of U.S. government agencies, corporations and research institutions, said the Office of the National Counterintelligence Executive, which focuses on espionage against the United States.

The Russians, French, Israelis (yes, supposed allies), and other countries are stealing US technology as well.

Individual incidents are expensive.

A senior intelligence official, briefing reporters on the condition of anonymity, noted a few cases in which estimates were given in economic espionage prosecutions over the past six years: $100 million worth of insecticide research from Dow Chemical, $400 million worth of chemical formulas from DuPont, $600 million of proprietary data from Motorola, $20 million worth of paint formulas from Valspar.

What's the long run cost when a company gets beat in the market by a lower cost Chinese competitor that got the company's stolen secrets? Well, the Americans who developed the technology might end up getting laid off.

The shorter the period during which a company can earn returns on intellectual property the less incentive to develop intellectual property and the lower living standards will be. But my guess is companies focused on next quarter's earnings tend to put far too little effort into protecting intellectual property.

The US now runs a trade deficit even in many high tech goods. We need a national strategy to reduce the rate at which American technological secrets get stolen.

Share |      By Randall Parker at 2011 November 06 09:23 PM  China Mercantilism


Comments
adam said at November 6, 2011 11:50 PM:

I think the long run costs are even greater than lost American jobs. Diverting funds away from those on the frontier of human knowledge slows the growth of human knowledge. If the American research firm closes down because they can't profit from their research, then we all lose. Those who steal our technology lose new tech to steal.

It could hypothetically have a big benefit. If it brings Chinese researchers closer to the frontier faster, they may begin pushing the frontier sooner, and the long run pace of new discovery might be improved. So far that hasn't happened yet. Count me skeptical.

The problem is making research profitable, not keeping the results secret. If we could do this without keeping secrets or attempting to enforce an artificial monopoly via patents that would certainly be ideal. I just don't see a workable way to do this.

Demoliton Man said at November 8, 2011 2:35 AM:

Switzerland has very draconian and brutal prison sentences for economic espionage. Maybe the US can learn something from this.

Here is an even better deterrent: maybe the spies can be executed secretly by counterespionage, without trial. Just the rumors that such a secret policy exists would deter the spies, who are financially motivated (religious terrorists won't be deterred but such economic spies would be deterred.)

Rapa Nui said at November 8, 2011 3:58 PM:

We need a national strategy to reduce the rate at which American technological secrets get stolen.

As far as military tech goes, I don't think the Russians and Chinese need to steal a lot of American secrets. Fifth generation planes and all, youknow

anon or anonymous said at November 9, 2011 7:49 PM:

what a laugh. the USA values copyrights, trademarks and patents more than products or services. why the frack would china or any other country care about stupid laws that prevent the advancement and sharing of human knowledge? why would china spend billions and years when information be copied from one hard drive to another in seconds? randall, why are you looking at all the wrong problems? a national strategy to what, perfect information assurance standards? lol. is that really the problem? or is it that the USA is building itself up for complete failure because of our corporations self-righteous monopoly on ideas?

listen to some episodes. http://www.rantmedia.ca/piratepartyradio/episodes.php


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