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Statement Before Senate Select Committee on Intelligence - 7/17/90
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Originally Processed With FOIA(s):
foia Number:
2005-0336-F
2005-0336-F
FOIA
MARKER
This is not a textual record. This is used as an
administrative marker by the George Bush Presidential
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Record Group/Collection:
George H.W. Bush Presidential Records
Collection/Office of Origin:
Science and Technology Policy, Office of (OSTP)
Series:
Bromley, D. Allan, Files
Subseries:
Administration Files
OA/ID Number:
62027
Folder ID Number:
62027-002
Folder Title:
Statement Before Senate Select Committee on Intelligence - 7/17/90
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Withdrawal/Redaction Sheet
(George Bush Library)
Document No.
Subject/Title of Document
Date
Restriction
Class.
and Type
01. Report
Statement by Allan Bromley before the Senate Select
7/17/90
(b)(1)
Committee on Intelligence on US Intelligence in Support of
America's Economic Competitiveness (62 pp.)
Collection:
Record Group:
Bush Presidential Records
Office:
Science and Technology Policy, Office of (OSTP)
Series:
Bromley, D. Allan, Files
Subseries:
Administration Files
WHORM Cat.:
File Location:
Statement Before Senate Select Committee on Intelligence - 7/17/90
Date Closed:
3/5/2010
OA/ID Number:
62021-002
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2005-0336-F
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RESTRICTION CODES
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agency [(b)(2) of the FOIA]
P-4 Release would disclose trade secrets or confidential commercial or
(b)(3) Release would violate a Federal statute [(b)(3) of the FOIA]
financial information [(a)(4) of the PRA]
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P-5 Release would disclose confidential advice between the President
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and his advisors, or between such advisors [a)(5) of the PRA]
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personal privacy [(a)(6) of the PRA]
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C. Closed in accordance with restrictions contained in donor's deed of
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financial institutions [(b)(8) of the FOIA]
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PRM. Removed as a personal record misfile.
Withdrawal/Redaction Sheet
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02. Letter
To: Donald Riegle From: John Macomber
7/17/90
(b)(1)
Re: Export Administration Act (3 pp.)
Collection:
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Science and Technology Policy, Office of (OSTP)
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Statement Before Senate Select Committee on Intelligence - 7/17/90
Date Closed:
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RESTRICTION CODES
Presidential Records Act - [44 U.S.C. 2204(a)]
Freedom of Information Act - [5 U.S.C. 552(b)]
P-1 National Security Classified Information [(a)(1) of the PRA]
(b)(1) National security classified information [(b)(1) of the FOIA]
P-2 Relating to the appointment to Federal office [(a)(2) of the PRA]
(b)(2) Release would disclose internal personnel rules and practices of an
P-3 Release would violate a Federal statute [(a)(3) of the PRA]
agency [(b)(2) of the FOIA]
P-4 Release would disclose trade secrets or confidential commercial or
(b)(3) Release would violate a Federal statute [(b)(3) of the FOIA]
financial information [(a)(4) of the PRA]
(b)(4) Release would disclose trade secrets or confidential or financial
P-5 Release would disclose confidential advice between the President
information [(b)(4) of the FOIA]
and his advisors, or between such advisors [a)(5) of the PRA]
(b)(6) Release would constitute a clearly unwarranted invasion of
P-6 Release would constitute a clearly unwarranted invasion of
personal privacy [(b)(6) of the FOIA]
personal privacy [(a)(6) of the PRA]
(b)(7) Release would disclose information compiled for law enforcement
purposes [(b)(7) of the FOIA]
C. Closed in accordance with restrictions contained in donor's deed of
(b)(8) Release would disclose information concerning the regulation of
gift.
financial institutions [(b)(8) of the FOIA]
(b)(9) Release would disclose geological or geophysical information
PRM. Removed as a personal record misfile.
EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF SCIENCE AND TECHNOLOGY POLICY
WASHINGTON, D.C. 20506
April 23, 1990
MEMORANDUM FOR D. ALLAN BROMLEY
THROUGH:
MICHELLE K. VAN CLEAVE
FROM:
RICK E. YANNUZZI Reg."
SUBJECT:
TESTIMONY BEFORE THE SENATE SELECT COMMITTEE ON
INTELLIGENCE
You have accepted an invitation to appear before the Senate
Select Committee on Intelligence (SSCI) on May 2, 1990, from 2:00
to 4:00 p.m.. The subject of the hearing is U.S. intelligence in
support of America's economic competitiveness. The other
witnesses for this hearing are Ambassador Michael B. Smith,
former Deputy U.S. Trade Representative, and Mr. Lionel Olmer,
former Under Secretary for International Trade, U.S. Department
of Commerce.
Attached is the final draft of your testimony for your review.
In discussions I've had with the staff they would like each
witness to spend about 15 minutes presenting their testimony.
The staff wants to reserve as much time as possible for Q&A's
between the committee members and the panel. You have been asked
to focus your comments on S&T intelligence in the context of
economic competitiveness.
According to the staff at least two committee members appear
particularly interested in the hearing -- Senators Danforth and
Bradley. Judging by Senator Boren's speech to the National Press
Club earlier this month (see attached newspaper clipping) I would
certainly add him to the list of interested committee members.
On a logistical note the SSCI staff has informed me that we can
expect Chairman Boren to be late to the hearing. Apparently,
tardiness is one of his trademarks.
Attachments:
1. Proposed Testimony
2. Newspaper Clipping
Boren Urges Intelligence Upgrades
By George Lardner Jr.
with operatives from other nations
watch on foreign exchange rates, oil
Washington Post Staff Writer
who have worked with the United
production levels and trade policies
States in the past and "once de-
worldwide, he said.
The U.S. intelligence community
manded our strong presence."
In turn, he said, "We will be con-
must develop "new and different
These people "are looking at us
fronted with the policy question of
assets" and help keep the nation
and saying, 'Why are you still here?
how active our intelligence commu-
economically competitive, Sen. Da-
We don't need you any more,'
nity should become" in serving U.S.
vid Boren (D-Okla.), chairman of
Boren said.
business and commercial interests.
the Senate Select Committee on
American influence in the coming
U.S. embassies should be turned
Intelligence, said yesterday.
century, he said, is going to depend
into outposts "not just of American
"As the arms race is winding
more on economic factors and mor-
political influence but of American
down, the spy race is heating up,"
al leadership than military strength.
economic influence as well.
We
Boren said in a speech at the Na-
"We have had a strange and sym-
can no longer regard the commer-
tional Press Club. "An increasing
biotic relationship with the Soviet
cial section [of an embassy] as
share of the espionage directed
Union," Boren said. "The decline of
something that ought to be in the
against the United States comes
the Soviet Union might lead to our
basement."
decline as well."
from spying against private Amer-
Boren expressed alarm at the low
Problems of U.S. intelligence in
numbers of American students
ican companies, aimed at stealing
the Soviet Union will expand from
studying abroad and he called for
commercial secrets to gain a nation-
finding out what happened at the
new exchange programs to help
al economic advantage."
last Politburo meeting to finding out
"internationalize the thinking of the
He said another sign of changing
"what is going on among the peo-
next generation of Americans."
times was testimony before his
ple" who will be electing a president
Last year, he said, 356,000 foreign
committee in the past month by
five years from now, he said.
students came to the United States,
U.S. intelligence officials who said
"We will also need greater human
but only 24,000 U.S. students went
they are having "some real prob-
capabilities and personnel equipped
abroad. Students coming here from
lems down at the operational level"
with economic expertise" to keep
Malaysia alone outnumbered them.
Business
Most U.S. corporations could protect
When "Friends" Become Moles
their sensitive communications simply by
sending them in code. But many companies
American companies wake up to a new spy threat: U.S. allies
are reluctant to do this, even though the cost
and inconvenience might be minor. One
reason may be that the effects of spying are
By JAY PETERZELL
tive told officials about a trip to Paris dur-
largely invisible. All the company sees is
ing which he had made handwritten notes
that it has failed to win a contract or two.
T
he dangers of Soviet military espio-
in the margin of one of his memos. While
Meanwhile, its competitor may have clan-
nage may be receding, but U.S. securi-
negotiating a deal with a French business-
destinely learned all about its marketing
ty officials are awakening to a spy threat
man, he noticed that the Frenchman had a
plans, its negotiating strategies and its man-
from a different quarter: America's allies.
photocopy of the memo, handwritten
ufacturing secrets. "American businesses
According to U.S. officials, several foreign
notes and all. Asked how he got it, the Pari-
are not really up against some little compet-
governments are employing their spy net-
sian sheepishly admitted that a French
itor," observes Noel Machette, a former
works to purloin business secrets and give
government official had given it to him.
National Security Agency official who
them to private industry. In a case brought
Because of such incidents, U.S. officials
heads a private security firm near Washing-
to light last week in the French newsmaga-
began a quiet effort to warn American
ton. "They're up against the whole intelli-
zine 'Express, U.S. agents found evidence
companies about the need to take special
gence apparatus of other countries. And
late last year that the French in-
they're getting their clocks
telligence service Direction
cleaned."
Générale de la Sécurité Extér-
As U.S. national-security plan-
ieure had recruited spies in the
passing along secrets involving
research and marketing to Com-
ILLUSTRATION FOR TIME BY MICHAEL C. WITTE
ners increasingly focus on Ameri-
European branches of IBM,
can competitiveness, many of
Texas Instruments and other
them fear that U.S. corporations
U.S. electronics companíes.
are operating at a severe disadvan-
American officials say DGSE was
tage. America's tradition of keep-
ing Government and business sep-
arate tends to minimize op-
pagnie des Machines Bull, the
portunities for the kind of intelli-
struggling computer maker
gence sharing that often occurs in
largely owned by the French
Europe. "I made a big effort to get
government.
the intelligence community to sup-
A joint team of FBI and CIA
port U.S. businesses," recalls Ad-
officials journeyed to Paris to in-
miral Stansfield Turner, who
form the French government
headed the CIA in the late 1970s. "I
that the scheme had been un-
was told by CIA professionals that
covered, and the Gallic moles
this was not national security."
were promptly fired from the
Moreover, it would be hard for the
U.S. companies. Bull, which is
Government to provide informa-
competing desperately with
tion to one U.S. firm and not to an-
American rivals for market
other. Yet if sensitive intelligence
share in Europe, denies any re-
is shared too widely, it cannot be
lationship with DGSE. Last year
protected.
the company made a legitimate
acquisition of U.S. technology
ne thing the U.S. Government
when it agreed to purchase Ze-
can do is make sure business
nith's computer division for
leaders understand the threat.
$496 million.
When the late Walter Deeley was a
U.S. officials say the spy ring
deputy director at NSA in the early
was part of a major espionage program run
precautions when operating in France.
1980s, he began a hush-hush program in
against foreign business executives since
While France can be blatant, it is by no
which executives were given clearances and
the late 1960s by Service 7 of French intel-
means unique. "A number of nations
told when foreign intelligence agencies were
ligence. Besides infiltrating American
friendly to the U.S. have engaged in indus-
stealing their secrets. "He considered it a
companies, the operation routinely inter-
trial espionage, collecting information with
real crusade," a former intelligence official
cepts electronic messages sent by foreign
their intelligence services to support pri-
says. American business leaders could see
firms. "There's no question that they have
vate industry," says Oliver Revell, the FBI'S
some of these intelligence reports, I think
been spying on IBM's transatlantic com-
associate deputy director in charge of in-
they would go bananas and put a lot more ef-
munications and handing the information
vestigations. Those countries include Brit-
fort into protecting their communications."
to Bull for years," charges Robert Court-
ain, West Germany, the Netherlands and
"It may not be possible to level the play-
ney, a former IBM security official who ad-
Belgium, according to Courtney. The con-
ing field [with foreign companies] by shar-
vises companies on counterespionage
sultant has developed a few tricks for gaug-
ing intelligence directly" with their U.S. ri-
techniques.
ing whether foreign spies are eavesdrop-
vals, observes deputy White House science
Service 7 also conducts an estimated
ping on his corporate clients. In one
adviser Michelle Van Cleave. "But it should
ten to 15 break-ins every day at large hotels
scheme, he instructs his client to transmit a
be possible to button up our secrets." That
in Paris to copy documents left in the
fake cable informing its European office of
argues for much more use of secret-keeping
rooms by visiting businessmen, journalists
a price increase. If the client's competitor
techniques and far less naiveté on the part
and diplomats. These "bag operations"
in that country boosts its price to the level
first came to the attention of the U.S. Gov-
of American business as it enters the spy-
mentioned in the cable, the jig is up. "You
vs.-spy era of the 1990s.
ernment in the mid-1980s. One U.S. execu-
just spoof 'em," Courtney says.
With reporting by Christopher Redman/Paris
50
TIME, MAY 28, 1990
Price Per Plane
Could Increase
To $1 Billion
By BARBARA AMOUYAL
And PHILIP FINNEGAN
Estimated B-2
Defense News Staff Writers
Research and development
costs for the B-2 bomber become
Program Costs
WASHINGTON - Congressio-
nal failure to reach a compromise
a smaller share of the total appropriation
10 planes: $26.6 billion
on B-2 funding could force a
over time as production rate increases.
15 planes: $35.4 billion
deadlock that would escalate
All figures in billions
75 planes: $61.1 billion
costs and result in even more in-
efficient production rates than al-
ready proposed by the Bush ad-
1988 and prior
1989
1990
1991
ministration, congressional
Request: Not available
Request: $5.23
Request: $4.73
Request: $4.16
sources say.
Appropriation: $17.1
Appropriation: $5.23
Appropriation: $4.29
Appropriation: Not available
With the legislative options
narrowed as a result of Defense
Secretary Dick Cheney's April 26
decision to cut the B-2 stealth
$13.2
$2.18
$1.88
buy from 132 to 75 planes, con-
$1.56
gressional sources say compro-
mise legislation intended to pro-
long B-2 production at lower
Research &
Research &
Research &
Research &
annual rates could jack the price
development
development
development
development
of the $815 million bomber to
well over $1 billion per copy.
Source: Department of Defense
Marty Baumann
Opponents of the B-2 bomber
U.S. Mulls Industrial Spy Role
Planned
Intelligence Agencies Would Share Commercial Information
By NEIL MUNRO
study being prepared on U.S. in-
the National Press Club in Wash-
May Not L
Defense News Staff Writer
telligence priorities in the 1990s,
ington. "We are going to have to
said one official, who declined to
think about the role that we want
WASHINGTON - U.S. intelli-
elaborate on the study's contents.
our own intelligence service to
Of Italian
gence agencies may be asked to
Foreign intelligence agencies
play in terms of protecting Amer-
gather industrial information
already collect and distribute in-
ica's economic and commercial
about foreign competitors and
formation to national companies,
interests around the world."
By ALESSANDRO POLITI
provide it to U.S. defense firms
many of which are partially
Defense News Correspondent
The intelligence agencies are
and other companies, sources
owned by the government, said
already working to defeat espio-
ROME - Although the Ital-
say.
one former intelligence official.
nage directed against U.S. eco-
ian Parliament took a decisive
Sen. David Boren, D-Okla.,
"It is a fairly routine thing," he
nomic and technological targets.
step last week toward approv-
chairman of the Senate Select
said.
But such efforts should be com-
ing new arms export regula-
Committee on Intelligence, told
However, industrial data gath-
plemented by the use of informa-
tions, government and indus-
Defense News last Wednesday
ered by U.S. intelligence agen-
tion for the benefit of American
try sources here are uncertain
that he expects a policy to
cies, such as the Central Intelli-
companies, experts say.
that new rules will boost Ita-
emerge in the next few years that
gence Agency and the Defense
Although the intelligence agen-
ly's sagging foreign sales.
would task intelligence agencies
Intelligence Agency, are not
cies collect much secret informa-
The new regulations were
with collecting commercially
shared with U.S. companies,
valuable information.
tion, they also collect a great deal
sought by defense manufac-
sources say.
of public information from news-
turers concerned that Italy's
Such a policy would change
"The spy race is heating up
papers, scientific papers and oth-
cumbersome rules for gaining
dramatically the charters of intel-
against commercial targets
er sources, said Michelle Van
export licenses would put
ligence agencies and open debate
in the United States. More and
Cleave, assistant director for na-
them at a disadvantage when
on how information should be
more
espionage is [being
tional security affairs in the
European trade barriers are
fairly shared with U.S.
used] to steal our private com-
White House's Office of Science
eliminated in 1992. The mea-
companies.
mercial secrets for the sake of
and Technology Policy. "At pre-
sure could be passed by the
This prospective new task may
national economic purposes,"
sent, it is not integrated or ex-
first week of June, according
already be included in a classified
Boren told an audience April 3 at
ploited to support the private
to Italian Sen. Michele Achilli,
sector
we should look at bet-
chairman of the Foreign Com-
ter ways of doing that," she told
mittee.
19901
++
*
Defense News last Thursday.
While the new regulations
THOMAS J. BISHOP ##1550
070611430
FIRM 20500
The government could use
are intended to simplify the
DEC99DN
computer systems to make avail-
regulatory process, in some
MILITARY ASSISTANT
able openly gàthered informa-
cases gaining export licenses
OFF OF SCIENCE & TECHNOLOGY
tion, she said. In turn, the com-
will be more difficult. Because
1600 PENN AVE NW
Italian companies have been
WASHINGTON DC 20500
See SPY, Page 35
Monday, M
U.S. Agencies May Draw
Israel Moves to Reinstate
Industrial Spying Activities
For German Information
SPY, From Page 1
pose any involvement in econom-
puterized information would be
ic intelligence gathering, the
ISRAEL, From Page 4
penditure of U.S. funds to non-
reviewed and analyzed by private
intelligence units in the Depart-
the contract funds would go to
U.S. contractors] are used to
research companies, she said.
ments of Agriculture, Treasury,
the German firm Krupp Atlas.
support Israeli subcontractors
Such computerized analysis of
Commerce and State could con-
Of the money, $40 million
only and that the specified
unclassified information might
tribute to economic intelligence
would go to Loral and $60 mil-
funding for advanced weapons
yield information that normally
gathering, Brown said.
lion to Krupp. Some $20 mil-
is to be spent in Israel.
would be classified, said F. Reese
Experts disagreed on whether
lion of that amount - all FMS
Brown, editor of the New York-
the Central Intelligence Agency
funds - would be for royalty
based International Journal of In-
(CIA) would welcome the new
and licensing fees to Krupp.
"Those of us who have
telligence
and
role. In a speech on April 27 to
U.S. government officials
sought to maintain po-
CounterIntelligence.
the Jefferson Club at the Univer-
and industry executives fear
litical support for the
However, distribution of secret
sity of Missouri, Columbia, Mo.,
that if Israel is able to broaden
or classified information gath-
military assistance pro-
William Webster, director of the
its exceptions, other countries
ered by the intelligence agencies
may follow suit. Already, indus-
gram always find it use-
CIA, said, "It is the job of intelli-
is a much more difficult matter,
gence to examine what is occur-
try sources report that Egypt is
ful to point to the fact
sources said. "Once you've got
ring, the forces at play, and the
interested in seeking an excep-
that, with certain spe-
the information, who do you give
ways that action taken abroad
tion so it also can spend $10
cific exceptions, Foreign
it to?
Ford, General Motors,
can affect our national security.
million with Krupp for combat
Chevrolet or Oldsmobile?" asked
Military Sales funds are
With a clear understanding of the
information systems for its Ro-
Ken Levit, a spokesman for Bo-
playing field, policyakers can bet-
meo-class submarines.
used only to support the
ren.
ter determine where it is not level
If Israel spends the money
sale of American
Moreover, many U.S. compa-
as far as U.S. interests are
on non-U.S. systems, it also
systems."
nies are partially owned by for-
concerned."
would weaken the arguments
eign companies, Van Cleave said.
To improve the intelligence
of foreign aid supporters at a
Sen. Claiborne Pell
"How would it be disseminated
agencies' ability to help formu-
time when the aid program is
without at the same time giving
late U.S. economic policy, the
facing increased criticism.
advantage to foreign competi-
government should increase eco-
As Pell wrote in a May 8 let-
Israel has been allowed to
tors?" she asked.
ter to Israeli ambassador
Protecting secret intelligence-
nomic expertise in the foreign
spend its funds on non-U.S.
embassies and other areas of
Moshe Arad, "Those of us who
goods since 1987. At that time,
gathering methods would also be
difficult, especially if foreign in-
government, Levitt said. "In that
have sought to maintain politi-
it was permitted to spend $300
vein, we have to be prepared to
cal support for the military as-
million of its $1.8 billion in
telligence services were able to
give our intelligence officers the
sistance program always find it
U.S. military aid on Israeli
monitor the information that the
U.S. government was disseminat-
skills to analyze economic infor-
useful to point to the fact that,
goods and services. Israel was
ing, she said.
mation," he said.
with certain specific excep-
in the midst of its Lavi fighter
tions, Foreign Military Sales
project, and wanted to spend
Also, the government's intelli-
But industry's effort to protect
funds are used only to support
the money on Israeli systems
gence agents might be reluctant
their own secrets must be
the sale of American systems."
for the fighter.
to take personal risks for the
stepped up, Van Cleave said.
Pell also wrote that in the
At that time Israel also en-
benefits of American companies,
"Our private sector could do a
case of Israel, it is understood
joyed the unique benefits of di-
she said.
better job of protecting informa-
that directed offsets [the ex-
rected offsets under which Is-
Although the Pentagon's intel-
tion" against foreign intelligence
ligence agencies are likely to op-
services, she said.
Troop Levels and Aircraft Ceilings
British Hope
Problems Wi
Among Remaining Arms Talk Issues
Before Sea H
CFE, From Page 4
any limits on German troops
indicated a willingness to re-
be negotiated under CFE.
duce their own troops sta-
with his counterpart, [Soviet
"The only way to do this on
AMRAAM, From Page 3
tioned in Germany, as have
Foreign Minister Eduard] She-
the German side is in the
RAAM production might reduce
the Belgian and Dutch govern-
vardnadze, and hopefully the
framework of CFE as part of
costs. Lowerey added that the en
ments.
Soviets will arrive in Washing-
tire timeframe of the program
an overall cap on troop levels
U.S. officials and NATO dip-
ton with some additional
might be stretched, and that all of
in Europe," said a West Ger-
lomats are optimistic that the
thoughts for us on how we can
man official in Washington.
these options would be consid
stalemate over CFE and Ger-
move forward with conven-
However, West German
ered by the defense ministry this
man unification can be solved
tional force reductions," Che-
diplomats have suggested that
year.
at the May 30-June 3 super-
ney said.
The Defense Committee had
a compromise might be
power summit in Washington.
Cheney was in Brussels for
earlier heard from other defense
reached by promising the So-
Aside from discussions on
a meeting of NATO's defense
viets further European troop
ministry witnesses that instru
conventional forces, Baker
mented AMRAAM missiles for
PCAST Briefing
20
Automobiles
20
Chemicais
O
10
-20
0
q
-10
-60
-20
72
75
80
85 87
7%
75
80
85 87
20
Commercial aircraft
20.7
Consumer electronics
10
10
o
0
-10
-10
-20
I
-20
72
75
80
85 87
72
75
80
85 87
2
Machine toots
20
Semiconductors.
1
computers &
10
copiers
o
0
-1
-10
L
72
75
-20
80
85 87
72
75
80
85 87
20
Steel
20
Textiles
-
10
10
o
o
-10
-10
-20
-20
72
75
-30
80
85 87
72
75
80
85
87
Figure 1.4 Trade balance in industries studied
Trade balances are in terms of billions of current U.S. dollars. Source: Data made
available by the U.S. Departmènt of Commerce. International Trade Administra-
tion, Office of Trade Information and Analysis.
B. U.S. Trade Balance with Japan and the NICs
Billions of Dollars
o
-5
-10
Japan
-15
-20
Med
-25
-30
-35
1961
1982
1983
1984
1985
1986
1987
1988
Source: United States Trade: Performance in 1988. U.S. Department of Commerce,
International Trade Administration, September 1989.
INTERNATIONAL ECONOMIC COMPETITION
Charge to PCAST: Examine aspects of competitiveness in which science,
technology, and engineering play a major role and, where appropriate,
suggest Federal action that could enhance competitiveness. Product
rather than basic science competitiveness is to be emphasized.
ELEMENTS OF COMPETITIVENESS
o
Internal competence and actions of individual firms.
0
Regulatory, tax, and financial environments in which firms
operate.
o
Availability in the environment of new scientific and engineering
knowledge.
o
Environment supportive to improvement of existing product.
o
Availability of technical labor force.
INTERNAL COMPETENCE AND ACTIONS QF INRIVIDUAL FIRMS
How well do firms manufacture, how well do they support, use and manufacture R&D,
how well do they train and motivate their employees? Largely beyond the purview of
government action.
REGULATORY, TAX AND FINANCIAL ENVIRONMENTS
IN WHICH FIRMS OPERATE
Cost of capital and tax structure, particularly depreciation rules, and such items as
R&D tax credit.
In the legal area, there exist traditional issues relating to anti-trust, as well as the
newer issues of product liability and intellectual property.
availability IN THE ENVIRONMENT QE NEW SCIENTIFIC
AND ENGINEERING KNOWLEDGE
The kind of knowledge that historically has launched whole new
initiatives, produced radically different materials or powerful new
instruments. Really new manufacturing processes could be included
here.
ENVIRONMENT SUPPORTIVE TO IMPROYEMENT QE EXISTING PRODUCT
Less of a matter of really new scientific knowledge than of taking the next engineering
step, a step usually aimed at product. Can be a question of adapting existing
knowledge to a special product situation or of transferring existing knowledge to a
firm that could use it. Examples would include research on existing process or
manufacturing, or improved materials.
availability OF TECHNICAL LABOR FORCE
Training and orientation of scientists and engineers as
well as technically competent people for a production
environment.
POSSIBLE PCAST COMPETITIVENESS ISSUES
o
Effects of U.S. tax policy, trade policy, and regulatory
framework on investment in industrial R&D? In overall
competitiveness?
o
What are the real effects of U.S. capital costs on investment in
industrial R&D and in plant and equipment?
o
What should be the U.S. objective in the semiconductor area?
Is this an area where we must retain significant manufacturing
capability and market position?
o
What roles should the Federal Government take in encouraging
consortia such as SEMATEC, MCC and NCMS? What should
be the criteria for Federal involvement?
o
Are our universities adequately preparing engineers for careers
in commercial manufacturing?
o
Is there a continuing need for DARPA? Could criteria be
developed to make a Civilian Advanced Projects Agency a
focused, effective competitiveness catalyst?
o
Are the policy and decision making processes of the Federal
Government (the Administration and the Congress)
appropriately structured to respond to the modern challenges of
technology and manufacturing competitiveness?
o
What role can Federal laboratories play in the industrial
competitiveness arena? What expectations here are realistic?
o
How effective have state and local Industrial competitiveness
programs been? What should be the nature of the
Federal/state partnership here?
o
Have the diverging interests of our financial and manufacturing
sectors adversely affected U.S. manufacturing competitiveness?
If so, should there be and is there redress?
o
What are the 2-4 most important short-term and long-term
initiatives the private sector and the Federal Government should
be undertaking to improve our global competitiveness?
SOME ADMINISTRATION COMPETITIVENESS INITIATIVES
FISCAL YEAR 1991
0
Reducing the tax on capital gains to spur
entrepreneurial activity.
The Administration has proposed restoring a capital
gains tax differential such as existed before the Tax
Reform Act of 1986.
0
Making the research and experimentation (R&E) tax
credit permanent to reduce uncertainty.
Under the current law, the R&E credit is scheduled
to expire on December 31, 1990. The Administration
proposal to make the credit permanent would permit
businesses to expand without fearing that the tax
laws will suddenly change.
0
Protecting negotiations. intellectual property through international
The Administration is aggressively pursuing
improved international protection of intellectual
property. Negotiations on intellectual property rights
are being conducted in the World Intellectual
Property Organization and in trilateral talks with
the European Community and Japan, as well as in
the Uruguay Round of GATT.
0
Reforming product liability laws to restore balance
to the tort system.
The Administration supports the adoption of uniform
product liability standards across the 50 States. The
proposed changes to product liability laws would
maintain incentives to produce safe products, but
would restore balance to the tort system and reduce
uncertainty - particularly for new products.
0
Removing barriers to research. innovation. and
development.
The Administration has proposed legislation that
would make it easier for companies to enter joint
production ventures by requiring challengers to prove
such ventures would harm competition. The
legislation would also eliminate punitive treble-
damage awards which have made it lucrative to
discover antitrust violations in almost every activity
of business.
0
Developing advanced technologies to meet
government and civilian needs. Some specific
advanced technologies that receive support from
more than one Federal agency are:
Robotics - The budget provides $192 million
to six Federal agencies for support of robotics
R&D. The focus of this R&D is on the
development of systems that are more
autonomous and capable of interacting with
changing and uncertain environments.
High Performance Computing - The budget
provides $469 million for Federal support of
R&D focused on high performance computing.
This activity includes the full range of
advanced computing technologies as well as
the systems and applications software,
networking, and underlying research and
human resource infrastructure.
Semiconductors - The budget provides $537
million for research on: semiconductor
materials; development and application of
semiconductor materials to meet agency
mission needs; and, support of R&D on
semiconductor manufacturing processes. The
largest single Federal program is DOD
funding of $100 million per year for
SEMATECH.
Superconductivity - The budget provides
$215 million for superconductivity R&D.
Programs in five Federal agencies deal with
beth high temperature and low temperature
superconducting phenomena and materials.
Advanced Imaging Technologies - The
budget provides $118 million for advanced
imaging R&D. Advanced imaging systems
include interactive graphics, high definition
displays, advanced signai processing, and
advanced digital switching technologies.
0
Improving productivity and the quality of life
through biotechnology. The budget proposes $3.6
billion for biotechnology R&D in pharmaceuticais,
foods, agriculture, waste management, and energy.
Developing technologies for improved transportation.
The budget proposes funding for transportation R&D
of $1,527 million. Federal programs are focused on
aeronautics, highways, mass transit, railroads,
maritime, water, aviation, and other transportation
areas.
0
Promoting alternate sources of energy. For conduct
of energy R&D programs in the Department of
Energy, the budget proposes totaling funding of
$2,450 million. Federal programs cover a broad
spectrum of energy technologies including solar,
renewable, conservation, nuclear fission, nuclear
fusion, fossil energy, and supporting energy sciences.
0
Enhancing industrial productivity and development
of standards. The budget proposes $198 million for
the National Institute of Standards and Technology.
R&D in fundamentai measurements and standards
provides the foundation for U.S. industry, commerce,
and science to achieve levels of accuracy and
compatibility required to support technological
development, efficient processing, process controi,
and quality assurance. Special activities include
R&D. on in-advanced manufacturing technologies. In
addition, the Advance Technology Program provides
grants to industry-led consortia to support
development of generic, pre-competitive technologies.
0
Creation of the Precision Manufacturing Technology
Program by the Department of Energy to provide
U.S. industry greater access to the extensive
manufacturing technology, expertise, and facilities
available within the Department's Defense Programs
weapons complex.
0
Establishment of Regional Manufacturing Technology
Centers. The budget provides $5 million for this
program. The approach is to reduce the barriers
faced by smail- and medium-sized manufacturers in
adopting new technology by: creating awareness,
providing up-to-date, practical information and
expertise, and supporting implementation.
The
Need
To Know
BY LEO CHERNE
he primary purpose of intelligence is to avert war by
I
flagging dangers to national security. The second role
of intelligence is to help us make the wise judgments
needed to retain our military, political and economic
strength against the many threats to each of these.
And some of these dangers will grow in the years ahead.
We are living in a world in which interdependence increases
more quickly than we are able to assimilate its significance. That
interdependence involves manufacture and trade, commodities and
credit communications, vital resources and ideas. It also stimulates
tensions between nations and instability within them. The tech-
nological developments that have revolutionized world banking
when confronted with a system that prohibits the freedom of the
and the transfer of credit result in consequences requiring prompt
press. Civil libertarians are slow to criticize a system that most com-
and accurate assessments. The United States depends increasingly,
pletely obliterates civil freedoms.
even for vital sources of military strength, on capabilities and resources
It is said that Marxist-Leninism as an ideology no longer exerts
that are diminishing within its borders and increasing elsewhere.
the appeal it once did. Nevertheless, each of the previous paradoxes
The difference of intelligence in the democracies and the
remains and is now expressed not by yesterday's adulation of the
Marxist-Leninist states is that the normal purpose of Western foreign
war-maker, the USSR, but by a constant and undiminished opposi-
intelligence is to buttress stability, make change as unturbulent as
tion to those who would keep the Kremlin's dangerous propensities
possible and protect the democratic order.
in check. In short, we, not they, are the enemy.
The KGB's role is almost the precise opposite except within its
political domain. Its function is to generate and exploit turbulence.
The Ambiguity about Hostility
"The worse, the better" is an old Russian nihilist maxim that aptly
Today's and tomorrow's societies differ in critical respects from
describes the thrust of Leninist intelligence activities wherever
the international military environment that essentially ended with
stability exists. The Soviet intelligence apparatus is inherently the
World War II.
provocateur, the merchant of disorder, the magnifier of social,
Among the 42 current conflicts involving 4 million people
economic or political weakness or distress.
engaged in wars, rebellions or civil uprisings, few nations have
One of the requirements for the late Eighties is to confront the
declared war upon another. This ambiguity about hostility today
fact that there are those intellectuals who are blind to an adversary
places a particular premium upon effective intelligence.
that prohibits ideas. Peacemakers exist who are uncritically ready to
The massive lethal power possessed by the great nations-and
serve a perpetual war-making machine. Journalists develop myopia
most particularly the United States and the USSR-has had a still
inadequately understood effect upon warfare. Smaller nations are
Leo Cherne is vice chairman of the President's Foreign Intelligence Advisory
infinitely more free to take belligerent action than are the two
Board, which reports directly to President Reagan. He is the executive director of the
muscle-bound giants.
Research Institute of America, which he helped found. This article is used with per-
This does not mean that the United States and the USSR adapt
mission of the National Strategy Information Center, Washington, D.C.
to this reality similarly. The belligerent propensities of smaller
38/Journal of Defense & Diplomacy v.4,n.5, May 15, 1986
senior statesmen, active and retired military officers and national
security specialists from 12 countries convened to consider the
character and extent of state-sponsored terrorism. Among their con-
clusions, the following are particularly penetrating:
The problem indeed is not just loose, gang-like incursions. It is
terrorism-state-sponsored, state-supported, state-condoned, and
even state-directed. Tyrannical and totalitarian ideologies have now
subscribed to a new gospel of violence as an instrument of political
change. A "radical entente" presently spearheaded by five militant
states (Syria, Libya, Iran, North Korea and Cuba) is making coor-
dinated efforts-by themselves and with others-to undermine the
power and influence of the United States and its allies. Here the well-
documented role of the Soviet Union is to provide the professional
infrastructure of terrorism including money, arms, explosives, re-
cruitment and training, passports, infiltration and escape routes,
transport, communications, safe havens, control officers and more.
Taken together, these constitute an elaborate international network
of support systems for terrorists.
This is not to suggest that the Soviets push the buttons and that
their hand is always, directly or indirectly, in play. None of us sub-
scribes to that kind of oversimplification. But where they do not
initiate it, they encourage it. The destabilization and subversion have
a pattern which serves Soviet interests, and this must be faced by
leaders of the Free World even if, for the moment, it is not high on the
official diplomatic agenda. Both lives and liberties are at stake. We
must learn more about what we are dealing with-and do more
about it.
Meanwhile, the Soviet Union has pursued twin objectives
since the end of World War II: to separate the United States and
Western Europe and to mount a relentless, sophisticated and sur-
prisingly effective propaganda campaign to persuade the world that
peace is the Soviets' true purpose and that the risk to that peace
resides in Washington, not Moscow. And the Soviet Union has per-
nations all too often involve the interests of the superpowers and,
fected the manipulation of proxy bodies essential to the propagation
somewhat less often, the participation of a superpower by means
of that all too widely accepted fantasy.
short of war. How, where and why such indirect intervention occurs
A great danger to stability is surprise. It is the vital attribute of
is a crucial difference. So, too, is the freedom or eagerness with
terrorism and aggression. Intelligence is our only available instru-
which such indirect action occurs.
ment to keep these disasters in check.
The Soviet Union has pressed to the hilt the use of proxy
nations to perform its purposes, content to rely on the fear of wider
Means and Ends
war to keep the United States largely paralyzed.
Terrorism provides the clearest spotlight with which to
Within this rubric, we have seen the growth of a new form of
illuminate the true purpose of intelligence. Critics of U.S. intel-
war-terrorism-supported, if not spawned, by nations virtually
ligence efforts virtually never extend their distaste to include intel-
secure in the absence of risk to themselves. Such involvement is
ligence designed to alert the nations to impending terror or to
invariably supported by the Soviet Union and its client states, while
identify the terrorist perpetrators once they have struck. Yet in no
joint action to punish those who unleash terror is shunned by
respect is the function of intelligence, whether analytic or clandes-
U.S. allies.
tine, different when applied to the frightful consequences of ter-
There will be no more difficult task for intelligence in the years
rorism than it is when applied to other international hazards, some
ahead than to penetrate the small, fanatical groups that perform the
of which involve the threat to life and human safety that are infinitely
terrorist acts, groups utterly without moral restraint and that hold
greater.
the innocent in complete contempt. But that intelligence task
Intelligence will be increasingly important with each passing
becomes a nearly impossible one unless there is a better
month of these years ahead to protect not only freedom, security and
understanding that terrorism is itself simply another form of
stability but to enhance the safety and stability of all the nations that
warfare.
seek to avert war and cultivate their own growth with minimal risks
One of the most penetrating and accurate descriptions of the
to their own tranquility. It is here that the rapid growth of inter-
true nature of terrorism was contained in a statement from a con-
dependence is especially relevant. Following are listed a few of the
ference on "State Terrorism and the International System," held by
major dangers in which intelligence is an indispensable tool.
the International Security Council in Tel Aviv. Sixty prominent
A decision was made by a handful of men that led to an oil price
Journal of Defense & Diplomacy/39
reduction by more than a third in less than a month. The life and
involving the dramatic economic difficulties we are likely to face,
death of nations and their economies will rest on how low that price
that the intelligence community is, or should be, the sole source of
falls. Some nations will benefit. Others face unmanageable social
the information and judgment required for wise and timely govern-
and economic turbulence. The consequences to the United States
ment policy.
are many and varied. A number of U.S. banks may be in jeopardy.
It is clear that in specific fields and on a number of the potential
Some industries and many localities face serious hardship. And
difficulties lying ahead, the U.S. Department of the Treasury, State
even as others momentarily remain unaffected or even benefit, an
Department, Federal Reserve Bank and Department of Commerce
economic fire storm may overtake all of us. Only wise, and some-
have specific responsibilities, and they are assisted by sophisticated
times swift, government policy provides the possibility of moderat-
sources of information available to them. Contributions made by the
ing these consequences. Policy formation will be at least partially
intelligence community to those key government agencies are on
blinded in the absence of effective intelligence.
the one hand supplementary and on the other indispensable.
A number of less-developed nations are now indebted to
Not only must each of these instruments of the federal govern-
banks and government and international institutions by more than
ment seek to improve their own sources of advanced knowledge
$900 billion. It is less the debts than the consequences that flow from
and judgment, not only must the intelligence community make a
their payment or nonpayment of the interest on those debts that
hold a world economy in thrall.
It is unfortunate that many of those now in debt are countries
that only recently adopted democratic governmental forms. Political
and social instability in those countries can swiftly snuff out that
recent progress. The danger may be as close to the United States as
its southern border.
The meeting of the five leading finance ministers of the indus-
trial nations illustrates the urgency of cooperative international
policy if these shoals are to be navigated. Intelligence is an indispen-
sable mapmaker of the charts needed to navigate these shoals.
This is the age of high technology married to the information
age of microchip, supercomputer and the new sophisticated
unique contribution to that input, but it may well be that the greatest
robots.
contribution required in the interval ahead is one that addresses
Labor-intensive industries will continue to die or adjust, move
itself to more effective coordination of intelligence sources without
their operations to countries that suddenly enjoy comparative
which the policy responses may prove inadequate or late.
advantage or merge with successful foreign competitors.
There are virtually no U.S. automobiles made entirely of U.S.-
Tough, Indispensable
made parts. The five leading Japanese car makers are now operating
There are other very specific intelligence tasks that will be of
on U.S. soil. Television brings to every home in the United States the
increasing importance for the balance of this decade. Some of them
$3,990 blessing of the Yugo, and South Koreans will make their
are altogether new. Regrettably, almost none of them are easy. Yet
automotive presence vivid indeed with the $4,995 Hyundai.
they are indispensable.
There are all the makings of international tension in these facts
Among the urgent tasks for intelligence will be to fathom the
of disappearing U.S. manufacture and growing U.S. manufacturing
means by which the Soviet Union intends to derive the benefits of
unemployment. And the mix is one that threatens the growth of pro-
the information age while withholding from its managers the
tectionism. And all this is the grist of governmental policy that
technology and the freedom to use it, which are essential to
depends on accurate and early intelligence.
eminence in the revolutionary structural change taking place.
Some of the best work on this process of structural change is
Linked to the challenges of the information age, a host of
being done by the analysts in the Central Intelligence Agency
intelligence questions emerge from the convulsive demographic
augmented by expertise derived from conferences, many of them
changes taking place in the Soviet Union. These changes are shifting
unclassified, with businesses, universities, think tanks and others.
the balance of population to the Muslim republics and away from
Russia, where its government, industry and education are concen-
The Age of Information
trated. By what means can these ethnic tensions in the European and
Most observers who have studied the structural change
Asian USSR be exacerbated?
referred to believe we are entering the greatest threshold of de-
Is it possible that the Soviet Union had chosen to buy and steal
stabilizing change in the history of man-greater than the change set
the high technology it requires because those means of acquiring the
into motion with the birth of cultivated agriculture, greater than the
most advanced technology are easier and cheaper than inventing
industrial age that followed, greater than mass manufacture, greater
and producing their own high-tech breakthroughs? Their technical
than the birth of the service economy that now provides more than
ability is surely not the total impediment.
70 percent of U.S. jobs. We have entered the age of information, and
The spreading high-technology capability in the Third World
we will wander through it blindly unless effective intelligence is an
creates an increased difficulty in averting transfer of sensitive
instrument that helps shape prompt, effective and peaceful policy.
technology to the Soviet Union. And this, too, will complicate the
Without it, there is the greater certainty of turbulent, divisive and
task for intelligence.
dangerous economic conflicts.
This new environment suggests still another need that partially
The focus on intelligence requirements for the balance of this
involves both intelligence and the continuous planning for indus-
decade may leave the misleading impression, especially in areas
trial mobilization that is the Defense Department's responsibility.
40/Journal of Defense & Diplomacy
months
That question is, how do we manage our economy in an emergency
the wave of the future is not assuredly theirs.
when we are increasingly dependent on strategic materials, facilities
Do we periodically subject our most certain conclusions and
and processes in other nations that may or may not be amenable or
cherished conceptions about our adversary to remorseless reex-
reliable when needed?
amination? For example, are we too ready to assume that the Soviet
There is still another intelligence question regarding the
Union's economic problems significantly diminish the continuing
periodic difficulties in securing participation by U.S. allies in one or
danger to security represented by Soviet power and will?
another of the international difficulties we confront. Perhaps the
It is clear that the tasks ahead for intelligence are both different
most striking illustration of this question is why nations that have
and greater than any intelligence community has previously con-
suffered the destruction of life and property by terrorists far more
fronted. There will be many problems in dealing with this painful
than the United States appear quite unwilling to associate them-
reality. Almost all of them are affected significantly by the public's
selves with the United States in any action to redress state-
misconceptions, let alone repeated evidence of media hostility.
sponsored terrorism.
There are bureaucratic and budgetary problems. There are prob-
Do we really understand why this is so? Are we altogether clear
lems that flow from the very nature of a democratic state and some
why neutralism and unilateralism play as large a role as they do in
that flow from the particular culture of the United States. The United
States has a remarkable tendency to look at the mirror when it con-
siders its adversaries, and mirror-imaging is the curse of accurate
intelligence.
The United States must also ask: can U.S. intelligence be as
good as it must be as long as U.S. knowledge of foreign languages
and cultures remains as poor as it is and is handicapped further by
the disinvolvement of centers of learning, research, science and
technology, some of which shun "contaminating" contact with
the world of intelligence?
In conclusion: a prophecy and a challenge. One is unavoidable,
and the other as yet unmet.
Less than 50 years ago, the United States, unlike England, had
Europe? May not the distaste for the United States among many
no need for economic intelligence. Whatever intelligence the United
Europeans exist because they correctly perceive the Soviet danger
States had was focused on the capabilities and intentions rooted in
and correctly judge that they cannot moderate that danger, while the
dangers it perceived to be military.
United States, by opposing the Soviet Union, would involve its allies
During the remainder of the decade, the greater threats to
in a risky and costly hazard they are not prepared to assume?
stability will flow from economic, social, cultural and political haz-
Can we win the war of systems if we cannot win the war of
ards. Do not misunderstand. It is not that the military dangers have
ideas or are unwilling to pay for what it takes to do so? The Soviet
receded. They have changed their character but are painfully with
Union spends far more to jam VOA, BBC, Deutsche Welle and Radio
us. But a new panoply of dangerous troubles creates urgent intelli-
Français than the West spends in efforts to reach the Soviet Union.
gence needs in the years immediately ahead.
Are there means that have been neglected?
Among the pressing tasks facing intelligence for the balance of
The Challenge
this decade is the redefinition and legitimization of covert action,
Now the challenge! The actors in this new international drama
unless of course we are prepared to accept the notion that covert
are not only governments, but include industries, labor unions,
action is legitimate if used by the Soviet Union, its client states and
universities, banks and stock and commodity exchanges.
the states that sponsor terrorism, but unacceptable as a U.S. counter-
Intelligence has thus far been essentially limited to informing
force. We are no longer in Henry Stimson's world where "gentle-
other government sectors. The United States imposes understand-
men do not read others' mail" or George Kennan's world where "if
able limits-and they are sharp-to keep the world of foreign intel-
covert action cannot be kept secret, it must not exist."
ligence and U.S. domestic life apart. The United States also has its
And closely linked to this, a fresh assessment must be made of
antitrust laws. It does not, as the Japanese do, have an instrument
the consequences of sharply limiting the presence of the KGB on
like MITI that performs some of the coordinating and judgmental
U.S. soil. The Soviet Union's pervasive capabilities for telephonic
functions for Japanese industry.
eavesdropping enjoy immunity among us, and they operate from
Yet, how does the United States meet the manifold challenges
key urban locations. How can genuine symmetry be achieved in the
of the Information Age? How does it share essential intelligence
privileges the Soviet Union enjoys in the United States and those
with the private sectors of society, the sectors upon whom tomor-
they accord Americans in their midst? This is a major challenge that
row's eminence depends?
will continue to bedevil U.S. intelligence.
And even were that intelligence to be shared, there remains the
If the Soviet Union is long permitted to enjoy a field day in the
central problem that exists even in the most urgent governmental
United States, it should be noted that they have not had uninterrupt-
use of intelligence-how to make effective use of the information.
ed success in many of the world areas under their influence. We
By informing a man about to be hanged of the exact size, location
must better understand what is producing Soviet distress among its
and strength of the rope, you do not remove either the hangman or
clients elsewhere in the world and particularly in Africa. That dis-
the certainty of his being hanged.
tress varies, but it has included Egypt, Somalia, Mozambique,
All that intelligence can do is seek to concentrate the mind suf-
Grenada, South Yemen and Tanzania. There are now several on-
ficiently to reduce the chance of unanticipated crisis or, more hope-
going insurgencies fighting against Soviet-backed Marxist regimes;
fully-and less likely-avert it altogether.
Journal of Defense & Diplomacy/41
JOURNAL
O F
DEFENSE DIPEMACY
Vol. 4. No. 5
May 1986 $3.00
NAVY DEPARTMENT
INTERVIEW: JOSEPH LUN$
MAR 16 1987
LIBRARY
REPORT ON ALGERIA
BATTLEFIELD COMMUNICATIONS