Woolsey Cites Dangers in Economic Espionage : Intelligence: U.S. will have clear policy to govern, and defend against, such activity, CIA nominee says.

R. James Woolsey, President Clinton’s nominee to be CIA director, promised Tuesday that he and top Administration officials will come up with a new policy soon spelling out how far the U.S. intelligence community should go in collecting economic data that may help American companies compete in the global marketplace.

During confirmation hearings before the Senate Select Committee on Intelligence, Woolsey made it plain he is extremely reluctant to get the CIA into the business of industrial espionage, an endeavor he warned is “fraught with complexities, legal difficulties (and) foreign policy difficulties.”

But he said he has already talked to National Security Adviser Anthony Lake and National Economic Adviser Robert E. Rubin about reviewing the whole field of economic intelligence. Woolsey suggested the CIA might aid American companies both by helping them to defend against industrial espionage and by providing them with intelligence about economic trends.

In setting up the new National Economic Council and in changing other agencies’ priorities, the Clinton Administration has underscored its intention to bring more of the federal government’s resources to bear on improving America’s economic position.

Focusing the U.S. intelligence community’s attention on economics is “in some ways the hottest current topic in intelligence policy issues,” Woolsey acknowledged. “. . . The very difficult question on this (is) whether the U.S. government under any circumstances should share any types of economic intelligence . . . with private citizens or corporations.”

Woolsey, 51, a Washington lawyer, served as undersecretary of the Navy in the Jimmy Carter Administration and as an arms control negotiator for Presidents Ronald Reagan and George Bush. His cautious approach to the idea of putting the CIA to work on industrial espionage extended to other ideas for intelligence changes as well.

He indicated that he hopes to make gradual, rather than sharp, reductions in the budget for the intelligence community, and that he is reluctant to make public the figures on how much the CIA and other U.S. intelligence agencies spend each year.

“This is a somewhat more complex matter than it may at first appear,” Woolsey said when questioned about the need to keep the budgets secret.

He asked the senators for some time to discuss the issue with other Administration officials, possibly including President Clinton, before recommending whether to maintain the secrecy.

Despite Woolsey’s unwillingness to embrace changes at the CIA or to give many specifics in his testimony, most of the senators said they will support his nomination. The committee is expected to clear the appointment today, and the full Senate will probably vote for confirmation in time for Woolsey to start the job next week.

Throughout his testimony, Woolsey argued repeatedly that the end of the Cold War and the breakup of the Soviet Union have not reduced the need for American intelligence collection.

“In many ways, today’s threats are harder to observe and understand than the one that was once presented by the U.S.S.R.,” he declared in his written statement to the Senate committee. “. . . Yes, we have slain a large dragon. But we live now in a jungle filled with a bewildering variety of poisonous snakes. And in many ways, the dragon was easier to keep track of.”

The only specific intelligence change Woolsey proposed was an overhaul of the CIA’s system of “compartmentation” of information. Under this system, various groups and subgroups within the American intelligence community are cleared for access to different kinds of classified information, in such a way that few individuals are able to see all the available data.

Woolsey said he saw a potential for saving money because the current system “creates excesses . . . in facilities and personnel.”

During last year’s campaign, President Clinton released an economic blueprint that envisioned reductions of $7.5 billion from the U.S. intelligence budget over the next five years.

Woolsey said the President did not discuss this $7.5-billion figure with him before nominating him as CIA director, and Woolsey refused to give the senators any other commitments or specific numbers for possible cuts in the intelligence budget. He said he first wants to study exactly what tasks the CIA should perform and how its assets should be deployed.