Clinton Reportedly Orders CIA to Focus on Trade Espionage : Intelligence: Shift in priorities reflects Administration’s concern about economic rivals. Sources point to agency’s secret role in aiding talks that opened Japan’s auto market.

President Clinton has ordered the Central Intelligence Agency to make economic espionage of America’s trade rivals a top priority, and the agency has been scoring secret successes in trade talks with Japan and other nations, according to sources in the intelligence community.

Among the successes, sources say, is strong intelligence information the CIA provided on the Japanese during this spring’s heated auto trade negotiations between the Clinton Administration and Japan. “We’ve done really well with the Japanese,” one source said.

The trade talks ended in compromise, but only after critics charged that negotiators and officials in each country had misjudged the political undercurrents influencing their rivals. Even so, sources say U.S. Trade Representative Mickey Kantor has been pleased with the agency’s ability to provide accurate reports on the bargaining positions of America’s rivals in the Japan trade talks and other negotiations.

The CIA refused to comment, and it is unknown how the United States targeted the Japanese side of the negotiations, and whether it did so with electronic eavesdropping methods or with covert agents.

The new focus on economic intelligence reflects the high priority that the Clinton Administration has placed on international economic issues in foreign policy. Sources say the President has issued a classified set of intelligence priorities for the post-Cold War era that calls for the CIA to take economic espionage off the back burner, where it languished for decades as the agency focused on traditional issues such as the Soviet Union’s nuclear capabilities.

The shift to the economic arena actually began well before Clinton’s new directive. Once it became clear that economic rivalry with industrial superpowers such as Japan and Germany was being viewed by the White House and Congress as a critical national security issue following the collapse of the Soviet Union, the agency began to divert resources from Russia and other traditional targets to meet the new demand.

“The economic issues have come to the fore in this Administration, and so the intelligence community is moving to support the policy-makers,” said one former intelligence community expert on economic espionage.

The shift has not been an unqualified success, however. The CIA has recently experienced humiliating failure as well as victory, with perhaps the greatest defeat coming in a bungled operation in France that is now the subject of a confidential investigation--at the urging of the Senate Intelligence Committee--by CIA Inspector General Frederick P. Hitz.

As a result of the French debacle, new CIA Director John M. Deutch has vetoed plans for Joseph DeTrani, the 53-year-old chief of the CIA’s European division, to become the CIA’s Paris station chief, sources say. As European division chief, DeTrani--who once served as the CIA’s public spokesman--had responsibility for overseeing the agency’s covert operation to penetrate the French government and unearth the secrets of French and European Community economic and trade policies--much as the French have spied on American corporations.

But DeTrani watched helplessly in late February as the French intelligence service rounded up at least five of his agents, and then, on the eve of French national elections, trumpeted its victory over the CIA in the French press.

Deutch canceled plans to make DeTrani the Paris station chief, sources say, out of apparent concern that one of his first major overseas appointments would draw fire. Other sources also suggested that he was particularly concerned about the reaction of U.S. Ambassador to France Pamela Harriman. Deutch apparently fears that Harriman, who was called in by the French government in protest following its exposure of the CIA operation, might see DeTrani’s appointment to run the Paris station as too provocative, sources say.

Meanwhile, sources say that Dick Holme, a legendary figure within the CIA who survived a fiery plane crash in Africa early in his career and was apparently serving as Paris station chief during the botched operation, is leaving the post.

Yet, while observers concede that the French debacle represents an embarrassing defeat, analysts stress that it is just one of the opening salvos in the struggle over economic intelligence.

In fact, Deutch said in a recent interview that he now views economic policy-makers at the Treasury Department, the U.S. Trade Representative’s Office and the National Economic Council as among the most important “customers” of the agency’s intelligence-gathering.

Sources add that the CIA is providing its clandestine case officers with new training to be more adept at working on technical economic matters.

Critics charge that such training is badly needed. CIA officers now eager to report on economic matters are frequently tripping over State Department economic experts. CIA officers posted around the world sometimes send back reports that provide little insight that cannot be learned from State Department reports based on open sources of information, the critics say.

“We have always done economic intelligence,” one analyst said. “The difference is that now it has moved up in the batting order. It has become a much higher priority.”

As the effort goes forward, Washington is debating how to avoid getting caught in legal or political quagmires similar to the French incident. CIA officials now argue that they should be kept out of any spy work targeting individual foreign businesses at the behest of U.S. corporations.

Instead, they argue, the intelligence community should focus on broader economic issues such as trade negotiations, while also providing protection for U.S. firms from penetration by foreign intelligence services.

Uncovering bribes by rival nations when they are competing against U.S. firms for government contracts around the world is another area that the CIA is developing. Last year, for example, the CIA discovered that the French were offering bribes to Brazilian officials to help a French telecommunications giant win a huge government contract. The information helped a U.S. company, Raytheon, match a bid by Thomson of France and win the work.

Indeed, the intelligence community has told Congress that it can claim credit for uncovering bribes affecting $30 billion in foreign contracts over the past two or three years. But while other major industrialized nations are not shy about passing intelligence directly to corporations, the CIA is reluctant to allow its data to go outside the government. Even when it inadvertently receives information about a foreign rival that could benefit an American company, the CIA is loath to pass it on.

That reluctance is due, at least in part, to the difficulty in an era of multinational corporations of determining which firms should be considered American and which should not. So the agency is drawing a line against engaging in what it considers direct “industrial espionage” on behalf of specific firms.

“The practice of industrial espionage is an unnecessary perversion of the intelligence process,” Hitz argued in a rare public speech on the issue.

The new focus on economic espionage has put the intelligence services of the United States and its allies in a delicate position: They are spying on each other to gain economic advantage at the same time they are continuing to share information on military and national security affairs.

As a result, French and American intelligence officials working on Bosnia, for example, have been forced to play a polite game of amnesia, forgetting for the moment that at least some of their agents are going head to head against each other. But tensions have clearly worsened.

This year’s French debacle quickly faded from the headlines, and the French apparently did not pursue their request that five U.S. citizens leave the country. But the case remains a sore point with the CIA because the French have become one of the agency’s toughest adversaries in economic espionage.

Intelligence sources say that the French intelligence service has become openly aggressive in targeting U.S. corporations to steal technical or trade secrets, and sometimes ransack the hotel rooms of U.S. executives traveling in France. U.S. officials have previously disclosed that Washington obtained information showing that the French intelligence service had compiled lists of U.S. corporations that it planned to target for espionage.

What’s more, the Paris Air Show, which attracts the elite of the aerospace industry, has become a favorite location for French intelligence agents to try to steal the secrets of U.S. defense firms, officials say.

The CIA’s investigation into the Paris debacle is not complete, but sources say the agency’s efforts to gain economic and trade intelligence from the French failed partly because of the role played by a female agent who was discovered by the French intelligence service after she became involved with a French official. By following her activities, the French were able to identify other CIA officers.