Canada, Brazil and how snoops are threatening free trade

An in-depth Econowatch report
This photo provided by The Guardian Newspaper in London shows Edward Snowden, who worked as a contract employee at the National Security Agency, on Sunday, June 9, 2013, in Hong Kong. The Guardian identified Snowden as a source for its reports on intelligence programs after he asked the newspaper to do so on Sunday. (AP Photo/The Guardian)
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What really happened

Was a top-secret slideshow suggesting that Canada’s intelligence targeted Brazil’s Mines and Energy Ministry a “war game”? A fake? A completely hypothetical “paper exercise,” as Ray Boisvert, former head of counter-terrorism at CSIS, has been telling the media since the latest Snowden leak unexpectedly thrust Ottawa at the centre of a political and diplomatic spying scandal?

“I don’t buy that for a minute,” says Wesley Wark, a professor at the University of Ottawa and one of Canada’s leading experts on national security and intelligence. The slides, which surfaced for the first time in a Brazilian TV documentary last Sunday, detail “the beginning of an intelligence targeting effort” by the Communications Security Establishment Canada on Brazil’s Mines and Energy Ministry, according to Wark. Jeffrey Carr, founder and CEO of Seattle-based cyber security firm Taia Global, gave Econowatch much the same assessment: The slides are no simulation.

So that takes care of the first question that this bizarre Brazilian affair raises: There is one answer out there being spun by former Canadian intelligence officials and a different one give by authoritative, independent experts. It’s up to you to decide which you want to believe, but in this post, I’m going with the latter.

Why it happened

Let’s move on now to the second question: Why on earth were we snooping (or trying to snoop) on Brazil’s Mining and Energy Ministry of all things?

The hypotheses that have been floated so far are (a) that we were trying to steal information for the benefit of Canadian mining and energy firms and (b) that we were after intelligence meant for government eyes only — maybe a useful backgrounder for trade negotiations.

Wark dismissed both of them. Hypothesis (a), he says, is implausible. Canadian intelligence agencies do not share information with private businesses — and it wouldn’t make any sense if they did, he told Econowatch. Private corporations in liberal democracies are independent beings, often with massive operations and headquarters in several countries and free to leave and re-incorporate somewhere else if they so wish. Why would a government trust these companies with information that could land it in serious trouble if intentionally or accidentally spilled? Second, big multinationals are quite capable of gathering their own information about market conditions and opportunities at home and abroad — it’s called, not by chance, business intelligence.

Countries who do engage in stealing trade secrets for the benefit of their domestic industries, Wark and Carr told Econowatch, are ones with state-controlled enterprises. Then it makes sense for governments to stick their necks out: The prize is accessing information that can help the business operations of the local national champions, corporate behemoths politicians trust because, after all, they’re just another part of the government. That’s why China and Russia do what they do.

The hypothesis that CSEC collected information useful for Ottawa in some kind of future, hypothetical trade negotiation seems less of a pie-in-the-sky story, because there is some evidence that CSEC fetched just such intelligence in the mid-1990s. Wark, though, is unpersuaded. Nothing, he says, indicates that CSEC has been up to similar deeds since 9/11, when the agency acquired a heavy focus on global terrorism, weapons of mass destruction and conflicts zone where Canadian troops were engaged.

Wark’s theory is that Canada was doing a favour to U.S. National Security Agency, a favour we felt we owed the Americans by virtue of our membership in the Five-Eyes, an intelligence alliance of Canada, the U.S., the U.K., Australia and New Zealand.

And why, then, did the Americans want to snoop on Brazil’s mining sector? Probably, just because they could, says Wark. Metadata collection analysis, which makes it possible to get a picture of the volumes and networks of telephone, email and Internet traffic across the globe, has given so called signals-intelligence agencies such as CSEC and the NSA enormous powers. The NSA, in particular, has amassed tremendous capabilities, and it has shown a propensity to test the limits of its new tools. “They probably weren’t interested in the content [of whatever they would find at the Brazilian Mining and Energy Ministry],” says Wark, “they wanted to see what they could do.” And they entrusted their junior partner, Canada, to carry out the task: Regular burden-sharing among allies.

What will happen next

The picture painted by Wark conjures up the image of a bunch of kids with a new toy, doesn’t it? America, the bigger one of the group, dared Junior — us — to try it out on the Brazilian mining sector, and we got caught.

Further questions, then, are: What, if anything, did America promise Junior in return? Where were the parents? And what will be the consequences?

Since there’s no answer to the first question, let’s skip to the other two. The parents — politicians, that is, who are formally in charge of overseeing the activities of their government’s intelligence agencies — have notoriously kept a very loose hand on anything involving metadata collection, and not just in the U.S. In Canada, it isn’t even clear whether Prime Minister Stephen Harper was aware that CSEC had taken on the Brazilian task.

As for the potential consequences for Canada, there are domestic ones: Will we strengthen oversight of CSEC? (More on that from Jesse Brown here at Maclean’s.) And there are international ones: What will this do to Canada-Brazil relations? I’ll leave to my colleagues in Ottawa to pursue the first, and focus on the latter.

The Brazilians, understandably, are mad. And Brazil is the “B” in BRICS, the group of leading emerging markets that Canada is so eager to do business with in order to diversify away from the U.S. The incident might make it difficult for Ottawa to ink any trade deal with Brasilia. But there might a bigger moral to this story.

The U.S. has long chastised China for engaging in economic espionage. American officials have drawn a sharp line between snooping to steal military secrets and spying to steal trade secrets. The first — even when practices on friends and allies — is kosher, the latter is not. The first is worthy of reproaching words, the latter of outright retaliation: The U.S. tries to block Chinese imports it believes were made by stealing American intellectual property rights, has lodged a number of complaints about this with the World Trade Organization.

The Canada-Brazil affair, though, shows that the fine distinction drawn by the Americans doesn’t always work so well. You and I might find Wark’s theory of what the CSEC was really up to far more plausible than the idea that Canada was trying to steal mining trade secrets. But will Brazilian President Dilma Rousseff be persuaded? If she isn’t, she would be entirely entitled — under the standards set by the U.S. — to retaliate against Canada via our bilateral trade channels.

It’s bad enough that real, intentional state-sponsored cyber theft threatens free trade. As former deputy U.S. Trade Representative John Veroneau told the Financial Times: “The great recession did not cause a surge in protectionism despite many predictions. But cyber theft is changing things.”

Canada’s case, though, shows that unbridled intelligence agencies in liberal democracies snooping around without check can also lead to misgivings that ultimately threaten free trade.

It’s time Canada and the rest of them get a grip.