Washington eyes giving new spy powers to Commerce Department

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It’s not just about business anymore.

Efforts to transform the Commerce Department into America’s “19th intelligence agency” are quietly under consideration in Washington as lawmakers and Biden administration officials struggle to find new tools to stop the loss of strategic technology and intellectual property to China and other U.S. adversaries.

Policymakers have discussed housing a new intelligence unit inside the Commerce Department, a long-term second-tier player in the Cabinet pecking order with the lead responsibility for export controls and foreign investment screening that supporters say will be crucial to the country’s growth.

Congress has directed the intelligence community to assess the feasibility and advisability of providing enhanced intelligence support to the Commerce Department as concerns about Chinese technological theft and economic espionage have grown.

Although the idea may be gaining currency, the department has image problems to address. Congressional investigators have looked into the department’s efforts and say they are inadequate.

The House Foreign Affairs Committee said in December that the department enabled a “virtually unrestricted” flow of American technology to China-controlled companies. A 2021 Senate investigation revealed that the department operated a “rogue, unaccountable police force without a clear mission.”

The Commerce Department shut down its widely criticized internal investigations unit after it came under congressional scrutiny for reportedly conducting unauthorized surveillance and investigations into people of Chinese and Middle Eastern descent.

Efforts to create a replacement security and intelligence team inside the department were immediately considered.

The debate over the Commerce Department’s power resurfaced last week when Sen. Todd Young, Indiana Republican promoted an idea — developed with Democratic Sens. Michael Bennet of Colorado and Mark R. Warner of Virginia — to create a federal middleman to analyze intelligence and commercial information to understand technological threats and opportunities.

“Some had proposed creating a new intelligence department within the Department of Commerce, something I’m open to, but it does seem as though we have a constellation of different intel agencies,” Mr. Young said at a Center for Strategic and International Studies event. “It seems to me this is a more modest approach and, therefore, more likely to ultimately see its way to passage.”

Critics say the U.S. intelligence bureaucracy is already too convoluted, with the CIA, the Defense Intelligence Agency, intelligence branches of the military services and intelligence services under the State Department, the Treasury Department and the Drug Enforcement Agency jostling for resources and jurisdiction.

Mr. Young said he favors an office of global competition analysis inside the Commerce Department and has drafted a bill with his Democratic colleagues to see it through.

Despite the concerns about Chinese advances and the targeting of sensitive American technology, not everyone sees the need for the proposed service.

R Street Institute senior fellow Adam Thierer has questioned what the Commerce and Defense departments are doing.

“Creating yet another bureaucracy seems unnecessary when our government already has 2.2 million workers spread across 436 federal departments,” Mr. Thierer said in an email. “Certainly some of them already handle what this bill proposes. Perhaps lawmakers should first investigate why all those other bureaucracies failed to do their jobs before adding another one to the mix.”

The office would also serve as a brake on potential U.S. export and investment deals in the heart of a department predicated on making those kinds of deals easier to carry out.

House Foreign Affairs Committee Chairman Michael McCaul, Texas Republican, investigated the Commerce Department and determined that its Bureau of Industry and Security had effectively enabled the flow of American technology to China to facilitate its rise into a technological, economic and military superpower rival to the U.S.

The committee’s investigation found that the Commerce Department’s bureau overwhelmingly approved applications for the transfer of technology to blacklisted companies identified on the Entity List, which names foreign people and enterprises facing restrictions because of national security concerns.

“Now is the time to fix this — and the stakes couldn’t be higher,” Mr. McCaul said in a December statement. “The United States must have a win-at-all-costs mentality in these emerging technologies and invest in innovation while denying and delaying China’s access to critical U.S. technologies.”

Mr. McCaul’s investigation said the bureau is understaffed and lacks resources to conduct proper oversight.

Perfect landing place?

Some say the changing strategic landscape makes the Commerce Department the perfect landing place for an office with more intelligence powers in the technology and export sectors.

A defense bill signed into law in December 2022 included a provision authored by Mr. Warner to review the intelligence community’s relationship with the Department of Commerce.

Mr. Warner, chairman of the Senate Select Committee on Intelligence, authored the provision calling on the Office of the Director of National Intelligence to implement a pilot program to assess whether to give intelligence support to the Commerce Department to benefit its export control and investment screening operations.

Asked about the three-year pilot program beginning in fiscal year 2023, an ODNI spokesperson confirmed it is continuing and has reached no final determination.

Jonathan Panikoff, who joined the Atlantic Council in 2022 after working on investment security at the DNI’s office, is a vocal advocate for making the Commerce Department the intelligence community’s 19th agency.

Last year, he wrote for Politico that a new intelligence service was needed for the federal government to spot danger from China that the Commerce Department should handle, such as spyware and threats embedded in foreign technology.

Given recent revelations about the department’s performance, winning broader public support for the idea could prove challenging.

The Senate Commerce Committee found in 2021 that the department’s troubled Investigations and Threat Management Service had evolved into a “rogue, unaccountable police force without a clear mission.”

Commerce Department employees monitored X accounts of people “critical of processes used to conduct the U.S. Census,” Senate investigators said. In another instance, the department interrogated a Chinese-born employee for hours over charges of espionage, only to have the charges dropped after the employee’s arrest.

Cato Institute senior fellow Patrick Eddington said the thought of making the Commerce Department into an intelligence agency was “beyond baffling.”

“Before Congress even considers any reauthorization or expansion of federal surveillance authorities or bureaucracy, we need to know exactly how badly our rights have been subverted by the existing agencies and [departments] of the federal government over the last five decades,” Mr. Eddington said. “We need a Church Committee 2.0, and we need it now.” He was referring to the post-Watergate Senate investigative panel that looked into executive branch abuses of the intelligence community.

Congressional appetite for a new intelligence agency amid danger from China may be determined by its assessment of whether Commerce Secretary Gina Raimondo, a former governor of Rhode Island already tipped by some as a potential future Democratic presidential hopeful, is up to the task.

After a China-linked hack ripped through the Commerce Department last year, Ms. Raimondo continued her planned trip to China. She defended the travel as necessary to de-escalate tension.

The Commerce Department did not respond to requests for comment on deliberation over whether to include the hack in the intelligence community.