Friday, December 20, 2013

Assessing the overt costs of the NSA controversy

As has been the case the last few years with the subject of the use of drones, some topics in national security seem to dominate policy discussions with great tenacity.  Such has also been the case recently with the topic of the controversial data-mining practices of the NSA, especially since the leaks by Edward Snowden.  While there is much to debate with concern to the NSA practices in the domestic arena, a significant level of attention needs to be turned toward the overt costs the Snowden leaks and the American response are having on the United States in the international environment. 
Consider the explicit costs that are mounting between the United States and Brazil, likely as a result of the revelations of NSA activity.  In an announcement that shocked  nearly everyone, Brazilian President Rousseff just announced that a huge defense contract that most expected was going to be won by Boeing is now being awarded to Sweden’s SAAB instead.   Most observers feel it was a decision personally made by President Rousseff who is still angry at having been the target of direct surveillance by the United States.  This was not just any contract, however.  It is one that had been negotiated for decades over the course of three Presidencies.  The initial contract is expected to be in the amount of around 4.5 billion dollars, with billions of additional dollars to follow over the course of many years in terms of servicing, supply, and parts.  It was one of the most coveted and sought-after emerging market contracts in the world.  Boeing had been so confident in earning the win, that they even built a large corporate office in Brazil and hired the former Ambassador to Brazil to be its executive.   Now, instead of  American F/A- 18 Super Hornets, the Brazilians will be flying Sweedish Gripens instead.   The French Dassault Aviation SA who had also been in the running, flatly called the Gripen an inferior product. The next generation of the Gripen is not even out of prototype stage yet.

Saab JAS 39 Gripen

One Brazilian government source bluntly told Reuters that “The NSA problem ruined it for the Americans.”  And the decision apparently came straight from the top, with even the lead  Brazilian air force commander saying he only heard of the decision the day before, in a meeting with President Rousseff.   While the dollar losses are staggering, one has to wonder how much opportunity for increased military cooperation with this important country will be hampered in the future, especially as they steadily upgrade their military standing and capabilities. 

Brazil remains skeptical of foreign nations trying to take commercial advantage of them.  They even lashed out at a Canadian company earlier this year, which Brasilia felt was conducting industrial espionage of their mining sector.  Thus, if states wish to curry favor with this important and growing nation, already predominant in its continent and beyond, losing their trust must be considered extremely costly.

The direct costs are definitely not limited to lost contracts by Boeing, however.   Cisco Systems, Inc., for example, complained recently that revelations of U.S. spying were negatively affecting the demand for its products in China.  In fact, a rare uniting of nearly all major tech companies such as Apple, Microsoft, Google, Facebook, LinkedIn, etc. occurred last week to lobby President Obama for reforms to the data collection, because they felt that public trust in the internet and such services like cloud computing, is being undermined by the NSA controversy, to the point that their business interests are being hurt, especially overseas.
The presidential advisory panel that was assembled by President Obama last August after the Snowden leaks, to look into the matter of potential overreaches by the NSA, has finally gotten back to President Obama with some 46 recommendations.  Without question, most of the recommendations are aimed at domestic concerns of the grand-scale data collection, but the panel could not ignore the international ramifications.  Amongst its recommendations is to make foreign spying on friendly states the call of policy-makers and not of intelligence officials.  They also included the suggestion that “back-doors” into software that the NSA has used to exploit data from large companies should cease.  It would be surprising, though, to see these measures by themselves placate angry world leaders such as Rousseff and Gremany’s Merkel without being accompanied by some sort of Presidential assurances that the espionage will not happen again.  The degree to which President Obama is unwilling to commit to that may help determine just how much further financial costs and lost trust will be incurred.  Moreover, international ears are especially keen to determine whether such promises are made equally, with some suggesting that concrete assurances against further espionage of personal communication is being made to German leaders but not necessarily to Brazilian and Mexican leaders, for instance. 

The path forward is a difficult one for President Obama and all of the defense policy makers in Washington.   This situation is an excellent reminder of how all elements of defense policy are intertwined, causing leaders to decide the best balance and trade-offs between robust intelligence gathering, allied levels of trust, defense systems trading, American jobs, and economic cooperation and growth.  In this specific case, the crux of that decision was captured in the question posed by someone involved in the Brazilian defense negotiations.  Enquiring about the benefit the US earned in its electronic surveillance of Brazil, he asked simply, “Was that worth 4 billion dollars?”

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