Spy-fall: Trump imperils intelligence pact

0:10Hello and welcome to The Intelligence from The Economist. I'm your host, Rosie Bloor. Every weekday, we provide a fresh perspective on the events shaping your world.

0:25In the past decade, China has made great strides in AI and scientific innovation. Now its prowess is becoming evident in the field of biotech. Chinese firms are coming up with more and more medicines that will soon be coming to market. And you know those evenings when you're flicking through the reams of possible films and TV shows and wondering why you can't find anything that's worth watching? Well, our culture team may just have the answer for you.

1:02But first...

1:10Donald Trump has long had a tricky relationship with America's intelligence services. In his first term, he repeatedly contradicted his own spooks, including over accusations that Russia had interfered in the 2016 election. They said they think it's Russia. I have President Putin. He just said it's not Russia. I will say this. I don't see any reason why it would be. This term is already different. He's taking a wrecking ball to the spy agencies. I got to know a lot about that world, that we had some corrupt agents, and those people are gone, or they will be gone, and it'll be done quickly and very surgically.

1:49Trump loyalists are running the show at both the CIA and the FBI. Many long-term staffers are quietly packing up and leaving. Allies have watched with alarm and are starting to ask some difficult questions. After World War II, America and Britain, Canada, Australia, New Zealand, established this remarkable set of intelligence collection and sharing arrangements that became called Five Eyes. Shashank Joshi is our defence editor. This was and remains probably the most successful intelligence pact the world has ever seen. But that and America's wider intelligence alliances now look to be under some risk.

2:35So before we get to the risks, just explain to me exactly how connected these agencies are. They're incredibly connected. So we've got to distinguish here between human intelligence agencies, MI6, CIA, the kinds that recruit and run spies, the sort you'll be familiar with from, you know, John le Carré books, and signals intelligence or SIGINT agencies like the National Security Agency, the NSA in America, or GCHQ, its British counterpart, they both are very intimately entangled. The CIA has liaison officers with all its allied services. They do all kinds of joint operations, really, really work in close harmony.

3:10But in signals intelligence, it's a bit different. The bond is much closer still because their collection machinery, as they call it, the kind of things that hoover up bits of the internet and process it, send it along to other countries, it's all really bound up and entangled with one another. Each side trusts the other side to an astonishing degree. So there are lots of people from GCHQ and NSA seconded to the other side's organisations. And a CIA officer sits on Britain's Joint Intelligence Committee. So the level of trust is just really high. And why do you think there are risks now with Donald Trump's administration to that five eyes intelligence sharing?

3:53I think you could think about the risks in a few ways. One of them is Trump does something crazy. And this isn't hypothetical. We now have a mountain of evidence suggesting that he and or his aides directly threatened to kick Canada out of the Five Eyes alliance. The second risk is that allies basically grow concerned Trump is unreliable. In his first term, for instance, there was an episode where he divulged Israeli intelligence to the visiting foreign minister of Russia, probably the last person you'd like to accidentally divulge intelligence to. So they pull back. And I think the third risk, the one I certainly worry about a bit more is that the impact of appointing very ideological, radical people to the heads of American intelligence.

4:42Tulsi Gabbard is the director of national intelligence. Kash Patel, A very hard-righted eologue is head of the FBI. His deputy is a right-wing podcast host. That plus the effort to fire lots of intelligence officers from these agencies will corrode their effectiveness, making them less capable of doing the stuff that spies do, which is basically warning of threats to America and making sure that allies can see those warnings as well. So you mentioned Trump's threat to kick out Canada from the Five Eyes. Can it actually do that? A country has been sort of shut out of Five Eyes before. New Zealand was effectively suspended from the alliance from the 80s all the way to 2006 over disagreements over nuclear-powered ships in its ports.

5:26However, this signals intelligence machine is really closely integrated. You can't really just cut one country out without shaking up the entire machine. You would disrupt the flow of intelligence to America itself. There's also a lot of interdependence. Of course, America provides more intelligence to its allies than they provide to America. But that doesn't mean that America doesn't get anything. In the 80s, it was Britain that had the fantastic human spy inside the KGB, Oleg Gordievsky. Later on, it was the Dutch intelligence service who warned America that Russian hackers were inside Democratic National Committee systems.

6:06So America would lose a lot. Canadian signals intelligence stations are very important for the Arctic, an area that is of great concern to Donald Trump. However, obviously, lose-lose is also the end result of tariff wars, but that hasn't deterred Donald Trump, didn't deter him there, it may not deter him for intelligence. And what about the more likely scenario, which is that there's just less sharing and less communication between these agencies? What impact would that have? So my impression, I should say, right at the outset is that intelligence sharing for all of our panicked conversations and concerns is going on as normal, which might surprise you given the level of political alarm over Donald Trump.

6:47However, whilst it's not possible to just tone down signals intelligence sharing, so joint enterprise human intelligence agencies, they may have to think carefully before they share certain things with the Americans. You know, I spoke to one former very senior CIA officer who'd worked closely with Europeans, and he said, I'm sorry, but there's no way that an agency like MI6 will be offering the full level of detail on its source reports to the Americans as they would previously. There's just too much responsibility to protect your human sources for that to happen. So the risk is if this kind of friction transpires, it makes it more difficult to do the sorts of operations and analysis that was happening in late 2021, early 2022, saying, my God, Russia's putting loads of troops on the border of Ukraine.

7:37What does this mean? What does the intelligence tell us? How do we share it? That kind of stuff could become a little bit more difficult. I don't want to exaggerate it because, of course, as you know, whereas the intelligence agencies talk to each other even when political relationships are bad, that's kind of their job. And so there's a certain built-in resilience, I suspect. So how much power does Trump actually have over his agencies then? Oh, he has enormous power. I mean, if you look at the so-called President's Daily Brief, the PDB, that is the flagship product of America's 18 different intelligence agencies.

8:10The first customer of intelligence, as they say, is the president. And if he says, I want CIA operatives to go off the Russia beat and I want them going after Mexican traffickers, yes, all of them, they do it. There's no question. It's a democratic system that responds to the president. So he can damage them by changing their priorities. He can damage them also by sending a signal he doesn't want to hear intelligence that makes him suffer from cognitive dissonance. So for instance, if the CIA is saying that Vladimir Putin isn't that interested in a tough, balanced ceasefire in Ukraine, he wants a surrender of Ukraine with these draconian terms, Trump can say, actually, that's getting in the way of my diplomacy.

8:50I don't want to hear it. And the minute a president sends that kind of signal to his intelligence community, then if you're an analyst, a bit like in an authoritarian system, you don't send bad news up the chain. You don't tell Vladimir Putin his war's going badly in the same way that perhaps at some point down the line, you don't tell Donald Trump that his Russia policy is a hot mess. Shashank, as you say, all of this happens behind closed doors. How would we know and when would we know if there was less intelligence sharing? I don't think we necessarily would know what you're missing. If there are human intelligence reports that are sanitized, that lose details, that sort of are downgraded in levels of granularity.

9:28But it's important to understand, five eyes beyond the UK-USA arrangements, there's no big treaty-based pact underlying all this. With a stroke of a pen, Donald Trump can tear it all down. I think that what we will see over time is friction within the American agencies. We'll see people leaving, career officials being forced out, very experienced people being purged, recruitment suffering, morale suffering. the honesty and quality of intelligence analysis potentially suffering. And we will see some of that leak out into the public domain. Trump won't be the first president to have caused those kinds of problems.

10:05But given what he's doing to the American government across the board right now, he could be the one who does it on the biggest and most dangerous scale to date. Shashank, thank you very much. Thank you very much, Rosie.

10:50We'll see you next time.

11:03In recent months, China's progress in artificial intelligence has stunned the world. The emergence of DeepSeq as a contender in the field of AI has led to consternation among many in Silicon Valley. But a quieter yet equally significant shift is underway in biotech. Today, China's medicines are also surprising the world. China has been long known for churning out generic drugs, supplying raw ingredients for the pharmaceutical world, and also managing clinical trials for a lot of the big pharma companies. Shalas Chitnis writes about business. But lately, its drug makers are also at the cutting edge in terms of creating new kinds of treatments.

11:46And China has now become the second largest developer of new drugs behind America. we've talked before on the show about chinese prowess in ai and in science more generally but how have they been able to push ahead in the pharmaceutical field it was a very strategic decision by the chinese government to focus on biotech as one of the key pillars for their economy and this was something they had talked about almost 20 years back but realistically if you had to look at it chinese biotech really took off almost a decade ago sometime around 2015 when its national regulator reformed a lot of the regulatory structures that were there in China to be able to get new drugs to market.

12:28They increased the size of the workforce. They made it easy for smaller companies to get approvals to be able to start testing drugs on human trials. And so what all this happened was it made it much easier for smaller biotechs to be able to experiment and get new drugs into treatment. And this change also coincided with the return of what is called sea turtles. These are Chinese scientists or workers who have worked in Western companies or studied in Western universities and come back to China. And so frequently they bought their know-how and then they applied that to the biotech sector. And in parallel, what also happened is the government reformed the listing rules so that biotech companies could list a lot more easily, which again boosted the investment into Chinese biotech.

13:11I think it went from something like a billion dollars in 2016, private investment, to over 13 billion in 2021. And so a combination of these things, coupled with China's vast domestic market itself, helped the sector to grow. So it sounds like it was a real effort to put money and manpower into this area. That's true. But I would also say that Chinese have been very strategic in terms of the type of drugs they go after. The normal approach with generic medicines is to wait for the patent on a particular drug to expire and then copy that drug exactly. What the Chinese did is they used this approach called the fast follower strategy, which is essentially not waiting for a patent to expire, but look at promising molecules that have shown good results in either early or mid-stage clinical trials.

13:57Take the molecule and then improve it in some way so that you're not infringing on a patent, but you're developing something new. Either improve the efficacy, reduce the side effects, and come out with a better drug, so to speak. So by doing that, they were able to essentially skip the initial part of the drug development, which is frequently expensive and long, and jump directly to the part where they could actually start testing it in human trials. So that I thought was pretty clever. A lot of companies follow that approach, particularly in the area of cancer research. And what does all that mean for Western pharmaceutical makers?

14:31I think this is good news for big pharma, particularly because they're always on the lookout for promising candidates. A lot of the Western pharma companies, what they're doing is they're licensing these molecules from the Chinese biotechs, bringing them over to America. In a lot of cases, running the clinical trials themselves and taking it through approval. So in a sense, it's the intellectual property. It's the know-how around these particular molecules that is being exported by China, not particular drugs themselves. If you look at the patent cliff, which is the expected loss in sales that a lot of the big pharma companies are expecting through the end of the decade, I think the number is close to around$160 billion.

15:11So big pharma is confronting a huge loss in sales by the end of this decade. And so for them, this is great news because they can go out and license promising drugs. Most of these drugs have shown pretty good results in early clinical trials. There's still a lot of work to be done to take them through mid and late stage clinical trials, but still in some form they have been de-risked. So I think for big pharma, it's a really good source of promising treatments. Now, for American biotech companies, this is not so great news, because if you're a young biotech company in the US, you're also competing with the Chinese biotech.

15:45What I've also heard from a lot of investors is there's a quote unquote China discount. When you go out and license drugs from China because of all the geopolitical worries, you can actually acquire molecules for much cheaper than you would acquire in the US. And for young biotech companies in the US, this is not so great news. But for big pharma, of course, this is really good. And what stage are we at now? Are we seeing Chinese drugs on the Western market? Not yet, but I would say fairly soon we should start seeing that. We've had some candidates that have shown pretty good results in phase three, which is almost the last stage of clinical trials.

16:21So I would expect pretty soon we'll start to see a lot of quote unquote Chinese originated drugs on the market. There are already a few, but the huge influx that we'll start to see from some of these deals, that should start happening pretty soon. And we are talking about China and the US, Shailesh, and we haven't yet mentioned Trump or tariffs. So what effect might geopolitics have on all of this? Well, it's tough to say if it's certainty for anything these days, but I think this is one of those areas that is reasonably insulated from the trade wars and the reason for this is twofold. First is the Chinese companies are not exporting drugs per se it's actually the licensing of the molecules and so in a sense American companies are actually getting innovative treatments that they didn't have access to before.

17:04The second thing is it's actually in America's interest to be able to license these innovative treatments cheaper particularly at a time when drug prices are so high, it takes a long time to get new drugs on market. Here you have a source that can potentially either lower the cost of treatment or get you to market sooner, which I think should be something that is welcome. Fascinating stuff, Shelesh. Thank you so much. Thank you for having me.

17:42I think the thing I've enjoyed the most so far this year is Wallace and Gromit, Vengeance, Most Foul. It's a stop-motion animated film, and it follows Wallace, who is an inventor, as he creates an orbot, which is a helpful garden gnome. It's a very timely, very funny satire of artificial intelligence. My choice of what to watch is Mickey 17, an absurdist sci-fi romp of a film in which Mickey, played by Robert Pattinson, evades his debts by joining a mission to another planet. There has been a glut of gritty crime dramas released on streaming platforms in India recently. But I think Patal Lok might be the best of the bunch.

18:22It follows a low-level police officer who lands a couple of high-profile cases. But this is far more than just a police drama. It also highlights many of India's problems in a refreshingly realistic way. There's an enormous amount of entertainment that's available at the touch of a button. Alexandra Sewitch-Bass is The Economist's culture editor. Hundreds of scripted shows and films are released each year. So we have decided to launch a weekly feature, What to Watch This Weekend, telling you what the culture team at The Economist thinks is worth your time. So how do you choose? There's so much out there, as you say.

19:02We want to have a balance of novelty, so new releases that perhaps people haven't heard of with also what's getting attention. But then we're also wanting to draw attention to hits that perhaps you haven't heard of. And then we're going to be canvassing colleagues around the world as well to get an array of offerings from our colleagues who are in posts outside of Britain and America. So Alexandra, what makes something worth watching? That answer depends on who you are. We are looking for something that feels fresh and notable. So it's either exploring a theme that feels quite topical. For example, we had Zero Day recently on our list, the new Netflix show that's dealing with a zero-day cyber attack.

19:52What happens when the internet goes down for a minute in America? It tracks the chaos that ensues. so much of what is released is hyped and people hear about shows that are worth watching. We're not only including the ones that are worth watching, but we're going to be including ones that are not worth watching and advise readers of when to stay away. There are so many guides out there. Why do we need another one? A lot of the guides that are out there aim to be comprehensive, almost like a modern TV guide that tells you what's on, or they're highlighting what's on a certain streaming platform.

20:32And you have to read across these different guides to have a sense of what is out there. We're trying to be very curated. So we're recommending about six shows every weekend. If we don't feel that something deserves it that's new, we'll keep the recommendation from the previous weekend. So we're not going to just be churning out something simply for the sake of offering a new title. We'll stand behind the titles. We really want these to be the gems that you might otherwise miss. And Alexandra, the real question, what should we be watching this weekend? What's your top pick? I have one that I feel slightly conflicted about, but maybe the best television leaves one ambivalent sometimes.

21:11I've been watching the new Netflix show Adolescents, which does not make for a great wind down at the end of an evening. It is highly agitating. It's about a 13-year-old boy who is accused of pretty heinous crime. It is impeccably acted. It's extremely compelling. And it's likely to keep you up with some nightmares. But that's what I am recommending this week. Alexandra, great to talk to you. Thank you so much. Thank you, Rosie. And thank you to everyone on the culture team for your suggestions too.

21:52Thank you.

22:22and Jonathan Day. We'll all see you back here for the Weekend Intelligence tomorrow.