WP: Encryption rules hurt exporters

["Declan B. McCullagh" <declan+@CMU.EDU>]

The Washington Post
January 17, 1996
   
Study: Encryption Rules Hurt Exporters
   
   
   By Elizabeth Corcoran
   Washington Post Staff Writer
   
   
   U.S. export restrictions on technology for encrypting information are
   slowing American companies' success in some foreign countries and
   retarding the growth of an international market for such technology,
   according to a new report released by the U.S. Commerce Department.
   
   The study is likely to become the latest ammunition in the struggle
   between the administration and many U.S. high-tech companies and civil
   liberties advocates over how tightly the United States should control
   the export of sophisticated data scrambling, or encryption,
   technology. Both sides are likely to try to use the report to their
   advantage.
   
   U.S. businesses contend that they are losing market share to foreign
   competitors because they are not allowed to include the most
   sophisticated encryption technology in their software products.
   
   "The day we show lost market share [in the overall market for
   software] is the day that we start losing the whole ballgame," said
   Rebecca Gould, director of policy for the Business Software Alliance.
   
   The report, which was commissioned in late 1994 by the national
   security adviser and carried out by the Commerce Department's Bureau
   of Export Administration and the National Security Agency, aimed to
   assess the impact of encryption export controls. It assigns no dollar
   values to any sales lost by U.S. companies, but notes that there are
   many foreign-made encryption products available overseas. On the other
   hand, some of those products do not work well, the report says.
   
   Still, it cites evidence that U.S firms are not making significant
   progress in the business of selling encryption technology.
   
   In three countries -- Switzerland, Denmark and the United Kingdom --
   market share for U.S. encryption products declined during 1994, the
   report said. Sources in 14 countries said that export controls "limit"
   U.S. market share, while those in another seven countries said such
   controls have "either no impact or no major impact."
   
   Although the report maintains that sources in "most" countries
   indicated that U.S. market share is "keeping pace" with overall
   demand, in many of the countries surveyed, "exportable U.S. encryption
   products are perceived to be of unsatisfactory quality."
   
   Today, a Washington-based policy group supported by a dozen major
   computer companies plans to release its own commentary on export
   encryptions, calling for the government to lift its export
   restrictions.