Japan tightens crypto export restrictions, from The Netly News

[Declan McCullagh <declan@well.com>]

The Netly News
http://www.netlynews.com/
October 29, 1996

The Japan Factor
By Declan McCullagh (declan@well.com)

       In a move designed to stem the global availability of products
   that use strong encryption technology, Japan last month succumbed to
   U.S. pressure and dramatically tightened its export restrictions, The
   Netly News has learned.
   
       The restrictions amount to a stranglehold. Officials from Japan's
   Ministry of International Trade and Industry (MITI) characterize the
   shift as a very small change, but the new rules require businesses to
   seek prior government approval for any overseas crypto-order that
   totals more than 50,000 yen, or about $450. The previous limit was 10
   million yen, around $91,000.
   
       "We made a very small change of the licensing exception of limited
   value," says Jun Takashina, the deputy director of the Security Export
   Control Division at MITI. Takashina denied that the U.S. pressured
   Japan. "It's our decision. We didn't have any pressure from the United
   States."
   
       Japan says its regulations are designed to codify the "Wassenaar
   Arrangement" on export controls for armaments and advanced technology,
   which was crafted over a two-year period to replace the Cold War-era
   COCOM treaty and was signed in July by over 30 countries. "In the
   Wassenaar Arrangement, we have consensus to cooperate -- not
   coordinate, but cooperate," Takashina said. "In this sense we
   influence each other. We cooperate in our regulations to achieve the
   same purpose." In implementing the agreement, Japan relaxed controls
   on many products -- and, tellingly, only tightened the regulation of
   encryption. However, other countries that signed the agreement have
   not done the same.
   
       Japan's move follows a hot summer of even hotter debate on Capitol
   Hill, where Justice Department officials claimed that criminals use
   PGP to scramble files and software company executives testified that
   current regs cost U.S. industry millions.
   
       Boosting the political temperature further was RSA Data Security's
   announcement in June that NTT and RSA's Japanese affiliate were ready
   to ship a triple-DES chip more secure than anything U.S. manufacturers
   are permitted to sell overseas. Privacy advocates quickly heralded it
   as exposing the fatal flaws in the Clinton administration's
   regulations. Phil Zimmermann, inventor of PGP, told me at the time
   that "the Japanese took over the American television manufacturing
   industry" and are poised to take over this one unless Congress
   approves the Pro-CODE bill.
   
       This widely-publicized announcement almost certainly prompted
   Japan's new crypto-muzzling decision. The company's president, Jim
   Bidzos, says that Tokyo has started to "look a little closer" at its
   encryption policies. "With all the press about NTT chips and whatnot
   in Japan, the U.S. government is going to try to stem the flow." (One
   White House scheme designed to do just that is the
   soon-to-be-announced creation of an ambassador-level position whose
   sole job will be to marshal international support for U.S. crypto
   policy.)
   
       Stewart Baker, former NSA general counsel, calls Japan's move a
   sign that the country's leaders are awakening to -- and are sensitive
   to -- the U.S. government's position. "This is a signal that they did
   not want to be at the center of the policy debate over export controls
   if they could avoid it," he says.
   
       "As [the policy] gets covered in the New York Times on the front
   page, the Japanese government focuses more attention.... This is a
   reflection of concern that that kind of story is not good for Japan,"
   says Baker, who recently wrote about Japan's stance on encryption in
   Wired.
   
       The key question, though, is how strictly will Japan enforce the
   new regulations? The Wassenaar Arrangement is designed to keep arms
   and technology out of the hands of rogue countries, but companies in
   Silicon Valley already are complaining that Japanese shipments of
   data-scrambling hardware are being delayed. And the fine print of the
   new Japanese regs seems to require the end user's name and address --
   which is impossible for U.S. distributors to provide.
   
       I think Marc Rotenberg, director of the Electronic Privacy
   Information Center and international crypto-watcher, has it right.
   Today he said to me that U.S. crypto isn't our biggest export in this
   area; instead, it's U.S. crypto policy. I agree -- and I say that's
   where we need more government intervention. Any government employee or
   erstwhile crypto-czar who wants to export a dumb crypto policy should
   be required to say why it should be allowed to infect other countries.
   I'm sure Japan won't mind.
   
   -- By Declan McCullagh (declan@well.com)
      with reporting by K. N. Cukier (100736.3602@compuserve.com)

Wassenaar Arrangement:
 http://www.dfat.gov.au/dfat/dept/isd/peace_and_disarmament/pd_4_96/pd10.html

RSA announces NTT chip:
 http://www.eff.org/pub/Publications/Declan_McCullagh/cwd.got.away.0696.article

U.S. to create crypto-ambassador:
 http://www.netizen.com/netizen/96/43/index3a.html

Stewart Baker on Japan's crypto-politics:
 http://www.hotwired.com/wired/4.09/es.crypto.html

Marc Rotenberg on OECD crypto-politics:
 http://www2.eff.org/~declan/global/japan/rotenberg.reply.102896

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