15 July 2000. Thanks to Anonymous.
Note: John Podesta, senior White House official, is scheduled to deliver a speech on encryption Monday at the National Press Club, Washington, DC. His office said on Friday that no information will be available before then.
BY LENNY SAVINO
Knight Ridder
WASHINGTON -- The Clinton administration plans to announce next week that it will permit U.S. software companies to sell their most sophisticated encryption systems to countries in the European Union without any licensing or review.
The announcement, which could come as early as Monday, completes the reversal of a longstanding and costly policy that until recently barred U.S. software makers from exporting any but the simplest encryption systems. It was feared that their misuse would threaten national security by frustrating U.S. intelligence-gathering. Unrestricted sales by encryption system makers in Europe and Asia undermined the argument and the U.S. trade curb.
Encryption systems are used in many consumer products, including cell phones, to ensure that conversations remain private and DVDs to prevent copyrighted movies from being copied illicitly. In more sophisticated uses, they protect banking transactions, hospital records, business privacy and other proprietary information.
To the dismay of U.S. software companies, European and Asian competitors ate up the global encryption markets American firms were forbidden to enter. Now that's over.
"The genie is out of the bottle,'' Robert Holleyman, president and chief executive officer of the Business Software Alliance, a Washington-based trade association of software manufacturers, said Friday. Referring to encryption technology's proliferation throughout the world, he said: "Trying to control the spread of technology is like trying to use a chain link fence to hold back a river.''
Sales of encryption products are worth hundreds of millions of dollars annually. The United States, Canada, Europe and Australia comprise about 80 percent of the market, and free export of U.S. encryption systems is expected to be allowed to all those foreign countries. Restrictions on U.S. exports to some others would continue. They include Cuba, Iran, Iraq, North Korea and others considered America's foes.
The biggest short-term gains are likely to be in the European Union, software makers said. ``We believe this is critical for maintaining our competitiveness in this market and keeping jobs in the United States,'' said Laura Ipsen, director of governmental affairs for Cisco Systems, Inc., a major U.S. maker of encrypted software. "The United States has to match the Europeans on deregulation.''
Mounting pressure from software, hardware and privacy groups who argued that encryption products could be bought easily around the world helped convince the administration that a relaxation of the rules was necessary.
Against them was a powerful intelligence and national security establishment that rarely loses battles in Washington. They warned that even unsophisticated encryption systems afforded stout protection to terrorists.
World Trade Center bomber Ramzi Yousef, for example, used over-the-counter encryption technology in his laptop computer, according to the FBI. It included two encrypted files that it took FBI experts more than a year to decipher, law enforcement officials said. Among his plans was one to blow up 11 U.S. airliners in the Western Pacific in one day.
In a speech before the Citizens Crime Commission of New York last July, FBI Director Louis Freeh warned that encryption systems in the wrong hands were a threat to the nation's security.
"A terrorist operating without a lot of sophistication, targeting a hospital, a stock exchange, a power grid, or informational systems upon which we all depend poses all kinds of different, complex but imminent threats,'' Freeh said. "There is real danger in fantastic technologies that are at the beck and call of fairly unsophisticated operators.''
The FBI on Friday referred inquiries about encryption to the Justice Department. A spokesman there declined comment until the policy change is made public. The White House press office did not respond to requests for comment.
Software experts said that although many new encryption systems cannot be broken, their U.S. makers are cooperating with federal law enforcement and intelligence agencies. Somewhere in the future, they said, are so-called quantum computers a billion times more powerful than existing home computers. These would be able to break the most sophisticated encryption systems available today.
The Clinton administration began changing its policy on encryption in January by allowing encryption systems to be exported once their makers were licensed by the Commerce Department and the transaction was approved by an office at Commerce that determines whether foreign sales endanger U.S. security.