September 14, 1999

By JERI CLAUSING

Administration Plans to Loosen Encryption Restrictions

ASHINGTON -- The Clinton Administration, facing mounting pressure to eliminate controls on the export of encryption technology, is preparing to announce a further loosening of the controversial restrictions.

The planned changes come on the heels of a report from a special presidential advisory committee recommending the White House abandon nearly all export controls on software that protects Internet communications.

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They also come as the House is preparing to debate a bill that would lift most controls on the export of products intended to keep computer communications and transactions secure.

William Reinsch, the Undersecretary of Commerce and President Clinton's point man on encryption policy, declined to comment on the upcoming announcement or the advisory committee's report, which has not been made public. But he said the Administration's new policy would be announced by September 16. The changes, he said, are the "result of our own policy review," although he did acknowledge that the advisory commission report "was valuable input into that."

That upcoming policy change comes exactly one year after Vice President Al Gore first announced the Administration was lifting controls on the export of strong encryption to certain business sectors, like banks and insurance companies, and was providing limited export relief for mass market products.

At the time, Gore promised the Administration would review the controls again within a year. Since then, the Administration has come under continued pressure to move even further, both from Congress and the President's encryption advisory panel.

In June, the President's Export Council Subcommittee on Encryption sent the White House a report recommending the Administration loosen its restrictions on encryption technology to allow for the export of consumer products based on a 128-bit key. That is significantly stronger than the current limit on encryption products exempt from control.

The report also recommended allowing the export of a broad range of encryption products to online merchants who need powerful security systems to do business; eliminating approval requirements on exports to countries that "do not present a significant national security concern," and giving preferential treatment to exports aimed at utilities, telecommunications companies and other infrastructure sectors at risk of hacking attacks.

White House and Commerce Department officials are keeping quiet about how far the policy changes will go. But if the changes reflect recommendations made in the advisory panel's report, it would move the Administration much closer to ending its years-long battle with the high-tech industry. Technology executives say they are losing their lead to companies in countries without export restrictions.

Technology executives say they are losing their lead to companies in countries without export restrictions.

The Administration has resisted calls to eliminate the restrictions because of strong opposition from the Federal Bureau of Investigation and other law enforcement agencies. Those groups have been pushing tying any easing of export restrictions to mandates that software developers develop "spare keys" so law officers can easily unlock scrambled data and communications when they suspect a crime is being committed.

Stewart Baker, a member of the advisory panel and former counsel to the National Security Agency, characterized the committee's report as "the most sweeping set of liberalizations that have ever been recommended by a government advisory body."

Although some who have been fighting the Administration's export controls doubt the planned changes will go far enough to effect a truce with House and Senate leaders pushing legislation to eliminate export controls entirely, Baker said he remained optimistic that substantial revisions would still be made.

"I think it's in play," said Baker. "There's still some possibility that this will turn out to be a smaller package than some might hope, but it's still open."

Ed Gillespie, executive director of Americans for Computer Privacy, a coalition of high-tech and civil libertarian groups that have for years been pushing for an elimination of all export controls on data-scrambling technology, said adoption of the advisory committee report by the White House would be significant.

"But we don't know what to expect at this point. We're watching like everyone else," he said. "If it's good, great. If not, we'll continue to advocate change."

This week:

A special task force appointed by Congress to study Internet tax issues will hold its second meeting. The Advisory Commission on Electronic Commerce, headed by the Governor of Virginia, James Gilmore III, is meeting Tuesday and Wednesday in New York City.

On Tuesday, the Senate Judiciary Committee will hold a hearing on the rise of hate group activity on the Internet and ways to increase Internet policing.

On Thursday, the Federal Trade Commission will showcase its new Internet lab and will announce its 100th Internet enforcement case.

The CAPITAL DISPATCH column is published weekly, on Tuesdays. Click here for a list of links to other columns in the series.

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• White House

• Bureau of Export Administration

• Americans for Computer Privacy

• Advisory Commission on Electronic Commerce

• Senate Judiciary Committee

• Federal Trade Commission

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Jeri Clausing at jeri@nytimes.com welcomes your comments and suggestions.

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