Selling Secrecy
Encryption of electronic data using lengthy numeric codes can be compared to a string of beads. Longer strings allow more beads. More beads allow more complicated arrangements, which require more time and effort to break.
American companies have not been allowed to export encryption coding with more than 40 bits (the “beads”), out of concern that more sophisticated codes could be used to hide criminal financial transactions or even terrorist plans. But the ban hasn’t made much sense. Stronger 56-bit programs can be purchased domestically, and foreign firms have embraced this U.S.-grown technology, freely selling their own versions of it worldwide.
Now, President Clinton has decided to allow such exports, if the electronic keys to unlock the codes can be obtained from manufacturers by law enforcement officials armed with court warrants. The change is welcome, but does it go far enough in freeing U.S. computer system suppliers to compete globally?
Demand for encryption grows in tandem with unauthorized computer system penetrations, which worldwide caused losses of about $2 billion in 1995. By one estimate, the economic loss will reach $40 billion by 2000. So, demand around the globe is for computer systems with built-in, state-of-the-art encryption. The U.S. software industry projects that a continued export ban would significantly reduce U.S. computer system sales overseas.
Significantly, the Clinton administration no longer wants the code keys to be in the hands of the government, but the fit between private development and federal monitoring still seems uneasy. For example, companies would have to update the federal government on their code technology as often as every six months; foreign markets may not trust encryption that is so closely monitored by the U.S. government. It’s not at all clear how this process would work.
Congress has considered three bills on encryption export reform, and the president would do well to hear lawmakers’ advice. This is one broth that could use several more cooks.
