Export Controls Harm U.S. Software Industry, SPA Tells Congress

October 12, 1993 (Washington, DC) -- Congress today heard compelling new
evidence from the Software Publishers Association (SPA) that U.S export
controls hurt the U.S. software industry, but do not stem the availability
of powerful encryption software from foreign sources.

Former National Security Agency employee and SPA member Steve Walker of
Trusted Information Systems testified that the U.S. government cannot
control the availability of encryption technology because the technology
is already widespread.

Encryption technology allows Americans to protect the security and
integrity of data on their personal computers by using mathematical
formulas that encode or scramble the information so that only authorized
people can decode or unscramble it

Walker presented the latest SPA research on the availability of foreign
encryption products. To date, SPA has identified 264 products from 21
foreign countries. By showing commercially available encryption products
shipped from Australia, Denmark, Israel, Russia and Germany, Walker
demonstrated that foreign companies can easily import their encryption
products into the United States, even though the reverse is not the case.
Moreover, strong encryption is widely available on the Internet, which
connects millions of computer users worldwide.

The government has claimed that its restrictive export laws do not harm the
U.S. industry because there is no competition from the foreign products.

According to Walker's research, the existence of affordable cryptographic
products overseas is already an indisputable fact. Any attempt by the U.S.
government to eliminate them by restricting U.S. exports of cryptographic
software are futile. Worse, Walker testified, the restrictions place a
huge economic limitation on U.S. software companies leading to lost
revenue and jobs.

"SPA has been working for years to get the government to liberalize the
export controls on mass market software with encryption capabilities,"
said SPA Executive Director Ken Wasch. "Most countries control such
software as dual-use items -- those with both military and commercial
applications. But the U.S. persists in controlling encryption software as
a munitions item like a bomb or a jet fighter. Consequently, U.S. software
publishers are unable to export products that they sell in the U.S. The
U.S. companies lose the business, and foreign companies gain a competitive
advantage in this growing market."

Despite the existence of export restrictions, quality U.S. encryption
technology is being distributed illegally overseas, according to Walker's
testimony. "It is possible to walk into any of the thousands of software
retailers in the U.S., purchase a strong encryption software package
(generally marked "not-for-export") and carry it out of the country in a
suitcase or transmit it via modem to any computer abroad," Walker noted.
"Because demand exists for these products, illegally copied versions are
becoming more prevalent -- as is the loss in sales revenue to those
software companies that may have sold the product in an open market."

"We no longer can afford to have outdated laws on our books that hinder the
nation's economic competitiveness," said Ilene Rosenthal, SPA General
Counsel. "We hope that the Administration will realize the futility of
prohibiting the export of encryption products."

The SPA presented its testimony to the House Subcommittee on Economic
Policy, Trade and Environment, which is chaired by Congressman Sam
Gejdenson (D-CT). The committee is preparing legislation to reauthorize
the Export Administration Act, which sets guidelines for export control
policy.

The Software Publishers Association is the principal trade association of
the PC software industry. Its 1,000 members represent the leading
publishers in the business, consumer and education markets. The SPA has
offices in Washington, DC and Paris, France.

Software Publishers Association
1730 M St, Northwest, Suite 700, Washington, D.C. 20036
202-452-1600,  Fax: 202-223-8756

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