Clinton advisor says U.S. encryption policy has hurt business

Coming closer than ever to openly criticizing the U.S.'s controversial support for a public-key encryption infrastructure, Ira Magaziner, senior policy development advisor to President Clinton, acknowledged here today that the Clinton administration's current encryption export policy is most likely bad for business. 'Our policy has probably hurt the commercial possibilities of U.S. companies in the short run,' Magaziner told attendees at EDventure Holdings Inc.'s High-Tech Forum.

Coming closer than ever to openly criticizing the U.S.'s controversial support for a public-key encryption infrastructure, Ira Magaziner, senior policy development advisor to President Clinton, acknowledged here today that the Clinton administration's current encryption export policy is most likely bad for business.

"Our policy has probably hurt the commercial possibilities of U.S. companies in the short run," Magaziner told attendees at EDventure Holdings Inc.'s High-Tech Forum.

"The bad word here is not sex but security," said Esther Dyson, EDventure chairwoman and leader of a discussion panel that included Magaziner.

Balancing security needs with business needs is precisely the challenge that the U.S. faces, Magaziner said. "The law enforcement communities from most countries are in active communication with each other, and we should be grateful for that," he said. "Also, the economic ministers are in contact with one another. The difficulty is in reconciling those two concerns. A lot of countries are looking for us to exert some leadership, but we have not had a reasonable consensus in the government."

The U.S. government is searching for solutions that allow the Internet to flourish, but also address the problems the Internet causes, he said. "We think the Internet should be a seamless, global marketplace."

Magaziner today seemed bolder than before in expressing his widely assumed disapproval of the policy. Last month, for instance, he had defended restrictions on exports of technology using keys of 56 bits or longer, but he conceded that there are "internal conflicts" within the Clinton administration on the issue.

At the conference here, Magaziner described the Clinton administration's approach to encryption as an odd-man-out among the government's Internet policies. "You're accurate in pointing out the contradiction," Magaziner said in response to a question from the audience. U.S. companies have lost encryption-technology business to companies from other countries as a result of the current restrictions governing the export of encryption technology, he noted.

Still, Magaziner said that the U.S. government is working hard to find a solution to the current controversy fostered by the administration's attitude toward encryption exports. "My hope is that we could allow encryption [business] to go forward," he said. "Hopefully, we will find a solution soon."

However, he noted the challenge given that the issue has become so emotional that it is difficult for officials to have rational discussions on the matter.

"We need a solution that allows us to move ahead with electronic commerce but offers a political solution," Magaziner said. "There are times when certain subjects pass beyond the rational realm and go into the political/emotional realm. The encryption issue is in that realm right now. We need a political solution. I hope it is one that lets electronic commerce move forward. What will make the difference right now will be political discussions" rather than purely rational discussions, Magaziner said.

And a lot is at stake for U.S. businesses, as the digital economy has a transforming effect like that of the industrial revolution in the last century, Magaziner said. "It is moving so rapidly that its effect will be felt throughout the economy."

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