Administration Policy for Boosting E-Commerce Includes Crypto Restraints

(November 30, 1998) Bill Clinton and Al Gore jointly announced the administration's first annual report on electronic commerce at a ceremony held in the Old Executive Office Building in Washington DC on Monday, November 30.  The report, which describes the administration's agenda for promoting e-commerce, contained little new information or policy statements.  It does, however, include the incompatible directive of maintaining existing restraints on encryption.

The lengthy Report was accompanied by the release of a shorter Memorandum to the heads of executive branch departments and agencies.  This document outlines instructions for implementing the administration's e-commerce promotion policy.   Simultaneously, the U.S. and Australia released a joint statement on e-commerce policies.

The Report is a follow-up to the Framework for Global Electronic Commerce, published by the Clinton administration on July 1, 1997.  It continues the policies that "The private sector should lead" and "Electronic commerce should be a market driven arena not a regulated one".   (See, Report at page 5.)

The Report covers a wide range of topics, including measurements of levels of electronic commerce, recent legislation affecting e-commerce, prior administration statements, administration agreements and negotiations with other nations, as well as policy statements.

The Report is a carefully worded and often vague or self-contradictory political statement that tries to associate the administration with all sides in many controversial issues.

For example, the Report states support for encryption products, but supports the FBI agenda of restricting encryption. (Pages 21-23.)  The Report states that industry self-regulation should prevail, but lauds the passage of the Child Online Privacy Protection Act, and suggests that further laws should enacted to protect privacy. (Pages 15-18.)  The Report states that e-commerce should be market driven, but backs government support of e-commerce ventures through the Small Business Administration.   (Page 30.)  The Report supports "the broadest possible flow of information", but also supports development of filtering technologies.  (Page 18.)

The Report reviewed progress on several other policy initiatives, and offered directives for future action.  Among the items covered by the Report were the following:

• Tariffs.  It directs the U.S. Trade Representative to  seek agreements with other nations that the Internet will not be subject to tariffs.
• WIPO.  It directs the Secretary of Commerce to protect copyrights in the digital environment through ratification of WIPO treaties.
• DNS.  It restates the directive to the secretary of Commerce to privatize the governance of the domain name system.
• Taxes.  It directs the Secretary of the Treasury to work with state and local governments to ensure that no new discriminatory taxes are imposed on Internet commerce.
• Digital Signatures.  It directs the Secretary of Commerce to work with state, local and foreign governments to seek agreement on the use of digital signatures.

The Report also states several "new initiatives".  These include:

• Broadband Internet access.
• Consumer protection on the Internet.
• Promotion of the Internet in developing countries.
• SBA support for e-commerce.
• Social and economic study of the Internet.

The Introduction to the Report by Al Gore states that "we must redouble our efforts to to remove barriers that can stifle the growth of the Internet and of electronic commerce."  (Page i.)  However, the Report continues to support the FBI agenda of restricting encryption.  While both Clinton and Gore said nothing about encryption in their speeches, the Report is clear that restraints on encryption remain a part of the administration's policy.

"The administration acknowledges the risks to public safety and national security that unlimited access to strong encryption products by terrorists, criminals, and other enemies may pose," the Report states.  (Page 22.)  The Report continues that only "up to 56 bit DES, or its equivalent" may be exported without regulatory approval.  (Page 23.)

The Report further provides that "products that allow for the recovery of plain text by ... law enforcement ... will be permitted for wide export."  (Page 23.)   The Report also states that the administration seeks to "promote[] electronic commerce, while also protecting the public safety and national security."  (Page 23.)

The "national security" argument is "patently nonsense," said Barry Steinhardt, President of the Electronic Frontier Foundation, in an interview with Tech Law Journal after release of the report.  "I did not see very much new in it," said Steinhardt about the Report.

"The administration continues to be the single greatest impediment to the adoption of strong cryptography, which is having a disruptive effect not only on the bottom line of the American software publishers, but more importantly, it has had the effect of dumbing down the market," said Steinhardt.

"The effect is that Americans still do not routinely receive or use strong encryption, and we are putting ourselves at greater risk by not providing ourselves the locks and keys," added Steinhardt.  "The very same encryption products which U.S. computer companies cannot export are available outside the U.S."

"I continue to worry that the administration is not addressing the ultimate questions."  Steinhardt stated that "the ultimate question is, how does the individual enforce the rights that have been given to him.  That question has not been addressed yet by the administration."

Sen. Conrad Burns (R-MT), who is Chairman of the Senate Communications Subcommittee, and Co-Chairman of the Internet Caucus, likewise pointed out the administration's failure to adopt an encryption policy that does not stifle e-commerce.

"It is vital that we clear some huge hurdles, such as the encryption issue, for the Internet to reach its full potential as a place of business.  The administration still wants to have a key to everyone's private mailbox and every financial transaction that occurs.  These positions stifle electronic commerce and threaten the future of the Internet as a marketplace," said Burns in a statement released after the event.

Sen. Burns is likely to sponsor legislation again in the 106th Congress to protect encryption rights.  He will likely re-introduce the E-Privacy Bill, said Burns' staff on Monday.

John Chambers, Cisco President and CEO, also spoke at the administration event.  "President Clinton and Vice President Gore have shown remarkable leadership building an Internet Economy that is reshaping the fortunes of countries, companies and people," said Chambers.

Cisco Systems is a leading producer of internetworking products, including routers and switches.  It is also likely to be one of the prime beneficiaries of spending by schools under the Federal Communications Commission plan for subsidizing Internet access.  The plan is also known by its supporters as the "e-rate," and by its opponents as the "Gore Tax."

"With Internet leaders and government working hand in hand, America can look to a bright horizon filled with hope," said Chambers. "To achieve that, government and business leaders, and teachers and parents, must accept the challenge to give everyone access to the Internet and a quality education."