The Washington Post January 17, 1996 Study: Encryption Rules Hurt Exporters By Elizabeth Corcoran Washington Post Staff Writer U.S. export restrictions on technology for encrypting information are slowing American companies' success in some foreign countries and retarding the growth of an international market for such technology, according to a new report released by the U.S. Commerce Department. The study is likely to become the latest ammunition in the struggle between the administration and many U.S. high-tech companies and civil liberties advocates over how tightly the United States should control the export of sophisticated data scrambling, or encryption, technology. Both sides are likely to try to use the report to their advantage. U.S. businesses contend that they are losing market share to foreign competitors because they are not allowed to include the most sophisticated encryption technology in their software products. "The day we show lost market share [in the overall market for software] is the day that we start losing the whole ballgame," said Rebecca Gould, director of policy for the Business Software Alliance. The report, which was commissioned in late 1994 by the national security adviser and carried out by the Commerce Department's Bureau of Export Administration and the National Security Agency, aimed to assess the impact of encryption export controls. It assigns no dollar values to any sales lost by U.S. companies, but notes that there are many foreign-made encryption products available overseas. On the other hand, some of those products do not work well, the report says. Still, it cites evidence that U.S firms are not making significant progress in the business of selling encryption technology. In three countries -- Switzerland, Denmark and the United Kingdom -- market share for U.S. encryption products declined during 1994, the report said. Sources in 14 countries said that export controls "limit" U.S. market share, while those in another seven countries said such controls have "either no impact or no major impact." Although the report maintains that sources in "most" countries indicated that U.S. market share is "keeping pace" with overall demand, in many of the countries surveyed, "exportable U.S. encryption products are perceived to be of unsatisfactory quality." Today, a Washington-based policy group supported by a dozen major computer companies plans to release its own commentary on export encryptions, calling for the government to lift its export restrictions.