By "allow", I'm assuming that you mean "allow for export".
Technically, yes.
Or, are you saying that they won't allow strong crypto in *domestic* next-generation cellular phones?
De facto, if not de jure. As has been the case for several years, the NSA publicly maintains that it is not interested in controlling the domestic use of strong cryptography. But the standards committee that controls this stuff (the TIA TR45.0.A "Ad Hoc Authentication Group") is made up largely of the technically incompetent and/or "spook wannabees" sympathetic to the government. With a single exception, the members all represent cellular vendors and carriers, not end users. The single exception is a NSA R&D employee legitimately representing the US government as a potential end user of digital cellular.
What forms have the "incentives" or "disincentives" taken?
It is clear that without a strong, organized demand by the US public as a whole for meaningful cell phone privacy, the cellular industry has no real incentive to provide it. NSA only had to suggest very quietly that the lack of meaningful cryptographic privacy would make it much easier to export digital cellular technology, and the industry quickly got the hint. After all, they were really only concerned about cellular fraud in the first place (hence the use of "authentication" in the group name) and they'll care about end-user privacy only if it hits them in the bottom line. So far it hasn't. Indeed, we're now starting to see protests and demands for real privacy from some of our potential non-US customers; how we could ever meet it under the ITARs is a good question. Phil