Battle Ready
     After suffering a major setback in 1997, the computer industry launched a major push in 1999 to sell the need for loosening controls on computer exports to Congress and the administration, which was much more sympathetic.
     Industry officials vowed not to repeat the mistakes of 1997 when Congress — with little resistance from computer companies — slapped new conditions on computer exports after reports emerged that U.S.-made high-performance computers had ended up illegally at Chinese and Russian military facilities. The reports emerged not long after the administration's relaxation of computer export controls in 1996.
     Lawmakers inserted language into the fiscal 1998 defense authorization bill imposing additional reporting requirements for companies on some computers exported to about 50 "Tier Three" countries, which include China and Russia. The rules also required the Commerce Department to do on-site checks of every computer with a performance level over 2,000 MTOPs (millions of theoretical operations per second) exported to those countries. In addition, the law required that new changes to computer export controls covering those countries go through a six-month congressional review before they could go into effect.
     The six-month wait proved to be among the most problematic conditions for the industry in the last year.
     When the Clinton administration announced it would loosen its computer export controls, the industry had hoped its allies in Congress could persuade their colleagues to reduce the six-month review period to one or two months, or at least allow for a one-time waiver.

Tiers For Fears
     Countries are divided into four tiers for the purpose of computer export regulations. Exports to countries that pose the most serious security concerns are placed in Tier Four and are virtually banned from receiving U.S. high-performance computers, while exports to Western European countries and other strong U.S. allies are in Tier One and face few restrictions.
     In its July announcement, the administration boosted the performance level of computers destined to Tier Two countries from 10,000 MTOPS to 20,000 MTOPs. Controls on the performance level of computers exported to Tier Three countries were raised from 2,000 MTOPs to 6,500 MTOPs for military end users and from 7,000 MTOPs to 12,300 MTOPs for civilian end users. Today, there are inexpensive consumer computers for sale in the U.S. that are more powerful than 2,000 MTOPs.
     Little public resistance in Congress emerged to the administration's announcement, though it appeared unlikely that lawmakers would pass a permanent reduction in the six-month review period. Still, industry and key lawmakers were confident Congress would agree to a one-timer waiver allowing the recent announcement to go fully into effect before the six months were up in January.
     But the industry ran into a roadblock two weeks before Congress left for the year when Senate Armed Services Committee Chairman John Warner, R-VA, objected to a move to add the waiver to satellite legislation lawmakers were expected to pass.
     After initially rejecting conditions Warner wanted to impose on a waiver, the industry reached a compromise with him. It would have required the companies to notify the government when they export computers with a performance level of 4,000 MTOPs or more, instead of the 6,500 MTOPs threshold under the White House announcement, and also required the administration to provide two reports to Congress in the next six months on the sales of computers above 4,000 MTOPs to Tier Three countries.
     House Rules Committee Chairman David Dreier, R-CA, had planned to add the deal to a broad omnibus spending measure, one of the last major items Congress passed before leaving town.
     But the Commerce Department raised concerns about the compromise on Capitol Hill and urged the industry not to accept it. Some industry representatives also had second thoughts and quietly sought its demise in the closing days of the session, according to several sources.
     "I thought it was a bad deal. I told them so," said Commerce Undersecretary for Export Administration William Reinsch. "I'm glad it didn't happen. It would have been contrary to what they thought."
     House Appropriations Committee Chairman C.W. "Bill" Young, R-FL, cited the Commerce Department's concerns when asked why the waiver was not included in the omnibus spending bill.
     Some congressional and other sources, however, were more critical of the industry, saying it did not handle the situation well and showed some naivete by giving in too easily to Warner.
     Computer industry representatives argue that while they are disappointed they didn't get an acceptable waiver passed into law, it would have only shortened their wait by two months at the most. At the same time, Kay of the Computer Coalition for Responsible Exports and others argued that it was important to show members of the Senate Armed Services Committee that the industry also is concerned about national security.
     "I do think that we've had a constructive dialogue" with both the Senate and House Armed Services Committees, Kay said.

New Battles Ahead
     Industry representatives say they are hopeful the Clinton administration will provide enough relief next year to give it breathing room until July 2001, which will give the next administration a few months to examine the issue before having to act.
     The industry's concern is that if export policies do not keep pace with advances in chip technology, the government could be regulating machines that have become commodity products and are sold in high volumes. Industry lobbyists would not say how much relief they were seeking because they are still in discussions with the administration.
     In addition, they would like to see the tighter controls on Tier Two, which includes South America and such countries as South Korea and South Africa, abolished or at least have many countries moved from that list to Tier One. Dan Hoydysh, director of trade policy and government relations for Unisys, said there doesn't appear to be a strategic reason for maintaining separate controls on Tier Two countries and it may be more beneficial to instead focus on countries of real concern.
     The administration could provide the relief all at once or in two steps. Some industry sources expressed concern that there could be resistance in Congress if the administration provides all the necessary relief at once.
     "It's a sticker shock situation," said Bill Maxwell, international trade policy manager for Hewlett-Packard.
     He compares the situation to a tourist in Italy who is shocked when told by a cab driver in Rome that he owes several thousand lira — until he realizes it's equivalent to just $3.50. Maxwell and others argue that it is a challenge explain to skeptical lawmakers that machines once used to help design nuclear weapons a decade ago are equal in power to the lap top computers of today
     "Certain segments on the Hill are not happy that (the White House) even raised it to level that currently exists" when all the changes announced in July go into effect, said Jason Mahler, vice president and general counsel of the Computer and Communications Industry Association. "Any increase will be met with some opposition from some quarters. We don't think there's any way of avoiding that. We hope…to provide sufficient information and education to members and the administration."
     Senate Intelligence Committee Chairman Richard Shelby, R-AL, said he is not necessarily opposed to loosening controls, "we just need to focus in on what these computers can be used for."
     One congressional source, who spoke on condition of anonymity, argued that the administration did not provide sufficient evidence to support raising the performance of computers subject to regulation as high as it did in July. The source pointed to a General Accounting Office study that claimed the administration did not provide evidence to support its claim that foreign companies are making computers that are as powerful as the ones U.S. firms are restricted in selling abroad.
     The administration's "discussion of foreign sources of high performance computers implied that there is a higher level of foreign competition than is factually supported by available evidence," the report said.
     Reinsch dismissed the GAO report as inaccurate and cited examples of foreign companies such as Taiwan's Acer that are advertising multi-processor computers on the Internet.
     "They're wrong," he said with exasperation. "They continue to look at the box and not the processors."
     Even if congressional critics fail to block any relaxation in controls, the industry will still be stuck with a six-month unless they succeed in persuading Congress to the change the law.
     Rep. Zoe Lofgren, D-CA, and Senate Minority Whip Harry Reid, D-NV, have introduced bills in their respective chambers that would reduce the congressional review period to a month. Neither bill appears likely to see committee nor floor action, but the lawmakers could attempt to attach their measures to other legislation. In addition, a bill, S 1712, that would reauthorize the Export Administration Act includes a provision that would cut the review time to two months. While the bill has been approved by the Senate Banking Committee, it faces long odds in passing Congress.
     Still, said Lofgren, "I'm an optimist. I believe if it's rational, it's possible."

- by Juliana Gruenwald