Crypto export procedure must be changed to match federal policy: ITAC

Industry leaders are calling on the federal government to fulfil a two-year-old promise to help expedite exports of cryptography products, or risk losing both companies and jobs to countries with more export-friendly rules. In letters to then-Industry minister John Manley and international trade minister Pierre Pettigrew, the Information Technology Association of Canada (ITAC) says immediate action is needed to clear red-tape that is costing companies valuable business, and stifling the growth of a nascent Canadian industry. In letters dated Sept. 15, ITAC suggests that the Department of Foreign Affairs and International Trade (DFAIT) isn’t practising what it preaches when it comes to exports of cryptography products. "Canada has not responded sufficiently in the months since January 2000, when the U.S. reversed its very strict export-control approach and instituted a much more liberal regime than Canada," the business group writes. The letter concludes that, "as a result, companies attempting to export from Canada suffer delays and lost opportunities to foreign competitors. Canada’s more restrictive export-control regime has also been shown to have a direct bearing on the amount of R&D conducted in Canada, and on the number of jobs in Canada – in the critically important high-technology clusters in particular." The controversy stems from a policy issued in late September 1998 by Industry minister Manley which virtually lifted any restrictions on the export of strong encryption products. The policy was born after a summer of intense lobbying by companies such as TimeStep Inc, Entrust Technologies Ltd and Kyberpass Corp and others which feared falling behind countries with liberal export rules. At the time, security organizations such as the RCMP and Computer Security Establishment were concerned about the non-recoverability of public keys and the possibility that strong encryption software could fall into the hands of criminals and terrorists who could hide correspondence for unsavoury purposes. Industry’s concerns were largely allayed with the September policy when no restrictions were placed on Canadian crypto companies, putting this country far ahead of the United States which had one of the most restrictive policies for crypto export in the world. That changed this January, however, when the U.S. turned its policy around 180 degrees to allow almost all forms of crypto software export. The change shouldn’t pose a problem according to the Canadian policy, but industry leaders say the small "p" procedures overseen by DFAIT haven’t matched Industry Canada’s big "p" policy. As examples, ITAC points out that Canadian companies are given licences to export products for only two years, something Bill Munson, director of policy at the lobby group, says puts Canadian firms at a disadvantage. "(The letter) was more a response to growing frustration on the part of the Canadian industry feeling that not enough was being done fast enough to respond to American initiatives that were getting rather long in the tooth since January when they made their change," Munson told Canadian NEW MEDIA. "If you’re a buyer, and you’re looking at buying from a Canadian company, and the Canadian company has a licence that comes up for renewal, and the competitor has a licence as well, but their licence doesn’t come up for renewal, then, all other things being equal, you’d rather go with the certainty," he adds. Brian O’Higgins, CTO and EVP of Entrust, is blunter in his assessment of the regulatory environment to date. "The design intent of the policy was dead-on. Perfect. The follow-through is pathetic," he contends. O’Higgins says there are dozens of examples of how procedures such as the Canadian requirement for an end-user statement about how crypto software will be used are turning potential customers off with excessive red tape. He points out that while Entrust currently develops, manufactures and supports its products in Canada, that could change if the regulatory regime isn’t improved. "We’re a very agile corporation. We have a lot of choices, but I’d rather stay here. It’s got to get resolved otherwise we’ll have to explore alternatives." Secure Internet transactions of the type supported by Entrust are still a small fraction of business conducted today, but he says the market has tremendous growth potential. "You look at the head count of transactions on the Internet compared to real transactions, and it’s only about one per cent. So, there’s room for growth. People look at it and say, ‘gee, what if that company moves its operations out of Canada, big deal,’ but we’re growing so fast and it’s becoming such an important area that we need a policy that’s very friendly for high-tech." Munson is still cautiously optimistic that DFAIT can be persuaded to take a more hands-off approach in dealing with export regulations. ITAC is preparing to meet with government officials to discuss the issue in more detail.

Crypto export procedure must be changed to match federal policy: ITAC

Broadcast | October 18, 2000

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