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China spy report skips PCs

A report on China's nuclear spying declines to recommend stricter export controls on some computers, but the PC industry is wary of a backlash.

An unsealed House report on China's nuclear spying declined to recommend stricter export controls on over-the-shelf computers, but the high-tech industry is nonetheless bracing for backlash.

The so-called Cox Report, drafted by a special House committee chaired by Rep. Christopher Cox (R-California), blames lax security for several decades of extensive espionage at U.S. nuclear laboratories by the Chinese government. Although the 700-page report, which was unclassified today, was inspired by nuclear espionage, the authors examined the effect of computer exports on overseas military development.

While relieved that the report doesn't endorse a far-reaching export crackdown, high-tech industry groups said government officials should not overreact by lumping today's powerful PCs into the same group as "high-performance" computers, which the report says should be more closely monitored.

"I hope that folks on the Hill and in the administration will readily see that for export controls to be effective, they've got to focus on products that are sensitive in nature and controllable--high-volume commodities computers and microprocessors don't fit that model," said David Rose, director of import and export affairs for Intel.

The Cox Report comes at a critical time for the PC industry. Companies are aggressively lobbying the White House to raise the performance thresholds for exporting computers. Under the current regulations, servers using Pentium III chips could soon become subject to limited export restrictions.

A bipartisan faction in both houses of Congress sent a letter to President Clinton earlier this month asking him to remove export restrictions on computers that already have hit the mass market.

"There is substantial evidence that the current export control thresholds for computers, which were last updated in January 1996, are lagging behind the technology now being used in the most commonly available business computers," states the letter, signed by 80 Congress members. "Foreign manufacturers are now clearly capable of competing with U.S. computer companies in the global marketplace for [these] sales."

Under current regulations, companies have to file a notice with the Commerce Department and wait ten days before exporting computers capable of 2 billion to 7 billion theoretical operations per second, known as MTOPs, to customers in 50 countries such as China, India, Israel, and Russia. Astronomical as the number sounds, some industry advocates say that two-processor Pentium III systems can fit within the definition. So-called supercomputers, which are fewer in numbers and are used for applications such as nuclear testing, run at about 1 trillion MTOPs.

With the industry possibly on the verge of export reprieve for top-of-the-line PCs, the fallout from the Cox report is being closely watched.

"We always say that 'yesterday's supercomputer is today's laptop,' so people are taking this very seriously," said Rhett Dawson, president of the Information Technology Industry Council and co-chair of the Computer Coalition for Responsible Exports, whose members include Microsoft, Apple Computer, Hewlett-Packard, Compaq Computer, IBM, and others.

"While the report is not aimed at commodity exports, we want to make sure lawmakers keep the espionage questions separate from commodities," Dawson added.

The coalition supports the Cox Report's call for stiffer penalties for violation of the export rules, but that the rules not encompass commercial PC sales.

Pleas for caution
"We also agree with Congressman Cox's previous statement that 'clamping down on commercial exports' is not the answer to our problems with China," Lewis Platt, chief executive of Hewlett-Packard, said in a statement. "Widely available computers should be available for sale to China when they are destined for commercial use."

The American Electronic Association, however, seemed more on edge about the report's findings.

"One of the consequences of a rush to new controls is significant damage to U.S. high-tech's ability to compete not just in the China market, but in others as well," the association's chief executive, William Archey, said in a statement.

For its part, the administration seems in tune with the high-tech industry's plea for caution, and said that it will completely review the report by the end of this month.

"The administration agrees with the committee that we should encourage the sale of computers to China for commercial, but not military purposes," the White House said in a statement today. "As recommended by the committee, we are reviewing the potential national security uses of various configurations of computers, the extent to which such computers are controllable, and the various consequences to the U.S. industrial base of imposing export controls on such computers."

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