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Industry leaders assess new export limits

Computer industry leaders say the easing of export restrictions on high-powered computers is a good first step, but doesn't go far enough.

The Clinton administration's decision to ease computer export rules may be a step in the right direction, but it falls short of what major computer manufacturers had asked for.

The White House announced last week it would ease export controls to "tier 2" and "tier 3" countries. The changes are effective immediately for tier 2 countries, many of which are major trading partners, and on a limited basis for tier 3 nations, such as China and Russia, considered more of a national security concern.

But restrictions put in place by National Defense Authorization Act of 1997 could force manufacturers to wait another half year before realizing the full benefits of the export changes. Under that law, the administration can propose changes, but Congress has six months to respond to them.

The export controls, introduced in January 1996, sought to protect national security by preventing supercomputers from being exported for potential military purposes or nuclear research. Systems performing 2,000 MTOPS (theoretical operations per second) or greater were defined as supercomputers, and required government approval for export.

Major computer manufacturers complained the existing export rules no longer made sense and put them at a competitive disadvantage overseas, where 11 foreign companies, such as NEC and Toshiba, sell systems to countries such as China without restriction.

Recent technology developments outpaced the export controls, manufacturers argued, requiring companies to get export approval for commodity systems. A dual-processor 500-MHz Pentium III system would be classified as a supercomputer under the old export rules. Today's fastest supercomputers perform at up to 1.6 million MTOPS.

"Our computer export laws are so antiquated, a new Sony PlayStation video game console might be classified as a supercomputer that cannot be exported to certain countries," said House Majority Leader Dick Armey (R-Texas) in a briefing last month.

The government approved the export of 390 high performance computers in 1998 and before last week's announcement estimates put the number at 40,000 for this year.

Industry response to the export changes was lukewarm.

"We're pleased. But it's not complete. As a first step, it's a pretty robust first step, but a first step," said Chris Cain, vice president of government affairs for IBM.

"In general terms, we're happy because this shows receptiveness to the point we have been making about commodity systems," said Dan Hoydsh, director of Unisys' Washington, D.C., office. "We have somewhat of a different opinion about where the line should be drawn, but it is a good first step."

That line is now 20,000 MTOPS for computer exports to tier 2 countries and, on a limited basis, 12,300 MTOPS for tier 3 nations.

But it is not as much as industry wanted. Last month, CEOs from ten manufacturers--Cisco, Data General, Dell, Hewlett-Packard, IBM, Intel, NCR, Silicon Graphics, Sun, and Unisys--rallied support on Capitol Hill and met with the White House officials requesting an increase to 30,000 MTOPS for exports to tier 2 countries and 12,300 MTOPS for tier 3 nations.

Manufacturers based the 12,300 MTOPS level on the performance of an eight-way 500MHz Pentium III Xeon system, which they contend is the upper end of the commodity market.

Under the changes announced last week, manufacturers could export systems performing up to 20,000 MTOPS--an increase of 10,000 MTOPS--to civilian customers in tier 2 countries without government approval.

Tier 3 exports are more complicated because of the National Defense Authorization Act. The Administration agreed to a 12,300 MTOPS limit, but for six months manufacturers would still need to seek government approval for systems between 2,000 and 6,500 MTOPS.

After six months, exports to civilian customers below 6,500 MTOPS would require no government approval, and those between 6,500 and 12,300 MTOPS would be subject to a ten-day waiting period for government review.

Systems performing up to 6,500 MTOPS sold to military customers would require individual export licenses.

The export changes are a victory for industry and acknowledgment of technology's impact on the U.S. economy, said a spokesperson for the Computer Coalition for Responsible Exports, a group formed by 12 computer manufacturers.

But when the CEOs left Washington last month, it looked like they were going away empty handed. Chilled by the Cox Commission Report, which determined that lax security allowed China to steal vital nuclear secrets, the White House made no promises to ease export controls.

Last week's announcement demonstrated a potential policy shift by the White House on national security pertaining to computers. President Clinton agreed to a six-month review process for computer exports and left open the possibility of an expedited process subject to Congressional approval.

"We designed and developed the Stealth fighter--very, very, advanced--and it's the biggest machine we had, on what was the equivalent of a 100-MTOPS machine," said Deputy Defense Secretary John Hamre during yesterday's press briefing. "And we're now talking about laptops that can produce at 2,000 MTOPS."

The policy's fate now rests in the hands of Congress, which is on recess for the Fourth of July holiday. But congressional leaders have vocally supported a lifting of export restrictions and in May, 76 House members sent a letter to the White House asking for relaxed controls to tier 3 countries.

"I think the mood on the Hill is receptive, but we won't find out until they get back from recess," said IBM's Cain. "The first thing they could do would be to expedite the existing six-month process that is called for whenever the administration calls for a change in the threshold."

If that happens, computer manufacturers could see quicker relief on export changes for tier 3 countries and an eventual permanent reduction in the six-month waiting period.

The White House has requested reducing the waiting period to 30 days.