LEXIS-NEXIS® Academic Universe-Document

LEXIS-NEXIS® Academic

June 8, 1999, Tuesday, Home Edition

SECTION: Part A; Page 1; National Desk

LENGTH: 928 words

HEADLINE: EASING EXPECTED FOR COMPUTER EXPORT RULES

BYLINE: PETER G. GOSSELIN, TIMES STAFF WRITER

DATELINE: WASHINGTON

BODY:
The Clinton administration is preparing to loosen government controls on the sale of powerful computers to more than 100 countries only two weeks after a congressional committee charged it with carelessly permitting sales to China.

The Commerce Department has proposed easing restrictions on sales to most countries in Asia, Africa, Latin America and Central and Eastern Europe, administration sources said Monday. In addition, virtually all restrictions are likely to be lifted on sales to Poland, Hungary and the Czech Republic, which recently became members of the North Atlantic Treaty Organization.

In a move that seems certain to anger U.S. computer makers, however, the administration will not ease restrictions on China and almost 50 other countries. The split decision is a graphic illustration of the powerfully conflicting impulses that now grip Washington over the export of American technological know-how.

Two weeks ago, a congressional committee headed by Rep. Christopher Cox (R-Newport Beach) blasted the White House for unwittingly helping China update its nuclear arsenal by failing to capture alleged spies in U.S. weapons labs and, perhaps as important, not adequately restricting Chinese purchases of high-powered U.S. computers.

"This city wants to have it both ways--to ease export controls and tighten them at the same time," said Daniel Goure, a leading defense analyst with the Center for Strategic and International Studies in Washington. "It's a natural outgrowth of our being both the last superpower and the world's leading producer of high technology."

Administration officials, who spoke only on condition of anonymity, said that the White House has yet to settle on how much to loosen controls on sales to Asia and other regions but that it generally agrees with industry claims that current restrictions have been overtaken by technological advances.

The government regulates the overseas sale of computers based on their speed, which it measures according to how many millions of theoretical operations they can perform in a second. To sell to the countries for which the administration is preparing to ease restrictions, computer makers must obtain government licenses for any machine that can perform more than 10,000 such operations per second. The industry wants the limit tripled to 30,000.

The administration's plans to ease some export controls are almost certain to be viewed as a slap at the Cox committee's findings that China has obtained U.S.-made computers powerful enough to be useful for weapons design and other military purposes.

Although Cox has said in the wake of the panel's report that he still favors computer sales to emerging nations, including China, the report found that China acquired some of its advanced computers through third-party nations that resold American machines, something likely to become more frequent if restrictions are eased and sales to these nations grow.

If the White House follows through on easing controls, it will be the third time the administration has taken such a step. Administration officials and a wide array of independent analysts have argued that the United States has been forced to act because of the increasing availability of powerful computers from non-U.S. sources. But Republican critics have charged that the moves were motivated by a narrow drive to help American firms capture overseas sales partly in hopes of attracting campaign contributions.

Industry officials almost certainly will not be satisfied with the administration's latest proposal for easing controls because of the absence of action to loosen restrictions on sales to China, which American computer makers view as their next great market.

Industry officials estimated that China could absorb almost $ 2 billion in high-powered computers next year and that it will buy them from foreign makers if U.S. manufacturers are prohibited from selling machines above minimal speed levels.

"Our concern is that overseas customers will say, 'I don't need this headache. I need product,' and go shopping elsewhere," said Dan Hoydysh, trade policy director for computer giant Unisys Corp.

The industry wants Washington to raise China's limit on computers to be used for military purposes. from 2,000 to 12,000 millions of theoretical operations per second. Although industry officials have acknowledged privately that they did not expect to win the change outright, they had hoped that the White House would announce a tentative step, for example, by ordering a study.

But one White House source said that the administration had devoted almost no attention to easing U.S. limits on China and was unlikely to do so in the immediate aftermath of the Cox committee report. Industry officials said that in recent meetings the administration has suggested it might not act until late this year.

The issue of when the White House acts is crucial in the case of China because current law requires it to give Congress six months to review any change before it can be implemented.

First official word that the White House is prepared to ease export limits on the 100 countries could come during a meeting scheduled for Friday between White House Chief of Staff John Podesta and a group that includes IBM Chairman and Chief Executive Louis Gerstner, Intel Corp. Chairman Andy Grove and Sun Microsystems Inc. CEO Scott D. McNealy.

More on the allegations of Chinese spying, including the text of the Cox report, is on The Times' Web site:

http://www.latimes.com/chinaspy

LOAD-DATE: June 8, 1999