China's encryption rule could shut U.S. businesses out of big market

U.S. businesses would be blocked from selling computers and other electronics to the Chinese government, unless they share their encryption technology with officials in Beijing by this weekend.

Saturday marks the deadline by which certain tech firms must submit to China a series of details about their security tools. Failure to do so, according to officials, means those businesses will lose access to the multi-million dollar market for Chinese government contracts.

The new rules do not apply to all tech products; rather only manufacturers of Internet firewalls and Web routers, among six total tech areas, must submit their encryption techniques. Still, only Chinese companies have so far submitted the necessary information, which experts fear China will only use to bolster its practice of rooting out online dissidents and blocking content on the Internet.

As tech groups grow increasingly frustrated with the new rule, which they decry as protectionist, U.S. and European officials have pressed their Chinese counterparts to abandon their plans.

The U.S. Trade Representative's office reportedly "pressed China to address the concerns of foreign governments and industry before implementing the testing and certification rules," a spokeswoman told reporters this week, adding the Obama administration hopes China will soon "follow global norms."

European leaders were considerably more aggressive in their reaction, describing China's new plan as one without a "real base in reality."

"We cannot see what they see in regard to security, so we are in fact disputing this," Karel De Gucht, an European Union trade commissioner, told The Wall Street Journal this week.

But most concerned is the U.S. tech community, which regards the encryption debate as the latest in a series of concerning and unprecedented moves by the Chinese.

"The problem we're facing here is part of broader, systemic problem we're having with China veering from global approaches and not fully integrating with global economy," said John Neuffer, the Information Technology Intdustry Council’s Vice President for Global Policy. "It's been a sustained effort across the board to steer China toward adoption of global approaches."

Earlier this year, many of those businesses and trade groups pushed congressional lawmakers to fight China's "indigenous innovation" plans -- essentially, new procurement rules that require government agencies to purchase equipment only from businesses that develop and register their intellectual property patents locally.

ITIC is among many that have since pushed the Obama administration to confront China on the issue during next months talks, they told The Hill in February. Their concerns have so far caught the attention of at least one lawmaker, Rep. Howard Berman (D-Calif.), who later aired his gripes with the Chinese ambassador.

"This new program would run directly counter to the joint commitment of our two presidents to open trade and investment at their recent meeting in November," he wrote in letter.

China has yet to relax those indigenous innovation rules. But if Bejing does, ultimately, heed U.S. and European calls on its new encryption standard, this weekend would mark the second time officials in Beijing have postponed and relaxed their encryption deadline. International criticism when the rule was proposed in 2008 prompted the Chinese government to scale back its original plans to require all tech manufacturers to submit their encryption data.

"We are pressing for a delay, we would like them to delay again," Neuffer told The Hill on Wednesday, "but it's very unclear to us what's going to happen."