With the increasing use of e-mail, wireless phones, personal computers, and electric commerce the market for encryption products is rapidly growing and reaching new segments of the population.  However, U.S. companies will not be able to reach many of these potential customers. Many U.S. industry representatives have stated that stringent U.S. export control of products with encryption capabilities reduced their international sales. An example of a product type for which export controls affect U.S.  global competitiveness is software with encryption capabilities used in international commercial networks.  As an example of less stringent foreign controls, a German company contracts with a Japanese company to manufacture a high-speed encryption chip for export to Germany.  In contrast, U.S. export controls prevent U.S.  companies from exporting such a chip to the German company.  Although the United States may not export such chips to this German company, U.S. companies may purchase secure products that contain these chips.  They are also allowed to sell them to anyone within this country.

According to the U.S. International Resource Development office, the world wide market was estimated at 695 million in 1991. According to a D.C. based economic think tank The Economic Strategy Institute, U.S. export limits on encryption technology will cost the economy as much as $96 billion over the next five years. Over 900 firms in 30 other countries produce encryption products according to a survey done in September, 1997, the report said.  Estimating lost sales and indirect effects, the report estimated a  growing loss to the U.S. economy over the next five years totaling between $37 billion and $96 billion.  In 1998, current policies would  cost the economy from $1.4 billion to $6.8 billion rising from $17.7 billion to $39 billion in 2002.  This gives a clear picture of how fast the market is growing. In seven years, it has been estimated to grow over 6 billion dollars.  The U.S. government did a report on foreign availability and production of software products.  In the report, they state that export controls have not really hindered U.S. companies at all.  They claim that many countries have their own limits on encryption and that it makes more sense for each country to use their indigenous security technology.  However, U.S. software firms currently own a 75% share of the global market for PC software and therefore could provide greater advantages to providing security software as well.  Currently, they are losing the global market for encryption technology.  Another report by industry leaders in the Computer Systems Policy Project, finds that U.S. information industries could lose $30 to $60 billion in annual revenues by the year 2000 due to export controls.

Foreign software manufacturers could possibly use the predominance of their encryption technology to gain an unfair edge in other sotware product niches.  If Bill Gates could do it, maybe someone else can too. If a foreign firm's tehcnology is optimally safe and popular, they can make it compatible or incompatible with any other software company they want. If they were pushing a certain product, they could use this to their advantage.  Although it is unlikely, it is still possible.
 

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