How Does This Affect Encryption Technology?
The US has pulled out of the Trans-Pacific Partnership (TPP). President Trump recently signed an Executive Order essentially killing the TPP before the US Congress had the opportunity to vote on it. Without the US as a signatory to the TPP, it will quietly vanish along with the decades of work put into negotiating and finalizing its terms and conditions.
A little-known consequence of the impending termination of the TPP relates to the free exchange of products which use or contain encryption technology among subscribers to the TPP; and incentives to build manufacturing plants in subscribing countries by companies that create products which use or contain encryption. How does the death of the TPP affect global export and import of products which use or contain encryption technology?
Based on our work with clients who manufacture hardware and software products which use or contain encryption technology in facilities on various continents, it appears that the US, Russia, China and to some extent the Netherlands are leaders in creating top-level, sophisticated encryption.
The import of products into certain countries is restricted if that product uses or contains encryption stronger than crypto usually found in most products sold to the general public through retail type outlets not requiring substantial installation or maintenance of the product after purchase, that is, “mass market” type products.
GOVERNMENT APPROVAL ON IMPORT
Government approval is required to import non-mass market type products into many countries around the world. Customs agents want access to data about the encryption functionality, use, and typical end-user of non-mass market type products before import. In some countries, “authorizations” are required before import of these products. The process of obtaining such an authorization delays the movement of the product resulting in delayed sales thereby affecting revenue.
It is evident from the language in the TPP and from tidbits of information gleaned from the global press during TPP negotiations that subscribers to the TPP do not want encryption to be a barrier to trade. TPP negotiators hoped to enhance the sale of subscriber’s crypto products by not hindering a sale due to import restrictions because the product uses or contains encryption, and, as important, by not hindering the placement of a manufacturing facility used to create crypto products in a subscriber’s country.
LANGUAGE IN THE TPP
Chapter 8, of the TPP, “Technical Barriers to Trade, Sustaining Encryption” found at Annex 8-B, prohibits subscribing countries from promulgating by regulation or any conformity assessment, any directive which, as a condition of manufacture or sale regarding TPP signatory countries, forces access to a product’s encryption technology. Considering this part of the TPP, negotiators attempted to promote the creation and use of encryption in products by manufacture or sale within TPP signatory countries. A giant leap forward to enhance the free flow of manufacture and sale of crypto products.
As an aside, transactions with subscribing governments are excluded from this provision, and law enforcement officials would not be prohibited under the TPP from legally, and within the confines of applicable legal procedure, requiring service providers to hand over unencrypted communications. The latter would not affect trade.
The TPP was a step in the right direction to enhance trade in products with cryptographic functionality and for the creation of manufacturing plants creating cryptography and related products. Barriers which now exist on the import and manufacture of such products would be minimized thereby promoting trade even if a product has cryptographic functionality.
Most US digital products, hardware and software, use or contain encryption. Import barriers to such US products will be alive and well considering that the TPP is, in effect, dead.