Wed, Aug 01, 2001 page21

• High-tech firms may gain from relaxed export rules

  TECHNOLOGY The US Congress is overhauling the Export Administration Act, making it significantly easier for computer and chipmakers to sell their goods abroad

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  Unisys Corp, Intel Corp and Sun Microsystems Inc are among US computer and chip producers that stand to gain billions of dollars in sales as a move to relax curbs on advanced technology exports advances in the US Congress.

  Legislation to overhaul the Export Administration Act for the first time since the Cold War faces votes this week on the Senate floor and in the House International Relations Committee. The changes are backed by the Bush administration.

  The legislation, stalled since April after a US Navy spy plane collided with a Chinese military jet near China, is picking up momentum partly because congressional anger is fading over the 11-day detention of 24 US crew members, analysts said.

  "The China spy incident put a chill on everything," said Dan Hoydysh, director of the Washington office of Unisys, a computer systems provider that anticipates several billion dollars in expanded exports to China alone if the measure passes.

  The export controls are a throwback to US efforts to keep advanced technology out of the hands of communist states during the Cold War. They limit the sale of equipment to more than 50 nations, including Russia, Vietnam, Pakistan, India and even Israel.

  The relaxation of controls is especially important to US companies hoping to expand in the Chinese market, which already provides them with as much as 10 percent of sales, Hoydysh and other corporate officials said.

  US friction with China has eased in recent weeks with an agreement between the two countries on terms for China to join the WTO, among other issues.

  "We are now moving forward in a positive direction," US Secretary of State Colin Powell said in an interview with China Central Television during a visit this weekend to Beijing.

  China this year will purchase US$18 billion in computer hardware and US$3 billion in software and services, projected analyst Juan Orozco at IDC, a computer industry research firm in Framingham, Massachusetts. Demand is expected to grow 18 percent for hardware, 40 percent for software and 55 percent for services each year through 2005, Orozco said.

  Senate Democratic leader Tom Daschle said he wants a floor vote on the legislation before Congress leaves Friday on a month's recess, and House International Relations Committee Chairman Henry Hyde, a Republican, scheduled a hearing on a House version of the bill for today.

  "We have to recognize that technology has gone way beyond the law here, and we have to update the law," Daschle said.

  The shift by Hyde improves prospects for passage of the measure this year, company officials said.

  Hyde, like some other legislators, had taken a harder line with China since April in delaying action on the bill. "Maintaining our position in the global economy should, in my view, not come at the expense of shortchanging our obligations to international peace and our respect for human rights," he told a committee hearing in May.

  The Senate measure, similar to the House legislation and endorsed by the White House, would update a 1979 version of the Export Administration Act by giving the president wider discretion in deciding what high-technology products could be sold to which countries.

  Chief among the changes is allowing the president to eliminate the system of Mtops, or millions of theoretical operations per second, for measuring the performance of computers.

  Users can easily overcome restrictions based on Mtops measurements by combining computers or using available software, said Jennifer Greeson, a spokeswoman for the Computer Coalition for Responsible Exports, whose members also include IBM, Apple Computer Inc, Compaq Computer Corp, Dell Computer Corp and Hewlett-Packard Co.

  The existing rules allow computers to be exported to US allies such as the EU and Japan.

  Exports of the most powerful computers are prohibited to countries like China and Russia without a specific export license.

  And sales are prohibited altogether to seven "rogue states" including North Korea, Iraq, Libya, Cuba and Sudan.

  The government currently approves most export applications involving the middle-tier countries, although only after expensive and time-consuming individual reviews, Greeson said.

  The new proposals also reduce limits on the export of products that are widely available overseas, she said. And they increase penalties for export rules violations, since inflation during the past 21 years has eroded the threat to companies from the existing schedule of fines, she said.

  If the current Mtops standard isn't replaced, the new high-speed Itanium processor developed by Intel will force almost all new computers shipped to China to face months of additional paperwork delays, Hoydysh of Unisys said.
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