The US plan for a Clipper chip, which lets intelligence agencies crack encrypted computer messages, has raised fears among European businesses that sensitive information would no longer be secret if it were vetted by the CIA, the FBI or GCHQ, the British Government's eavesdropping facility.
E-mail is rapidly taking over from 'snail-mail', as postal services are dismissively known. There are 20 million users on the worldwide web of computer networks known as Internet. But in 10 years it is predicted 80 per cent of trade information will sent by this method.
The Clinton administration, concerned that terrorists, money-launderers and drug dealers will use E- mail to send encrypted information to associates, wants to outlaw the use of private encryption on international computer networks.
The global censorship plan has run up against opposition from European and American businesses that use encryption to send sensitive information. In a position paper to a committee of European Union intelligence experts, which has been obtained by the Independent, the European organisation representing users of computer security has rejected the Clinton initiative as 'totally unacceptable'.
The statement by the Information Security Business Advisory Group (Ibag,) warns European governments to ignore overtures from the US government aimed at restricting access to the information superhighway to users who use encryptions that the government agencies can decode.
The European position is that 'industry needs to know when its sensitive data has been compromised (by the security services or others)' and that the US eavesdropping initiative will greatly reduce the benefits of the information superhighway. Companies 'will be restricted to a very restricted list of 'approved' algorithms (encryption methods)' greatly adding to business costs and making international co-operation difficult.
Ibag recently informed the senior officials group on information security that the planned US-style restrictions, or the even stricter French system under which those using cyphers must disclose the keys to the authorities, are 'totally unacceptable' to industry.
The European group has proposed that companies deposit the keys to their encryption cyphers with 'trusted third parties' rather than with governments. With this system, when intelligence agencies want to tap messages, the company will have to be notified.
Chriss Sund, a computer-security expert, said companies faced real dangers of economic espionage by governments. 'There was a general instinct among companies to distrust the French,' he said, who use government controls on encryption 'to their advantage'.
Stephen Dorril, an expert on the intelligence services, claims that the US proposal is designed to facilitate economic espionage.
'GCHQ, which has been co-operating hand-in-glove with the US for the past 50 years, finds itself caught in the middle of this EU-US dispute. Britain will eventually have to square co-operation on intelligence and encryption across the Atlantic with the demands of its European partners.'
Under the US initiative, use of computer or voice encryption which cannot readily be hacked into by the security services of co- operating governments will be deemed suspicious and worthy of surveillance.
These users will be denied access to the information superhighway.
The US has decided to replace private encryption with the Clipper chip. This enables government agencies to listen in on conversations and intercept and decode data flows at will. How European governments intend to tackle the problem of terrorists and other criminals using encryption to stay ahead of the law is not known, but there has traditionally been a close working relationship between the National Security Agency in the US and the GCHQ in Britain.
The clash over encryption could have serious implications for the development of the information superhighway, which has been hailed in Brussels and Washington as a way of increasing competitiveness and delivering a boost to the economies of the industrialised world.
If European businesses are blocked from using the US information superhighway because they will not bow to US pressure, the EU may be forced to develop its own independent system, adding to the cost and hastening the division of the world into three rival trading blocs, the US, the EU and Asia.
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