received access to the material he seeks in each before us today. attorney general eric holder and deputy attorney general james cole are not the problem. they are both intervened personally on multiple occasions to overcome the fbi's objections and to compel production of the materials in question. i commend them for that leadership. but i do not know who will hold these posts in future administrations. we should not be willing to entrust this key oversight matter to men and women who may

feel differently about the effectiveness of the office of inspector general. attorney general cole asked the office of legal council to issue a formal opinion resolving this dispute. i hope the principle deputy assistant attorney general karl thompson and his team would adhere to the plain text of the statute and to our obvious intent and grant the inspector general unfettered access to every document in the department's position. if the office of legal counsel find ambiguity to hold in place any of them on the inspector general's access to information, the house judiciary should be

the first to act to correct their mistaken impression. inspector general horowitz, we welcome and we look forward to your testimony today. and to your assistant's legislative response is indeed required. i thank the chairman and yield back. >> the chair thanks the gentleman. and chair understands that the gentleman from ohio would like to make a brief statement welcoming the inspector general. >> i thank the chairman. i'm looking at the letter you signed along with a bunch of other inspector generals from august 5th of this year. the first paragraph talks about serious limitations on access of record and the second paragraph department of justice recently faced restriction. i was going to say welcome to the club. it's no -- i think it's noticeable that four of these six republican members here are also from the oversight committee. i know, we have a hearing tomorrow on the very issue. we have been frustrated from the kind of response we've gotten

from the internal revenue service and the department of justice. we share your frustration and want to commend you. i've been impressed with your service to the pubic. this is critical. thank you for the hearing. thank you for your work and being here today. >> the chair thanks the gentleman. all other opening statements will be made a part of the record. we thank our only witness for joining us today. if you would please rise i'll begin by swearing you in. to do you swear the testimony you're about to give should be the truth, the whole truth, and nothing but the truth so help me got. thank you very much let the record reflect that the inspector general responded in the affirmative. as inspector general, he oversees a nationwide work force of more than 400 special agents, auditors.

previously worked as an assistant united states attorney for the southern district of the new york from 1990 to 1999. after this he served as in the ÷ criminal division at maine justice as deputy assistant attorney general and chief of staff. he has also spent time working in the private sector most recently as a partner. he earned his juris doctorate magna cum laude. we appreciate your presence today and look forward to your testimony, your written statement will be entered into the record in the entirety and ask you summarize your testimony in five minutes or less. thank you, welcome. >> thank you, mr. chairman.

congressman conyers, members of the committee. thank you for inviting me to testify today. information agency files go to the heart of our mission to provide independent and nonpartisan oversight. that's why 47 inspector generals signed a letter last month to congress expressing their concern about the issue. i want to thank the members of congress for their bipartisan support in response to that letter. the ig acted by congress in 1978 is crystal clear. section 6 a provides that inspectors general must be complete, timely, and unfilters access to all agency records. since 2010, the fbi and other department components have not read section 6 a in that manner. therefore, refused request during the review for relevant

grand jury, wiretap, and credit information in their files. as a result, a number of our reviews were significantly impeded. in response to the legal objections the attorney general or the deputy attorney general granted us permission to access the records by making a finding that our reviews were of assistance to them.

>> however, interpret in an

ability to act pursuant to the ig act. we will have a prompted remty. demonstrated the oversight saved taxpayers money and improves the department's operations. actions that limit information have substantial consequences for our work and lead to incomplete, inaccurate, or significantly delayed findings or recommendations. i cannot emphasize enough how critical it is to get these solved promptly. and hopefully olc will issue an opinion that it means what it says. this concludes this prepared statement. i would be pleased to any answer statements the committee may have. >> thank you. >> the only explicit opportunity to inspect audits within its

jurisdictions resides in 8-e. it is an extraordinary exemption that provides the attorney general with the authority in carefully circumstances to prohibit the office of inspector general from carrying out an audit or investigation. to invoke section 8-e the attorney general must explain his reason in writing and a limitation on an exercise of authority is necessary to prechbts the disclosure of specifically categorized impairment to national interests. my question to you is has attorney general holder at any ñ tenure used this formal procedure to limit your office's access to material essential to a review? >> he has not. and that's in one of the arguments we put forward which is that is the mechanism congress put forward to limit our access. that's the provision that should be used. not simply a standing objection. >> in your experience prior to

the three reviews you cite in your testimony, had any component used the right to unilateral about what requested documents were available. >> to my understanding from speaking to my predecessors, that had not happened before 2010. >> how valuable is your authority to access grand jury or other sensitive material to your ability to execute rigorous overnight of national security matters? >> it is critical. these are the tools of the tried for law enforcement agencies. if we can't access every piece of information in their files when we're doing oversight of the fbi's tools and handling of national security tools, we won't know the full answer to what's going on. >> and according to your office, the fbi's withholding of the

grand jury information is unsupported in law and contrary to both the inspector general act and exceptions to the general rule of grand jury secrecy. would you outline the reasons why the inspector general is entitled to access grand jury material that the fbi claimed was privileged? >> first and foremost, 6-a of the act could not be clearer as was just outlined in the opening statement. it is crystal clear. that's the primary reason. but secondarily under the grand jury rules, prior to 2010, we had regularly obtained grand jury material because we have attorneys for the government working for us. i'm an attorney. we have a number of attorneys working on our staff. that would be the other exception. third in the national security area, there's an additional exception in the grand jury rules that had before 2010 been used to get us grand jury material. so there are at least three reasons why we should be getting this material.

>> you testified earlier that at no time has the attorney general complied in gets a statement in writing as to why material may not be provided. have you had the opportunity to have any verbal discussion with either he or the director of the fbi as to why they are choosing not to make this material available to you? >> i have. i've raised my concerns with both of them. and the response from the department has been most recently to send the matter to the office of legal counsel to evaluate the two. the fbi's competing legal argument. and that is where the matter currently lies and has for several months now. and it's very important that that opinion be issued. i think it should be clear that we are entitled to it.

but if there's a contrary ruling, we want to know sooner rather than later to work with congress to fix the problem. >> have there been any previous opinions with regard to this issue? >> there have. and that again is one of our points which is in 1984 prior to our existence which we came into existence in 1988, olc issued a legal opinion finding the office of professional responsibility was entitled to grand jury information. we are at a loss to understand why that same opinion wouldn't apply to us given our -- we have the same oversight responsibilities and on top of that unlike with opr congress again as congressman conyers laid out, found that we should be getting these materials and put a provision in law that says that. >> thank you very much. chair recognizes the gentleman from michigan. >> thank you, chairman. you've anticipated some of the questions i was going to ask and

i thank you for raising them. just so that we're clear, mr. horowitz, am i correct in characterizing our discussion about the correct reading of the inspector general act as nonpartisan in nature? >> correct. >> all right. we have in our possession several letters written over the course of late 2011 from attorney general eric holder and deputy attorney james cole. in each of these letters over the objection of the fbi general counsel, the department grants you access to sensitive materials. as recently as last thursday in response to your office's report on material witness statute,

deputy attorney general cole again pledged, quote, to provide your office with access to all materials necessary to complete our reviews consistent with existing law. are these fair descriptions of the role of the department leadership in this debate? >> yes. as i mentioned earlier, the department's leadership has made clear they will continue to issue orders giving us access. so our issue isn't with getting the documents. it's frankly the process that's laid out, compromises our independence. >> have the attorney general and deputy attorney general been helpful to you? >> yes in getting these orders, they have been helpful to us getting the access. >> now, as the only member of the only committee that was voted for the 1978 act, i agree

wholeheartedly with your testimony. congress meant what it said in section 6-a of the act. inspector general must be given complete timely and unfiltered access to agency records. in your opinion, why did the general counsel of the fbi feel compelled to arrive at a different interpretation of the same statute? >> i'd be speculating frankly as to what the motivation was. but there's -- i think it's clear as you've indicated from looking at the opinion and you have it. it's attached to my statement. that the ig act i think trumps the arguments quite clearly. >> well, i hope the office of

legal counsel has a strong opinion in giving your office unequivocal access to the material you require. and this committee is going to be watching that carefully. i thank the chairman and yield back the balance of my time. >> chair recognizes the gentleman from california, mr. issa for five minutes. >> thank you, mr. chairman. general horowitz, thank you for your courage. for inspectors general to write a letter appealing to us over the people who appointed them but will not let them do their job and to have more than half of all the igs do so is clearly unprecedented. i commend you for your courage. i have no doubt that this administration will attempt retribution against all of you. that is their pattern. you won't say it, but i will. this is an administration that

believes justice delayed is justice given they have delayed at every step. so although the distinguished ranking member is absolutely willing to say all the right things, he made one error. the fact is there should be no commending of a man who sat in your chair, the attorney general of the united states, and told us he wore two hats. one being a political hat. because the fbi does not operate in a vacuum. that information can be made available to you over the objections of everybody who works for him. and the policies that are in place are his choice. now, i'm going to ask you just a few quick questions because you and i will be together tomorrow next door. one of them is, is there any basis not just with your shop, but with any of the 74 inspectors general? any of the 12,000 men and women. is there any basis to see that

igs have not been good stewards of confidential information since it was enacted? >> we absolutely having. we handled in my office the most sensitive matters including the hanson matter, including the 9/11 review that we did. we handled those documents entirely appropriately and consistently with the law. >> and isn't it a practice of the very organizations you see both on the fisa side and across the department of justice, fbi and all the other agencies. isn't it in fact one of the most important tools the clandestine nature of discovery, isn't in fact a good fbi investigation often done in a way in which the target of that investigation is not aware that they're a target until after the substantial amount of information has been gathered. >> that's correct. >> so the very requirement for

you to ask for access, doesn't that essentially negate the ability for you to look through such information as you need and perhaps extraneous information so as to not have the target always know you're coming and potentially thwart your investigation? >> it is and i would note that in those earlier reviews for example in the hanson matter, we had direct access to the information. we didn't even have to go through the process we're now going through that's creating all the problems that we're facing. >> and i guess one of the -- i would say last question and i don't really mean it as you know. but an additional question is if, in fact, the target knows and if your statutory limit is, in fact, only against current employees of the department you're involved in, doesn't any delay cause the likelihood that

both political and nonpolitical appointees will move on either through retirement or transfers? >> we face that problem frequently, i've learned, in the last two years. that individuals under review or investigation retire, move on to another job before we're able to complete our work. there are an innumerable number of issues that results from the delays we face that are problematic. >> hypothetically, let's say congress is interested in sending you a letter because we're worried the lowest people doing the lois lerner investigation are in fact tainted in some way either because of their conduct or some other matter and you agree to look into it. isn't that a classic example where it has to be done timely or irreparable harm to the process occurs? >> there are so many reviews that we do that it's imperative that we be able to do them timely. and we are not able to do that

right now. >> mr. chairman, mr. ranking member, i want to take a moment just to say that one of the few areas of specific legislative jurisdiction of the oversight committee is, in fact, the inspector general's. and it's my intention to conclude tomorrow's hearing and take draft legislation which has been done on a bipartisan basis over the last several years working with the inspector generals and with their oversight groups and author that legislation. and i hope both of you and your staffs will look at it ahead of time, give us your input, because i think today's hearing here tells us that we must as a body restate some principles and make some reforms in the ig act to make it clear for the next president and the next administration that we really meant what that legislation said. and i yield to the ranking member. >> thank you. mr. chairman, can i ask

unanimous consent that the gentleman be given one additional minute? >> without objection. >> and i yield to the gentleman. >> i thank you very much, my friend. but i do not think that i'm in error in commending either the attorney general or the deputy attorney 010, when the fbi fir advanced this argument, the leadership at the department of justice has bent over backwards to make certain that the office of the inspector general has access to every last shred of evidence it requires. attorney general hold he, deputy attorney general cole have intervened personally at least half-a-dozen times. and i thank the gentleman. >> i thank the gentleman. i just ask mr. horowitz to comment on whether those interventions in fact represent the kind of timely and

unobstructed kind of activity particularly when the ranking member said six times. isn't six times enough to show a pattern you're unable to overcome? >> the process i laid out in significant in terms of our independence. it also delays our reviews because we have to keep going up the chain to get to the leadership and that's the continuing problem we face. which is why the leadership has made the decision to send it to the office of legal counsel. we need that decision promptly. that's what we need to hear right away. >> thank you. time of the gentleman has expired. chair recognizes the gentle woman from texas. >> let me thank the witness for being here and helping us ferret through what are important issues. and i certainly hope that we're

not on another chain of condemnation of the obama administration, that we are actually trying to get to the facts that will help the oversight of this congress and as well work with the igs and various agencies. i understand the doj, epa and peace corps -- peace corps certainly shocks me because they're humanitarians around the world and we hope they're doing nothing except sending great americans forward to be of help. but let me start by saying, have you had an absolute bar to being able to address issues that have come to your attention, meaning that there has been an absolute dropping of the iron gate, the steel gate, the concrete wall. what have you faced in trying to do the work of the ig, the inspector general? >> the issue hasn't been road

blocks to our undertaking reviews it has been getting the information to timely complete them. that's been the big problem. >> and that is a distinction, to be very honest with you. i want to help you find a system that works. but as you well know, and i, as a practicing lawyer previously, i'll use the term discovery. and many times, particularly if we are in litigation against one of the big guys, there are several ways we can interpret discovery. one, that they are, in essence, road blocking. or that the documents, whether it is a governmental entity, which of course we have immunity issues, but it's down in the bowel somewhere. so my question to you is, is this an issue of getting a system that works because they're in the bowels -- remember, we have gone tech. but five years ago, ten years ago, or, as many of us started in the united states congress,

for exam, we were all paper. we packed up papers at the end of the session. we boxed them up. we thought we were labeling then and they were somewhere in a distant mine. can you discern that we are speaking of what every american understands. i filed it away somewhere, but where is it. would you? >> that's a great point, congresswoman. in fact, i have to say in many respects we feel like civil litigants where we're opposite the party that's going through documents and having lawyers look through documents. for example, the fbi now, the process in place because of their legal position that they're not sure what we're entitled to legally. they send all of their documents, all of our requests now go through their office of general counsel. >> do you say they're sending them in good intent? >> they're sending it there because of their legal position. the result though is we have lawyers like civil litigants. we're sitting waiting for their discovery reviews.

we end up sometimes getting documents from them and then learning from witnesses documents weren't produced. that's the problem with this situation that's been set up and it has to be resolved and it should be resolved in a way that gets us access immediately, frankly. there's really no reason for this process to even be undertaken. >> but let me get you to not put words in your mouth but this is not seen by the ig -- because i'm going to get to the point of a solution. this is not seen in the ig as a malicious intent. is this a malicious intent. >> no. i'm not here to suggest a malicious intent. but the consequence of the legal argument put forward and the time that it's taken is that our reviews go through these processes. >> this is going over a series of administrations. i don't know how long you've been here but this has been ongoing, whether it's been

president bush administration, there is a system in place. is that my understanding? >> well, on the ig side, my understanding is this began in 2010. i started in 2020 but the fbi -- >> this is on the fbi end of it. >> correct. >> but you see no malicious intent. so the question is we're holding a hearing here and i want the hearing intent to be a resolution, not a condemnation. so i think it is important for us to look certainly as you well know, if we're not litigants but litigants each have individual rights. i would have the right to protect my client and therefore in discovery i'm going to make sure that i'm giving precisely what is asked and not something that is just rating. you, on the other side, will be doing the same if you represent a client. in this instance we want transparent government, but as well the fbi, or the epa, or those producing documents, should in fact bed a he adherin the law. if a structure is presently in place that came in this 2010, let's see how we can work it

better. but fbi has the right to counsel. epa has a right to counsel and you have the right to transparency. am i arguing or making the point that you're now saying that you need some system that allows these documents to come forward? >> yeah. what i'm suggesting is the mindset has to change, in our earlier reviews. for example, the robert hanson matter. very sensitive matter. we had direct access to fbi information. no one tried to interpose lawyers in that regard. we are part of the department of justice. we should have, and congress set up a system, in the ig act, as congressman conyers laid out, that says we're there to oversee them. if we're going to oversee the fbi, their lawyers should not be going through and deciding and filtering what documents we get and how fast we get them. >> you have just given us a framework to be able to address -- you're from the doj. we don't have the inspect es from the epa. we don't know what their issues are or the peace corps. i think of them to twinkle toes to a certain extent in terms of

the work they do. but what i would say to you is that this is a workable -- you're presenting facts. i want to be clear as i end my query that -- i know there are a series of sections that you come under an offered sections going forward. as i end, could you precisely just give -- is that your suggestion to move that lawyer structure, or could you work with a lawyer structure that was -- then had a direction that their job is to be fair and cooperative with the ig? because if you remove them totally, can you work with that? >> time of the gentle woman has expired. inspector general can answer the question. >> thank you. yes, i think the lawyers need to be removed from the process for routine requests. there may be issues that arise that require legal opinion. right now what's going on is every request goes that route.

we should be able to get direct access to information. the witness at the fbi wants to come to us with information, with documents, they ought to be able to do that directly. we shouldn't have to go make a request to the legal counsel, have them go look through the documents, and get them eventually, hopefully. but then we often, as i said, learn from other witnesses that there are more materials out interest that are relevant to our review. is there thank you, mr. chairman, for allowing me to have this query. i think that we can solve the transparency approach without condemnation that i hope is not coming forward in this hearing. i thank the witness, i thank the chairman. i yield back. >> the chair recognizes the gentleman from ohio, mr. jordan, for might have been minutes. >> i want to make sure i understand your last statement. every single request, information you're trying to get access to, now goes through the department of justice's legal counsel? >> the fbi office of general

counsel. they've set up that process. >> the fbi has. you're saying that's not political? >> that is the office of general counsel is not a political appointee. >> i understand. >> they send it through their office of general counsel -- >> that just happened -- how long ago did that practice start? >> within the last two years. two to three years. >> so since you came? >> it may have been just before i came. >> i mean i'm concerned about all your work but i'm particularparticular ly concerned about one issue that's been a focus of the oversight committee and some other committees, that's the targeting by the internal revenue service of people exercising their first amendment rights. and frankly, have been very disappointed in the criminal investigation at the justice department for a number of reasons. 15 months ago then-fbi director muller sat right in the chair you are sitting in, was asked three questions, who is the lead agent, how many agents have been assigned to the case and have you interviewed any victims. one month into the investigation when it's been the major news story in the country and his

answers were i don't know, i don't know, i don't know. didn't exactly inspire confidence at that point. then since then, there's been early this year the leak by someone at justice that no one was going to be prosecuted. the president's now famous comment no krucorruption, not a smidgen. the lead lawyer has supported the president's campaign. in this letter you signed with 46 other inspector generals it says, "the department of justice faced restrictions on their access to certain records available to their agencies that were needed to perform their oversight work in critical areas. i want to know what were those critical areas. did any of the -- were you denied being a tess to oversite work in critical areas, were any of those critical areas related to the situation at the internal revenue service and the criminal

investigation that is going on now. any inquiries into that subject matter that you were denied access to. >> no. that is not an area that i was referring to. >> anything related to that -- i know we have asked you to look into certain things. we've asked you specifically i think to look into the fact that miss bosserman was selected to sort of head up this investigation. you didn't face any restriction or denied access to any nfl information regarding that? >> we have not faced any document restrictions with regard to that matter. >> change gears a little bit then, one of the other issues that we were very nervous about, brought to our attention a few months ago was the fact that the internal revenue service gave 21 disks of information to the fbi regarding the targeting issue. that information was given to the fbi in 2010. 1.1 million pages. some of that information

contained 6103, confidential taxpayer information, donor information. are you aware of that issue, mr. horowitz? >> i am. from the news stories and various letters. >> has your office looked into that at all just in any type of elementary way or examine any of that information at all? >> we try not to talk about matters that republican non-public in our office and what we might look at or might not be looking at. >> let me ask it this way. are you concerned about the fact that the justice department specifically the fbi had confidential taxpayer information, they had it for four years? >> yes, i have noted that information. taken note of it. >> last question then. just to be clear though, none of the access you were denied, information you were denied in your oversight work, dealt with the internal revenue service? >> that's correct. >> mr. chairman, i yield back. >> chair thanks the gentleman. recognizes gentleman from utah for five minutes. >> i thank the chairman. i thank the inspector general. i appreciate his work and hits

efforts. i had the pleasure to interact with you on several different occasions. you play a vital role in our system of checks and balances and we wish you nothing but success and want to make sure that your efforts are unimpeded. so i want to ask you some questions though about operation fast and furious. part of the indication from the attorney general was that he could not answer questions, would not provide more information to the public, in part because the inspector general was doing a review. how do you summarize your ability to access information regarding fast and furious? we had difficulty -- and this occurred just before i arrived, and then of course i picked up the investigation. but we had difficulty just before i arrived in gaining access to the grand jury information, because as you know, fast and furious raised a

number of prosecutive issues. and there were numbers of wiretaps. we had difficulty obtaining both of those in a timely fashion because of the objections raised by components to providing it to us because they did not read section 6a of the act as giving us authority to look at that information. >> so what percentage of the information could you actually see? >> i'm not sure i could put a number on it, frankly because i wasn't here at the time. i wasn't the ig at the time that these requests were going on but i do know that there was a fair amount of information that was potentially grand jury information. >> your interpretation -- talk specifically about grand jury information then. >> so i think it is quite clear in the first instance that section 6a in the ig act means we should have unfiltered, timely access to all records. the agency doesn't get to pick and choose.

so that would be the first basis. the second is, we have always gotten grand jury information up until 2010 from the fbi and other department components, either through the ig act or through one of the exceptions in the grand jury law which has an exception for attorneys for the government. we are -- i am an attorney. we are attorneys for the government. i work for the department of justice. that should be i think self-evident but that apparently has not been how it's been interpreted by the fbi. >> how many people report to you in your group? how many igs are you overseeing? >> my office has over 400 employees. >> so the process now, they're having to go and ask permission from -- who is it that -- specific to the fbi, who are they having to ask permission from? >> so what happens now is, we send our requests, because we don't have unfiltered access. we now have this review going on between our requests and us getting the documents.

we make a request. the fbi, the office of general counsel, looks at it. if it has an objection, it raises an objection. then we start this process going. >> what are the so-called objections? what are their excuses as objections? >> well, we've had the grand jury objection. we've had objection to wiretap information. fair credit reporting act information. we also had during the course of our review an objection raised to personally identifiable information for which there was no basis for an objection. but it took months before it got sufficiently elevated and the fbi withdrew its objection and we got the materials. >> at one point there was an objection about an organizational chart? can you tell me about that? >> correct. in two of our reviews that has comp up. one of the audits, an fbi related matter, related to cyber -- our review on cyber. the witness we were speaking with was prepared to hand us the organizational chart that we

asked for but we were told he couldn't do that because it had to go through this process at the office of general counsel to review it. so we were delayed for weeks. i actually had to send an e-mail to the general counsel saying, i don't understand how this can be the case. >> a simple organizational chart. >> simple organizational chart. in addition, recently with the dea, we requested an organizational chart. we got an organizational chart with names whited out. we then went back and said, well, we need the games because one of the purposes is to see who we need to interview. we then got a make shift unofficial organizational chart with names. i had to elevate that to the administrator in order to get the organizational chart we were looking for. >> mr. chairman, i'm so glad we're holding this hearing. glad we're doing so in the oversight government reform committee tomorrow as well. this is outrageous. the inspector general should have unfettered access to all the information they want. when it's got to the point where

they can't even see an organizational chart, it's reached a level of absurdity that must be addressed immediately. i appreciate the bipartisan notion on this and i yield back. thank you. >> the gentleman's point is well-taken. not only does the organizational chart give an indication who they need to talk to, it also gives an indication of who should be held accountable and accountability is, i think, a very serious issue in any government but certainly an issue with this government. at this time it is my pleasure to recognize the gentleman from north carolina, mr. holding, for his question for five minutes. >> thank you, mr. chairman. a limitation that's unique to doj, the department's oig does not have the authority to investigate all allegations of misconduct within the agency. so while the oig may review alleged misconduct by non-lawyers at doj under section

80 of the ig act, it does not have the same jurisdiction over alleged misconduct by doj attorneys when they're acting as lawyers in the department. if you could explain for us how this distinction came about and kind of how the process works. >> this is really a historical anomaly. it's because of the fact that opr existed before we did in 1988. and when our office was created in 1980 by congress, they decided at that time to keep opr in existence and that this jurisdictional limitation so that all matters went to opr. argument being that for many years opr had experience doing these matters and so they shall have authority. we're 25 years later now. we have been given authority over misconduct by all the other parts of the justice department. we've exercised that appropriately, effectively, and most importantly, independently. it's time for us to have authority over all misconduct. there's no reason that agents'

alleged misconduct should be reviewed by the oig but attorneys get to go to a non-statutory independent body for their conduct to be reviewed. >> so are you advocating i guess for -- if you're advocating for that, would opr continue to have any role at doj or are you saying it's past its usefulness? >> i think that would obviously be a decision congress would need to make. but in the past when congress has created these situations, they've kept in place, for example, the fbi's opr and what has happened now is we have right of first refusal. so we take the most sensitive cases, the cases where there needs to be independent review, where there's criminal conduct alleged, where there's high-level officials involved and opr for dea, fbi, the marshal service, et cetera, handled the other matters. that could stay as the process, or congress could decide that we should have all attorney misconduct, no matter who or

what it is alleged to have done. >> in addition to opr, there's the doj's national security division oversight section as well. as you've put toward in your testimony, there provided access to the information that the oig has had trouble accessing despite the language of the statute. so what is your understanding as to why dflt ocht j leadoj leade morthcoming with these documents and materials to these other entities as opposed to oig? >> our presumption is because we're independent and they're not. so there appears to have been a conclusion that there indeed does need to be a finding that our reviews are of assistance to the leadership. it's self-evident for the other entities, opr, nsd, because they are looking for the leadership. we are statutorily independent. congress set it up that way.

and therefore, two appear the decision's been made that somehow we need to go through this process so that is clear our reviews are being overseen or are being of help to the leadership. and of course, that's entirely inconsistent with what congress has set up in the ig act. >> all right. thank you. mr. chairman, i yield back. >> chair thanks the gentleman and recognizes the gentleman from texas for five minutes. >> thank you, mr. chairman. thank you, inspector general. appreciate your being here. we appreciate your candor and your efforts at trying to get records. we had the attorney general testify in here early during his tenure as attorney general, and there was a reference about how close he was to -- that he made to how close he was to the inspector general at the time. that caused me concern, because i had hoped that there was more

independence from an inspector general. nobody is supposed to be an inspector general and be big buddies with the attorney general, although he's called me his buddy. i take that as a term of endearment even though he said, "you don't want to go there, buddy." we never intended for you to have trouble, have any impediment to you getting documents. just so you're aware, mr. horowitz, for almost all of this administration, i've been seeking the documents that the justice department gave to the defendants in the holy land foundation who were convicted of supporting terrorism. this attorney general has used such lines as classification issues, things like that, when

actually, it's very clear, if you give documents from the justice department to terrorists who are convicted, then it's probably okay to give them to congress. and yet, still the most that i've been able to get after all these years is a notice that i can go online and check out some websites that have some of the documents that were admitted. so i share your pain in trying to get information from this administration that should have been a slam-dunk. very easy. just give me disks. give me the papers. whatever. i've been through boxes. i've been through masses of cds as a judge and a lawyer. so what do you think we can do, just the top thing that this congress could do -- well, put this way -- the house could do to make your job easier and make

your position more effective. >> i think, frankly, the number one -- given where this is at olc right now, i think having comments by the i think having comments about the ranking member about the intent and pressing by congress on does section 6a of what congress passed mean what it says? that's the number one issue we're waiting to get an answer to now. >> gentlemen? >> yes. >> i wanted to invite you to join with me in this endeavor because i think you're interested and have learned a lot about it. >> and i would certainly be willing -- i would think a sense of the house might what we should try to pass as quickly as

possible to make clear about our bipartisan belief in the importance of inspector general. i very much appreciate the ranking member of foreman chairman understanding this should be a bipartisan issue because we change majorities. the white house changes. we've got to make sure inspector generals can get the information they need. i appreciate the ranking members. >> thank you. look forward to working with you. you don't have to come back here for a hearing to seek individual assistance in your job. any of us that can help, i know all of us -- i know the chairman -- any of us would be willing to assist in any way. let us know what we can do. it is critical for any democratic republic, as this is supposed to be, to function

sufficiently if a general can't get the access to information he needs. thank you for being here today. >> thank you congressman. >> thanks gentlemen. recognize the gentleman from texas for r his questions for five minutes. >> thank you mr. chairman, mr. horowitz. as a member of this committee and oversight government reform committee, i'm acutely aware of the ben tefits throughout government provided to the citizens of this country. you're the first line of watchdogs right there with the whistle blowers that combat waste, fraud, abuse in the government. the idea behind inspector generals where they worked within the agency but were independent. they understood how the agency worked. felt there would be less reluctance of the agencies to share information with the ig for internal investigations and

the like. but the stuff we've been talking about and hearing about today has taken this to -- into politics. that's where i think the trouble is. one of the advantages of ig, they're within the organization so -- possibly non partisan. that's the intent. rather than having congress subpoena a bunch of documents and do an investigation ourselves where politics get infused in it, a lot of stuff can be taken care of by the ig's within the agencies. but this situation seems po lit sized. is that the sense you get there's a political element to this? >> you know, from our standpoint, what we've seen is simply, in lots of different review, objections being raised. no one has said to us that it's

being done maliciously or for other reasons. i'll let others decide how this came about and why. >> it's certainly been my experience in trying to pry information out of this administration that delay stone wall and quite frankly dealing with the irs, outright lie seems to be the rule of the day. eventual eventually, y'all got some of the documents y'all were after. this was after the leadership in doj determined they were positive. again, this points to po lit schism of it. i guess i don't have another question. i just want to express publicly and on the record dismay at the dismantle ofg what i think has been one of the most oversight and reform tools within the government the inspector general is being coopted and in my opinion po lit sized and

misused. it's a horrible indictment of an administration that early on said they wanted to be the most transparent administration in history. clearly that's not been the case. this is just another example of it. i struggle not to be numbed by it. it's like we have another scandal that comes out every two week, any one of which would have had heads exploding not that many years ago. it's disheartening. i'm going to yield back the remainder of my time. thank you. >> chair, thanks. going to recognize the gentleman for five minutes. >> as coming back in. we get a lot going on. i'm glad you're here. serving on oversight as well as judicia judiciary, importance of what you do is amazing. i wish we had more work done this way. for my folks and i, we are

stunned to learn you don't have access to information that i as an attorney and others feel you're entitled to. leading up to the letter and issue, based on your experience, is it particular people, is it somebody, just an agency culture under this environment agency leader? what do you think led up to the necessity of them to write the letter and say we don't think you're getting the access you need? >> this began a couple years before i became ig. there had been a series of report issued that were critical of handling of matters. this followed shortly thereafter. what happens once this begins, we start to see this among other components and in regular reviews. the roadblocks become more regular. that's the problem with not

resolving it and dealing with it promptly. >> i think one, it gives the impression especially government to government, if roadblocking yourself, it leaves the opinion you're hiding something. that's the way it looks. your review of department use of material witness statute reports fbi conducted page by page review of all documents requested by the oig and said anything it considered to be grand jury material. as a result the review states documents were not useful and review came to a stand still. while the deputy attorney general granted you access to certain documents under the foreign exception, this avenue was not without delays. how long did the oig have to wait for the grand jury material in all? >> it took us almost a year from start to finish to get the material we asked for in terms of completeness of the process. >> and there was really, at this point, no reason for that year's delay? >> there was no reason from our standpoint certainly.

>> basically again, we're stopping, hiding, whatever you want to call it. frankly t if you're going to stick with a story -- like i've told my kids f. you're going to lie once, you've got to the whole way through. >> right. >> now they're coming back giving you the information when they first said they couldn't. >> right. i'll add on top of delay to our review, you have pay whole bunch of lawyers and fbi who have a lot of things on their plate, spending time going through page by page documents we should be getting. my auditors and teams, lawyers, et cetera, being put on hold. not being able to complete the work. so there's waste along with it. it's not only the delay. there's the wasted resources that are going on. >> i understand. and i think that's another whole issue we've got to deal with, wasted resource. we're in an environment we're trying to find every penny we can to properly use taxpayer. also in the report, while

waiting for doj to return the information, fbi withheld other documents. what was that? >> fbi came to us with a list of areas it had concerns about producing. we ended up having to negotiate and discuss with them a variety of categories beyond that before we could get what we thought was complete. since they're controlling the process and we're not getting direct access, we're relying on their interpretation of these statutes and what's relevant and not relevant. >> and again, not to despair in a sense, but we're looking at an investigation that should be worked together on and not pinning us against them. this is honest, truthful mentality. what are we doing? look, we just got back off a working period in which i was in three town halls. that's the biggest thing i hear from most our folks. they don't trust the government anymore.

i've made many discussion about this. they come up and say what can we do? we've got to restore trust. part of this trust factor goes to our own internal checklist and making sure we're not just for busy work. the letter was courageous. there's a lot that could be happening in my short amount of time here quickly. other than hearings, what action do you hope congress will take in response to what has been brought forth today? >> i think the kind of statements and message put forward by the ranking member today who talked about what happened in 1978 and other statements for example in 1988 and 1993 reform as to our office, what was meant by accessed information? did congress intend us, when it gave authority in the early 90s, to oversee fbi and dea that we should be able to look at all records and files? >> we'll leave the last moment

of this to go to the bookings institute live about the panel discussion about information transmitted over the internet. it's just beginning. this is live coverage on cspan 3. >> if you wish to post comments or questions during the forum, feel free to do so. we're broadcasting this event over cspan. we'd like to welcome our audience from around the country as well. so since it's exception, internet has thrived as a platform that facilitates open data flows across national boundaries. commerce and commune kags has grown due to the ability of people in diverse areas to connect with one another. but in recent years, there's been a number of challenges that have arisen that have run the risk of balance conizing the internet and undermining trade and border control ros. this includes inopp rablt

challenges and cyber security threats among other types of things. the result has been a crisis of confidence in the digital economy as a whole. to help us understand these issues, we brought together a panel of distinguished experts. ambassador daniel is the deputy assist ant secretary of the bureau of business affairs in the state department. he coordinates information policy s. prior to that he served as a senior advisor to senator moe cow enof massachusetts and senior advisor to senator john kerry. the ambassador was telling the me last week that he has a new son who was born. the if he yawns from time to time, please understand. family considerations. christine bliss is the assistant u.s. trade representative if for services and investment in the office of the u.s. trade

representative. she oversees multilateral and bilateral services and negotiate services. she's the lead negotiate in the wto service negotiations and worked as chief council and acting trade representative for monitoring and enforcement. change is senior vice president of the corporation and chairman and chief executive officer of zte usa. he's been with the firm two years and was previously on the board of directors of san diego world trade center. richard salgato is director of law enforce skpmt information security at google. in that position he oversees the company's worldwide law enforcement and security efforts. prior to that he worked in security for yahoo. he also has been in the u.s. department of justice and also served as a federal prosecutor. james is vice president of the intelligence division of the

defense group. he also serves as the director of center for intelligence research and analysis is. he's an expert on various aspects of cyber issues and intelligence gathering. i'd like to start with daniel. just ask him what do you see as the biggest current challenges to international trade and cross border data flows? >> thank you very much. thank you for having us. it's an honor to be here. thank you for my fellow panelists assisting. bliss and i worked together a couple years ago. i think in terms of the challenges to to international trade relative to digital data and flows, the biggest challenge is cross jurisdictional issues and concerns people have about implementing particular laws on behavior that takes place and information housed other markets. what we do to try to effectuate

that, solution is lateral and multilateral. we make sure we have relationships with u.s. department of security and others. i hold bilaterals with multiple markets on a regular basis. the way we organize them, on the first day we'll have industry and my counter parts from the other country and industry from their country and myself and colleagues from the agency sort of challenging each other and conducting business on a fair basis across borders with that particular market. seeing if there are ways to resolve particularly outstanding issues. the other issue that we have is is the vision of the internet by some countries as something that disproportionately benefits the

united states or west in which there are consumers and not participants in a market. in that case, the situation there is that you get tradition protection. they'll try to force production or investment in a market in order to create a digital market or internet economy in that country. the problem with that, that seize of internet technology and communications in general not as a platform but a source of development. that's to say it's a piggy bank rather than a bank in the since the information technology is a global market is essential to the growth of sectors across an economy. so keeping it as open as possible has benefits that spread widely across health care, agriculture, all sectors of the economy to insure you get

greater efficiency, productivity of people working in those sectors. we make two points in that scenario. one is recognize and see the value of the platform as a source for development for your entire economy. secondly, work on capacity building efforts so you can use the open and global infrastructure of the internet and communication technologies to build legitimately competitive producers within your markets. that's actually happening. you see that occurring around the world with innovative products and services coming out of different par of the world and serving local and regional markets in a way products and services we develop from here can't do or don't know how to do. they don't know the market as well. all in all, i think that the biggest challenges here are insuring that we preserve what works about the internet. voluntary nature of it, economies of scale of a global network. insure we're including and

becoming increasingly inclusive both in the decision making about how information works and in our deliberations and respect of what others expect from the network. >> okay. thank you. so christine, you focus on trade issues. what are the challenges you're seeing? >> again, thank you very much for the invitation to be part of this distinguished panel. appreciate the opportunity to be here. certainly this is a very essential important part of the trade agenda. we start from the premise that digital trade and information flows are becoming a more and more important source of our gdp, employment, and just overall business productivity and opportunity for innovation. from that point of view, in terms of challenges,

specifically, i think i would say the number one challenge that we see and it very much overlaps with comments danny has made is localization requirements in various forms. i think most specifically tied to internet. it's either in the form of local server requirements, requirements you have a server in the country to provide your service. and the down side of the that i think are extremely obvious. the cost is tremendous. it can in fact deter companies from even going to a specific market if they know they have to set up a new local server in that country. secondly, having to store data locally within a country is also a tremendous costly barrier. again, we understand some of the motivations which may be

security, privacy. we believe there should be and can be ways around that. so that again the tremendous costs involved in setting up separate data storage centers can be avoided. i think those are two of perhaps the most practices we see. often tied to the comment danny made, companies see this as an opportunity to encourage the growth of their own internet industry. but we absolutely agree that in fact, that often turns out to be counter productive because of high costs, because it ends up undermining often the quality of the services that can be provided. level of competition. really the transfer and desemination of technology that comes through open investment and encouraging greater use of

internet. it's particularly true for small and medium enterprises which again is an areab!xck of partic interest to us in terms of encouraging trade opportunities. ebay did a study and showed that those sellers that sold through ebay participated in exporting basically at a 90% level as compared to those small and medium size sellers that did not participate in online sale who exported at a rate of 25%. we think there are real gains that can be made, not just in the united states but across the globe. again, those kinds of localization requirements are self-defeating. another aspect of this and china in particular is engaged in this practice particularly. that is favoring indigenous

technologies and standards. that can also be a very serious barrier, a deterrent to investment and one in which we have long sought to try and discourage. in addition, i think there are a couple of things i'll mention briefly a side from the localization issue which we spend a great deal of time trying to dismantle. secondly, i think lack of ability of privacy regimes. in that regard there's been a lot of highlight and attention on differences between the u.s. and the eu regimes and a lot of very good work going on in that sphere between the united states and eu. censorship is another issue we've had to confront. again, there can be legitimate basis, certain instances for censorship. at the same time, particularly in countries like china and some

instances sl s vietnam, it can barrier to increased trade and investment. and finally, trade and access barriers. first of all restrictions on investment. in some instances there's no investment at all in internet and related sectors. secondly, restrictions on related services like distribution is critical to carrying out the service in the particular sector. there are traditional kinds of trade and investment barriers that we seek to attach as well. and again, i won't spend time on them, and they're not within my particular province of trade negotiation. certainly ipr infringement is another very significant barrier that continues. i would add to the list finally to some degree i think customs

barriers are lack of clarity or customs requirements is something else that has created a barrier for companies. that's a long laundry list. i think it gives an idea of the real scope and spectrum of the kinds of trade barriers we're seeking to deal with through trade rules in internet and internet related services. >> thank you. >> so what are the current challenges in trade and cross border data controls you're focused on? >> thank you for putting this panel together. i'm honored to be part of this. the challenges i think the data flow cross border and also trade cross border really reduced the opportunity for the international and -- we reduced

the economy of skills and also for bidden us to further innovate and market affordable technology to everyone. as probably you know, zte was founded in 1985 to provide affordable communication. zte actually benefit from free information flow and free trade. now we are 160 countries and we are working with almost every single one in the world. we are also starting investing in the u.s. now we have extra smart phone provider in the united states. zte success is coming really from couple of things. number one, partnership. because of this flow of information, we're able to extend partnership with american companies for example intel, broad come.

we're able to integrate the innovation and products into our product with engineering in china and supply to sale worldwide. that's acw basis model for us. another important thing is really the trust. so it's very important for technology companies when we deliver products, we should have high integrity and also inner security. we need to earn trust between us and partners, customers and worldwide. we have to do whatever we can to make sure that those trust are not jeopardized. another thing that's very important for success being a global company, you have to global strategy but also very important that you act locally. it's our goal we always cocomply with local regulations and local

laws. witmply with local regulations and local laws. wit with internet and challenge of flow, it put a challenge to us as i mentioned early, how we going to further grow with that. one step forward is for government to jointly agree on certain things. first of all, should not judge a company of product or services for origin. because today is a global economy. we produced in china but running google operating system with cpu brand. i think then we sell globally. we need to overcome that. rather we charge the company of products based on its own mirror. also the comment globally, they

have to come together to agree on standardization and code of conduct. then we can make sure the internet, this kind of prosperity bring to the world and productivity improvement further prosperity the economy and also help us to manage the overall challenge in front of us even for the environment issue and those kind of issues. so then we can move forward. the next generation of internet, potential of fully utilized, then we can enjoy more growth for the world economy, prosperity, and also creating more jobs. >> thank you. so richard, what are the challenges you're focused on? >> thank you. good morning. thanks for having me. i'm honored to be sitting here among such experts.

i think it's somewhat telling that somebody who has a job that i have is speaking on a panel about trade issues. my job is really around come pelled d ee eed -- compelled da google, companies around the world seeking information about google users. i work on information security issues protecting data. it's all one big umbrella. what's interesting about this is the world of surveillance and world of trade has now collided or combined in absolutely undeniable way now. for my purposes and i think this is probably been the truth for some time now, my observation was of course after we saw some revelations about some of the nsa programs, we saw other jurisdictions concerned about what they perceived as expansive

surveillance authority by the u.s. government to hunker down and try to figure out how with can we protect ourselves and our users from nsa, u.s. government surveillance. one of the natural reactions to that i think, even if very misguided is consider data localization laws. under the misimpression that's a good step and reasonable step to take. so from a cross border trade issue, that presents very significant problems for a company like google and for users. we heard the other panelists talk a i little about this. a country says you've got to have a data in our jurisdiction and got to put some class of user data in that data center. it presents as others have noted here tremendous inefficiencies. the value of a cloud as we think about it is lost when you break

it up into little pieces. you have lots of sub clouds. the official sefficiencies are . you'll rereplicate every. it's very expensive. you have security issues presented when data can't be dispersed in a secure way among data centers that wouldn't share the same catastrophic fate as one might if there was a tremendous storm or other accident. you have network outages, data loss as a result of this. the natural ecosystem that would develop if you didn't have to put data in jurisdiction because of legal requirements, all that is lost with data localization. there's an irony as well. there's a presumption that data localization laws would be good for the local country that's

imposing them. partially perhaps it would give incumbent countries an ability to take advantage, be able to compete. of course what it overlooks is the fact that local businesses of all types actually take advantage of services offered by cloud providers. an awful lot of companies use google, amazon and sales force, lots of other countries to run their businesses. they take advantage of the efficiencies offered by the cloud. really what happens if a country imposes data implications, it harms countries that would otherwise take advantage. there's also i think security issues that are presented when you do this. i kind of mentioned the idea that a good, secure data a storage scheme is going to have data not just in one place where

it's susceptible to a attack or susceptible to some outage or act of god that knocks a data center out. a smart distribution will allow you to stay up, keep uptime at a maximum, allow traffic to route around damage areas of the network. if you impose artificial rules on what the architecture is supposed to look like, you start losing benefits and start exposing data to security threats that otherwise we would easily be able to engineer. in the long run, data localization requirements i think are really very bad. not just for the companies that are taking advantage of the cloud network. i think another aspect of this with the snowden revelations about nsa surveillance come in the form of countries that may be tempted to be build their own

surveillance infrastructure to match what they view as being what the capabilities of the nsa. so what we're starting to see now are jurisdictions considering aggressive surveillance laws that would have extraterritorial reach. they would report to require companies that aren't in their jurisdiction to engage in surveillance for them. maybe an entirely legitimate investigation. may be the need for investigation is undisputed and entirely appropriate by most of our standards that an investigation could continue. these laws are being imposed upon the providers to comply with them. yet they are extraterritorial. in fact, maybe imposing on those providers obligations to do things that are in violation of

other laws that are applicable to those companies. the result is a rather chaotic situation of conflicting surveillance laws and privacy laws which are really meant to protect sovereign interests of the different countries but aimed at an entity that has no way to resolve all of that. that is the private sector companies. the real answer to this is not layer upon layer of conflicting national laws aimed at providers but i think as the ambassador and christine mentioned, bilateral, multilateral diplomatic arrangements between governments to be able to sort out come peting equities in privacy and surveillance. in short term and long term few churks that's one of the larger threats we're seeing. >> thank you. so james, i know you have a lot of expertise on security issues. what are the problems you see? >> you're right darrel. i'm not a trade person. i'll go at this from a different

angle. for me the greatest current challenge is shaping the structural evolution of the internet particularly the regime that sets on top of that. there's obviously structural causes of the fracturing we're talking about. we sort of jumped in to how to to fix it without really beginning by saying why is the internet fracturing in significant ways? i think it's both the economic stakes which are so great and the enormous percentage of the global economy that relies on these networks as well as the decline and security we feel on those networks and the real concerns that we have. given those two trends, it's natural that people look to the governance model and ways legal structures are set up as a way of looking at those concerns. it's led to interesting false means that this idea i can as a cat's paw as the u.s. commerce department.

if anyone who's ever knownester dyson or backstrom or tang ent, it's ridiculous i am is at the commerce department's bidding. that's led to the opposite pendulum fall. the intelligence union under the u.n. that doesn't have the expertise to deal with this and really the wrong venue that we should move to a state centered monthed el. it's because the idea between two competing camps, somehow on the one happened internet is global common. that has cyber punk libertarian origins of the network versus those that now say because of the economic stakes on the internet, we need to impose sovereignty model on the internet. now i'm here to say my personal opinion is there's no global comments in cyber space even though my name is on the report called global commons in cyber.

i was in respectful decent. the reason is the actual structural internet, every node of the network resides within the sovereign boundaries of a nation state governed by laws. data travel over submarine -- there's no parts that don't fall into the west sovereignty order. so yet people say even all that is true, i still want to live in virtual space as an avatar and enjoy the freedom, benefit even though this absolutely falls in sovereignty and legal structure. this is a big philosophical battle we're fighting now.

china, russia and code of conduct mentioned in others, look at the structural aspects of architecture and it relates to sovereignty. they say naturally we have a right to not only protect the network but police the network. this is a huge philosophical battle when mixed also with the battle over whether internet standards and other i.t. standards can be used as trade weapons that we're fighting now that will really determine five, ten, 15, 20 years out what the nature of the network looks like. i wanted to step back for a minute and look from 30,000 feet and talk about cause and effects. i think we can then go back down and talk about specific remedies and ways we can understand where all of this problem actually comes from. >> it's help to feel have the

background. >> my next question, the entire panel and any of you hah want to jump in. several mentioned the questions of trust. we can see the tensions that have developed across countries as well as across sectors. so the question is, how can we rebuild trust in international trade and the digital economy? are there particular steps you think we should take that would improve trade and cross border data flows? any of you that would like to jump in. don't be shy. >> certainly i think from my little world of this surveillance world where so much trust has been lost, especially for users outside the united states, i think the simple but very meaningful steps would include updating u.s. surveillance law. we've got some good vehicles for that. we've got great vehicles right now for reforming the electronic communications privacy act which

is one of our domestic surveillance statutes. get it to be consistent with the standards that most companies are complying with any way in the united states. statutes are way out of date. the second is addressing the national security authorities in the united states, u.s. freedom act is one vehicle that does a nice job of addressing concerns. particularly issues of bulk surveillance by u.s. natural security. those are two very important vehicles that are there ready to be passed and can help reduce the concerns about aggressive u.s. surveillance. i think there's also a great need for the united nations to be better at being able to process requests from other jurisdictions for user data from u.s. companies that hold it. if we can provide a good working

avenue for foreign jurisdictions, non-u.s. jurisdictions to get data through a good process with good standards, we'll reduce the perceived need by jurisdictions to enact extraterritorial surveillance laws or put in place data localization. even simple changes to make it so we are the united states better at honoring our treaty obligations under assistance treaties and other vehicles. it can go a long way to reducing some of the pressure. >> there's a couple things i want to say. one, i think that we should put this in context and perspective. in the first instance, yes, there have been a lot of moves in the press and discussion about data localization. the biggest threat, most real was in brazil. it was passed earlier this year. there was at one point provisions mandating data localization. those provisions were remove ed

from the bill in part because of the recognition within brazil that doing so had negative repercussions for brazilians themselves. we're seeing that kind of educational process taking place around the world. people see it's not in their self-interest to invest in these data a processes. as it relates to steps we can take to restore some degree of trust or some degree of collaboration and comradery on these issue, eu and u.s. under the direction of department of commerce here and counter parts in the eu are working on updates to safe harbor for eu u.s. tran missions of digital data. it's as much their opinion as it is ours of distribution of information because of how important this is to the entire economy in both sectors. another step that we're taking

is ntia announcement earlier this year to transfer the contract functions subject to conditions to multistakeholder community to insure we're talking about a truly inclusive global system of government of the administration. then the third thing that i would talk about is capacity building in those part of the world where introduction to internet communications and network is coming on at a slower place. you're seeing what are around 20 -- 16 to 22% penetration rates for internet growing at expediential rates. those countries and governments are asking us and others to help them with building up incidents response teams and putting into place the right legal and regulatory infrastructure to make sure sharing is possible

and know you can mitigate against threats and attacks. separately the president announced a series of reforms relative to our intelligence practices. among those, within that package of proposal, there is proposals to improve the process which is the mutual legal assistance process by which governments ask us and access information necessary to enforcement of laws at home relative to information housed here. i would go back to the point that i think what we saw maybe in the immediate wake of this note of disclosures hasn't really manifested itself in a closing or fracturing of the internet. at the end of the day, you see a proposals from some authoritarian states to either wall off aspects of interthet or impose international regular la story standards of what people can do, see and say across the interthet. you don't see that adopted by a

significant portion of the world. the brazil's migration in particular, at a conference they held earlier this year, it really man vested itself in the vast majority of participants in the world at that conference. agreeing to the multistakeholder system and govern answer and agreeing to free flowing information across the boundaries. there's a story of half glass full. we're making progress with our colleagues a broad. >> i'm going to join in on that and absolutely agree with what danny said about brazil. i think that it was a good example of how hearing from companies and stakeholders in brazil about the real problem with localization requirements that brazil had proposed had a

positive impact in that instance. i think there are plenty of challenges that remain. i think for example indonesia, we're seeing a trend in the opposite direction which is of great concern and localization area. india remains a huge problem in that regard. so i think we have plenty of work to be done. i would say you know from our perspective, what we're trying to do and will continue to do is through our active negotiations, the most prominent one being our negotiations in services e-commerce tell come and investment chapters. there are series of five core proof visions we think are aimed at what we've been talking about this morning. the first is that we negotiate prohibition on tariffs

districted so they will not be custom to service duties. that's something that started in the wto but we extended are through fta. we think is core and important rule to reinforce. secondly, we negotiate non discriminatory treatment of digital products which again can be a kind of barrier to entry into a market. establishing the more we can make progress through our regional fta's, the better. thirdly, cross border information flows. we have a mandatory binding provision we're negotiating for the first time in tpp that countries are signing up to that requires they allow free transfer of data flows on a cross border basis which again goes directly to what we've been discussing today.

fourthly we're negotiating a rule which would prohibit requirement that countries require servers be located in their own territory. we think it cuts to the heart of the core concerns that have raised with regard to localization. then finally, what we do in our services chapter on a cross border basis, we negotiate on the basis of a negative list. the reason we think that's so relevant to what we're talking about today is you want to be able to cover virtually anything. i think as we all know in the digital area, innovation is ever present increasing something we want to encourage. so the more you have trade commitments that are based on a negative list, then you are able to cover new services as they are created and as they grow. we think these elements combined, more we're able to pursue them, if we're able to create agreement among the tpp countries, we're pursuing

similar kinds of requirements in the negotiations with the europeans. we're also pursuing similar requirements in the tsa, pleural lateral services negotiations which we have roughly 24 countries. 48 if you count all the individual eu member countries together. what's important about that is those core rules i've just described. if we can propagate them among that large a group of countries, i think we'll go a long way toward addressing or giving ourselves a tool in the tool box to take on what again seems to be the problems of particularly localization. finally on the investment front which again i've been talking about the cross border piece. through our bilateral investment treaties and chapter, we also believe the removal of market access barriers when a company decides it wants to invest and

makes economic sense fits with their business model that there are not barriers to foreign direct investment and as in the case of the china example, there are not discriminatory requirements that require you to use local technology or local standards. so i think it seems to us that having those tools is not the complete answer. much of what danny alluded to is also an important part of whole piece of address it can issue in terms of multistake a holder organizations that we need to develop in terms of internet govern answer. bilateral dialogues which are also important. all this working together, we think, can make significant end roads. >> what do you think we should do to rebuild trust in trade and the digital economy? >> this really brings significant improvement of

productivity and also the global trade. i think it's obvious. recently now people start concern about cyber security and the privacy. that is really coming from certain requirement from different comments. i agree that the government really have to jointly sit together, agree with a standard and code of conduct as i mentioned early. also don't judge the technology origination or product origination or service origination from other geography areas. we have to make sure that's frame work is established. also, today's openness of internet and also economy is really because of the contribution from all the technology companies. the technology companies also need to work together across the

international border to make sure that we can react and contribute to such kinds of frame work. then we can give up a viable commercial system and technology to enable such kind of openness to internet. today, again any success of a global company is depending on trust. the debut and intend they are customers. if we use the user's trust and i think we lose fundamental of our business. the prosperity of the world economy. that's very important for us keeping. no matter which comment for what kind of purpose. make sure the prosperity of the economy and the development of the industry is there. i want to say today, you know, the fragmentation of internet is

really coming from the concerns of our cyber security and privacy. i have to say that fragmented internet would not bring security, privacy, protection to the cyber world. cyber security enhancement and protecting privacy should not jeopardize the openness of the internet. so we have to see that you know. the wto to get a global trade. i think also we create a chance there is a missing piece how we're going to insure the free flow of data in today's connected world. that's also something that needs to be done by different comments. >> thank you. so james, what are the steps that you think we need to undertake here? >> when i think about trust in

this context, it's difficult in a world i can't trust my new refrigerator which i discovered in my home network logs last night was trying to go through my home network to communicate back to the manufacture to download the latest firmware. i didn't realize there was a wireless antenna in the [ bleep ] refrigerator. fortunately i had the firewall configured. sad refrigerator, happy james. >> not every refrigerator is smart as you. >> that's what i'm about to get to. you'll be surprised to hear this from me given what i do in the intelligence business. for me, the basis of trust in my daily life is robust transparent encryption. when i get messages from people it's because of digital

signatures. i've been an avid user of inscription over 15 years. it's been a user of it. everyone has discovered encryption. journalists have discovered how to to spell encryption. at the end of the day, it has to be robust, transparent as to how it's being used. engineering when it needs to has to fade into the background. sometimes it needs to be front and center. it has to be easy enough for my mother to use. it can't be that you can only be a crypto paranoid if you can run on the command line. it has to be baked in at a basic level of what we're doing. i will say as an apple fan boy for many years, the recent moves by apple for instance ios 8

where they took the burden of the robust encryption away from the user and configuration and baked it into the way the system is built is going to be the trend of the time. that's to the benefit of everyone who doesn't want to have to expend intellectual capital to figure it out. father of two teenage doctors, big fan of pictures in a cloud. we've moved to that in our corporate networks. all of these measures are coming along. you'll see the industry now growing up that understands there's this desire for it. that will naturally lead. we need to be prepared for another clipper chip debate. it's going to lead to another reaction that says okay, the world needs robust encryption. now what is the legal and privacy and governmental oversight regime that allows key escrow and everything else. we have to understand that that is coming. we're going to have that

discussion. there's a balance that can be struck there. we also have to deal with the use of standards as trade weapons. in china right now the rise of their natural smx standard and the insistence of using the market leverage, the fact so many i.t. products are manufactured in china, to use that as leverage to force ven r venders to make products compatible. the phone in my pocket has a dual wi-fi chip in it. when you talk to apple, they can't attempt you what the chip does. that's the chinese standard. there could be a wapi note in this room i wouldn't know. that's not transparency and regime. while arguing for robust encryption, we have a lot of work to do in the engineering of

making that possible. >> why don't we open the floor to questions from the audience. i'm used to being worried about the government. now i guess i need to worry more about my refrigerator. >> yep. and your toaster. >> questions from the audience. >> gentleman right here on the aisle. >> thank you. >> if you could give your name and organization. >> i'm roberto from professor of law at the university of chile. i wonder what the actual size of localization. we hear about initial china. the issue still we have a localization in place in several democratic countries. i understand to voice for local and avoid localization is because of localization requirements in canada. there are also localization requirements in australia law. and taiwan law. it's not bills to our law in

place. not to to talk about their requirements of localization, but the upn union. it's a little more open because it requires the service processed data in safe countries and data what is safe the diffe between the localization requirements that you are talking act, china, russia, or brazil, and the requirements of localization of those democratic countries i just mentioned? >> anybody want to jump in? christine? >> well, just briefly, i could start by saying that i would certainly agree with you that localization is still a widespread problem. i don't agree, though, that i think that tpp and the core elements that i mentioned were designed particularly for canada. we had a much broader concern

when we developed those elements, which certainly preceded tpp and exist more broadly across the globe. and i think, you know, we make the same argument with each trading partner that we meet and it's very much along the lines of the arguments that you've heard from the panel this morning, that there really is an economic case to be made that having localization requirements, local data storage, local server requirements can be self-defeating and can ultimately not have the high quality of services and competition that you want to see in your own economy. ened i think, you know, we've made a fair amount of progress certainly for that notion. we're not quite there yet, but we have.

similarly, we're making similar negotiations with other countries and we've just begun with the european. so i agree with you that localization is not confined to nondemocratic societies. it exists in democratic societies as well. but i think the economics and the argument that we make is quite similar, though, in terms of efficiencies and can we find ways around those requirements. >> the gentleman right here with us with his hand up. there's a microphone coming from behind you. >> hi. my name is joe hall. i'm the chief technologist at the center for democracy antec nothing. you talked about sort of the move to have more ubiquitous encryption and the more usable forms of consumer security

tools. and he talked a little bit about through the shift, as the professor talks about in terms of moving standard capability from being more law enforcement friendly to protecting the user more. and professor gene camp yesterday put it starkly in the sense that she said, you know, we could mandate that cars should be able to explode on command or the engines explode when being chased by the cops but we don't do that because exploding cars are dangerous. i'm wondering if the panel -- if other people have thoughts about sort of the international implications of this stuff. does

honest. i used to work at rand. they said it was supposed to be for scientists to communicate with one another. and all of a sudden we've been gluing security onto the side of it ever since. every once in a while someone comes along and says let's rearchitect the whole thing, you know, let's repair the damaged airplane at 30,000 feet with the giant hole in the side. right? you know, difficult, you know, not impossible, kind of a nasa-level problem. and, you know, at the end of the day, i have circles, right?

there's my company, then the country, so i'm trying to secure the boundary lines that i can secure. and if that has the ancillary effect of allowing people to use commercially available tools to be able to do things that i don't like, for me that's just a cost. i mean, good policies are not cost-free policies. good policies always have costs. and for me it's a good policy to have widespread distribution of commercial-level, easy to use security products and then we have the engineering problem that comes along with, well, what do we do about the fact that the people we might not like are going to be using them as well. but that's not a reason to then say, well, we're just going to continue to live in this very insecure world in which every time we swipe a card or put our pin into something we're70ñ imperilling, you know, our entire financial existence. >> other questions.

michael? >> mike nelson with georgetown university. i'm really glad to hear a discussion op encryption and data localization, but i thought it would be useful to look at a specific case study of the internet of things. we're moving forward here to a world where there's going to be hundreds of billions of devices connected to the cloud, reporting data in. they're going to arrange from the fit bit on my wrist to the sensors in a ge aircraft. how is that going to affect both our ability to implement encryption -- because some of these devices are going to be ten-cent devices that might not be able to support robust encryption -- and how will it change the debate over update to localization? will countries want to have more control over the data inside their country or give up and realize my fit bit is will go across border, the airplane is going to fly over 40 countries in a day? >> good question. who wants to address it?

>> i'm not sure, mike, if i can answer all of that. i would say that i think the trend you're seeing towards encryption in the obvious products for encryption, which are really communication-type products, i don't see that stopping and it shouldn't. it's something google had been working on long before the nsa worked on getting as much as we could get encorrupted between data centers and user, trying to make it easier for users to encrypt our phones. you encrypt those for a long time now. so i think we are heed towards an understanding, a societal understanding that encryption is good. i don't see why that would not apply to the internet of things. there may be practical issues and may also be differences where the information depending on the thing is not particularly sensitive. how much milk is in the refrigerator, james? probably a subjective judgment.

but i think there may be -- the trend towards encryption i think is one that is strong and we're going to see a lot more of it. i have the same concerns that james has talked about, which is are we going to relive the cryptobattles that we've had in the '90s. and i certainly hope not. but hoping that we can avoi that having learned lessons. >> because we have to acknowledge the fact that the trend line, if you will, i mean, i'm not a marxist determinist, but the trend line right now is that over time we will increasingly live in a world in which, largely for convenience reasons -- let's be clear why we've allowed all of these technologies to come into our life is because of the -- i think patrick henry said give me convenience or give me death. right? you know, that's -- that's why, you know, i mean i'm a slave to my smartphone. right? but we are living in a world, you know, just eve np the last 10 or 15 years in which we are

increasingly living in a world in which the mesh of surveillance and wireless interconnectivity is just going to get denser and denser and denser. i thought it was fascinating that dick clark a couple months ago was asked what the future of privacy looks like in 20 years and he says we're going to live in this, you know, ubiquitous sort of dystopia of cctv cameras and facial recognition and all this stuff, then the affluent are going to take vacations in place where is there are no cameras. in other words, they're going on privacy ska vacations. i don't believe that because the people hosting those resorts are going to want to know all about their preferences so they'll be secretly surveilling them in privacy resort to better offer services to them, you know, what kind of chocolate do they want and all that stuff. but in that world, i'm more comfortable in that -- you know, knowing that that is a dynamism that is being pushed by social interaction and the economy and the benefits and the economies of scale and all these things, if within that environment we

can set up, you know, our own definitions of multilevel security. i don't care if the toaster's unencrypted. i just want it to toast the dam bread. but, you know, i do want my e-mail to be encrypted. i do want my online banking to be encrypted. so, you know, having these kinds of -- i think that, you know, the market will sort out -- and now you have to give the consumer more tools to be able to empower them to sort out how they want that multilevel security to work. so, yeah, the ten-cent thing -- but, you know, at the end of the day, you know, as much as i love dystopia, you know, we're not necessarily moving to sky net, you know. we still have to control the machines. right? because they will decide we're a virus. but i want to encrypt my information so the machines don't know where i am all the time. >> if i could add something. the underlying question of