United States Trade Representative threatens the EU
The United States is accustomed to getting its way internationally through trade threats. One method is the Special 301 Report Watch List, which is an annual list of countries which the US believes are failing in their duties towards copyright protection (specifically, US copyright protection). Once included in the Priority Watch List, a foreign country is liable for legal and/or trade sanctions. The Special 301 Report is compiled by the Office of the United States Trade Representative (USTR), and is seen as a method of bullying recalcitrant nations into conformity with US preferences.
This is not the only annual report from the USTR. It also produces the Section 1377 Review which examines international compliance with telecommunications trade agreements. This too, perhaps because it has become entrenched in the USTR way of doing business, can take a bullying tone. The latest report was released on Friday – but I would suggest that it thinks again if it believes it can bully the European Union at this stage of EU/US relations.
Following the Snowden revelations on NSA/GCHQ spying, the now former head of Deutsche Telekom, René Obermann, proposed in November 2013 that Europe should establish a Schengen-routing and Schengen-cloud. The idea was that any communication from one point in Europe to another point in Europe should never leave Europe; and that personal European data should remain within Europe. This latter would effectively remove the existing safe harbour agreement with the US.
‘Schengen’ was chosen specifically as a mechanism for excluding the UK. The Schengen Area comprises 26 European countries that have abolished border control for Europeans between common borders – the UK has always remained outside of this agreement. As Die Welt described in March, the ‘Schengen-routing’ is intended to be “a defensive measure against the encroachments of the Anglo-Saxon intelligence on European internet users.”
Germany’s Angela Merkel and France’s François Hollande (that is, the central axis of the European Union) have declared support for the idea.
USTR’s Section 1377 Review
At the end of last week the USTR released its 2014 Section 1377 Review. On cross-border data flows it has two concerns: Turkey and the EU.
In Turkey, in the run-up to the recent local elections (‘won’ by Prime Minister Erdogan’s AKP party) and ahead of the presidential elections in August, the government has been tightening its grip on and control over the internet. USTR is concerned over restrictions on data flows and will seek “to ensure that data flows supporting legitimate trade can expand unimpeded.”
In Europe, the report notes that
DTAG [Deutsche Telekom AG] has called for statutory requirements that all data generated within the EU not be unnecessarily routed outside of the EU; and has called for revocation of the U.S.-EU “Safe Harbor” Framework, which has provided a practical mechanism for both U.S companies and their business partners in Europe to export data to the United States, while adhering to EU privacy requirements.
Well, obviously, this is a false statement. The safe harbour agreement requires that US companies holding European data do not pass that data to any third-party – but clearly they do pass it to the NSA and law enforcement. The report continues,
The United States and the EU share common interests in protecting their citizens’ privacy, but the draconian approach proposed by DTAG and others appears to be a means of providing protectionist advantage to EU-based ICT suppliers. Given the breath [sic] of legitimate services that rely on geographically-dispersed data processing and storage, a requirement to route all traffic involving EU consumers within Europe, would decrease efficiency and stifle innovation. For example, a supplier may transmit, store, and process its data outside the EU more efficiently, depending on the location of its data centers. An innovative supplier from outside of Europe may refrain from offering its services in the EU because it may find EU-based storage and processing requirements infeasible for nascent services launched from outside of Europe.
This is riddled with emotive language and inaccuracies. Draconian? Protectionist advantage? (Now I freely accept that DTAG will be looking for commercial opportunities, and that it is not a company I personally wish to use. From personal experience, I will never have dealings with T-Mobile again. But it is interesting that it seems to be willing to trade the US market for the European market.)
And the inaccuracies… Europeans would suggest that the US has shown scant regard for anyone’s privacy, while it is the US that delivers protectionist advantage (sometimes via economic espionage) to its own companies. Secondly, it completely misrepresents the proposals. European point-to-point communications should stay within Europe (that’s the ‘routing’); while personal data should not leave Europe (that’s the ‘cloud’). But the USTR is lumping the two together into some form of balkanised European intranet completely cut off from the rest of the internet. In reality, it should have little effect on legitimate trade between the EU and US.
It is not, for example, nearly as draconian as the US exclusion of Huawei from the US markets without any proof of actual threat (other than economic).
Then comes the USTR threat:
Furthermore, any mandatory intra-EU routing may raise questions with respect to compliance with the EU’s trade obligations with respect to Internet-enabled services. Accordingly, USTR will be carefully monitoring the development of any such proposals.
In reality we should not take this too seriously. It’s a form of lobbying – perhaps the first of much more to come – and we already know that USTR is not averse to lobbying on behalf of US industry. But it does show that the US is beginning to take the Schengen threat seriously. The UK should too. In the meantime, it should be said that US industry is not without its European allies. Neelie Kroes, the European Commissioner in charge of the European Digital Agenda, has said: “It’s not realistic that we can keep data in the EU, and the trial could jeopardize the open Internet.” Neelie Kroes is the commissioner who recently tried to redefine ‘net neutrality’ to suit big telecoms companies, only to have her definition rejected by the European Parliament.