Civil Liberties

NSA Spying Torpedoes American Business Dealings in Europe


Inspector Clouseau
Pink Panther

From the beginning of the NSA mass-surveillance scandal, revelations that the U.S. spy agency was not only scooping up international communications, but had conscripted American companies into the effort have opened doors for foreign firms. Tech companies in other countries are relatively shielded from pressure by U.S. spooks (whatever their relationships with spy agencies in their own countries) and some American entrepreneurs, like Ladar Levison of Lavabit, actively urge people to avoid U.S.-based services. Worse, though, the NSA's connection to some companies is giving European politicians cover to discriminate against American businesses. Never mind that Europeans do their own fair share of spying; they now have legitimate concerns to raise about the security of data in the hands of Apple, AT&T, Google, and other familiar names.

Reports Juergen Baetz of the Associated Press:

BRUSSELS—The backlash in Europe over U.S. spying is threatening an agreement that generates tens of billions of dollars in trans-Atlantic business every year—and negotiations on another pact worth many times more.

A growing number of European officials are calling for the suspension of the "Safe Harbor" agreement that lets U.S. companies process commercial and personal data—sales, emails, photos—from customers in Europe. This little-known but vital deal allows more than 4,200 American companies to do business in Europe, including Internet giants like Apple, Google, Facebook and Amazon.

Revelations of the extent of U.S. spying on its European allies is also threatening to undermine one of President Barack Obama's top trans-Atlantic goals: a sweeping free-trade agreement that would add an estimated $138 billion (100 billion euros) a year to each economy's gross domestic product.

The Safe Harbor agreement allows companies to move data around their networks as needed. In its absence, data from Europeans might have to be stored and processed only within the physical confines of Europe—a huge expense and possibly insurmountable hurdle for many companies. Many U.S. companies would effectively be unable to operate in Europe if they were reachable by European law.

Some companies could explicitly be barred from expanding their presence in Europe out of fears that they operate as pipelines to the NSA. According to the Wall Street Journal's Anton Troianovski:

AT&T Inc.'s ambitions to expand in Europe have run into unexpected hurdles amid the growing outcry across the region over surveillance by the National Security Agency. German and other European officials said any attempt by AT&T to acquire a major wireless operator would face intense scrutiny, given the company's work with the U.S. agency's data-collection programs.

Resistance to such a deal, voiced by officials in interviews across Europe, suggests the impact of the NSA affair could extend beyond the diplomatic sphere and damage U.S. economic interests in key markets. AT&T Chief Executive Randall Stephenson has signaled repeatedly in recent months that he is interested in buying a mobile-network operator in Europe, highlighting the potential for growth on the continent at a time when the U.S. company faces headwinds at home.

Some of this resistance to American companies is legitimate; Europeans are as outraged as Americans about the spying scandal—quite possibly more so, given that continent's long history with authoritarian regimes and secret police. And some of these moves are just opportunistic; the NSA has turned into a great excuse for European politicians to openly favor well-connected companie in their own countries at the expense of U.S. firms.

In a recent report (PDF), the European Parliament called out Britain, France, Germany, and Sweden for tapping directly into communications networks—though it insisted "The capacities of Sweden, France and Germany (in terms of budget and human resources) are low compared to the magnitude of the operations launched by GCHQ and the NSA and cannot be considered on the same scale". Germany's BND worked closely with the NSA to facilitate spying, and France's DGSE needed no encouragement to hoover up communications data, though it apparently aided the NSA, as did a counterpart agency in Spain. Britain's GCHQ is reported to have burrowed its way into Begian telecommunications firms in the course of its extensive cooperation with the NSA.

In other words, European government officials are shocked. Shocked!

But, however cynical the response, by compromising the independence of American firms, U.S. officials created a hell of a justification for other countries to torpedo those companies and favor their own.