Overview
The Trump administration and US tech companies are confronting major trade barriers in Europe and China. The problem in both cases is consumers’ right to privacy.
China is fostering national champions that are friendlier to state surveillance than Silicon Valley firms. Meanwhile, Europe is threatening to punish American companies because US surveillance policy doesn’t meet its data-protection standards.
The solution is simple: Step back and let America’s two biggest trade adversaries fight it out.
China’s hostility to US tech companies became clear when Google found itself frozen out of the world’s biggest search market. Since then, China has systematically squeezed US internet companies and favored local copycats. Now grown fat in a protected market, many of those local champions are preparing to challenge Silicon Valley for global dominance. That’s problem No. 1.
Problem No. 2 is Europe’s determination to impose its privacy law on the US. The European Union restricts the exportation of personal data to countries whose data-protection policies aren’t “adequate” by EU standards.
Perhaps Freud’s “narcissism of small differences” explains Europe’s 20-year history of threatening to cut off data flows to the US. Or maybe it’s the leg-up the policy gives to Europe’s dwindling tech industry. But there’s no doubt that Europe loves the fight. The EU will soon arm its privacy enforcers with the authority to impose data-protection fines on American tech companies. These could run as high as 4% of global revenue. For Google, that’s close to $4 billion.
This massive leverage is increasingly being used not to regulate the use of personal data in advertising or the private sector but to attack US counterterrorism tools. In a recent lawsuit brought by the Austrian student Max Schrems, the European Court of Justice objected to the way US authorities use data to find terrorists.
Relying on a garbled version of the Snowden leaks, the court declared that US law doesn’t adequately protect privacy in the fight against terrorism. Now the EU is threatening to punish US companies with $4 billion fines if the Trump administration rewrites the Obama administration’s limits on intelligence collection.
Instead of rushing to propitiate EU negotiators, Donald Trump’s team should try a different approach. Introduce them to Xi Jinping, who makes no bones about using data to keep the Chinese people in line. Before imposing sanctions on US companies over America’s human rights practices, maybe the EU ought to investigate China’s practices.
There should be plenty of data exports to investigate. China’s autarchic policies have made its champions strong in every part of the wireless internet, from back-end switches to consumer phones. In the app economy, WeChat boasts more than 800 million active users and is aggressively penetrating the European market. The Chinese company Wish is one of the top three online-shopping apps in the UK and is outpacing Amazon in France.
WeChat recently bragged in Brussels about how much data it collected on potential European tourists, and how seamlessly it could move around: “WeChat allows merchants to target a well-defined audience, based on age, gender, purchasing power, geographical location, likelihood to visit a country soon, etc., attract them as followers and send them personal communication messages, special promotions or coupons both in China and once they are travelling.”
If they’re traveling in Europe, those tourists are protected by the same European privacy law that has bedeviled the US for 20 years. So if it’s sauce for the American goose, why not for the Chinese gander? Hard-nosed Trump-administration negotiators should certainly be asking that question. Because “arbitrary or unjustifiable discrimination” in administering Europe’s data protectionism is a violation of international trade law.
But why wait for the negotiators? As Mr. Schrems has shown, anyone whose data has been exported to another country can challenge the adequacy of that country’s law. So should you find yourself in Europe, if only for an extended visit, just open your phone, download WeChat, and subscribe. That’s enough to make you a plaintiff—and shake the world.
Why? Because that lawsuit will force both Europe and China to make hard choices. How much diplomatic and economic pain is Europe prepared to suffer in support of its privacy mission civilisatrice? Will China defend its surveillance regime at the risk of exposing its tech giants to $4 billion in fines?
For Americans, this conflict would be a chance to break out the popcorn. But it could also resolve a contradiction that has bedeviled the tech industry for a generation. Because if Mr. Xi forces Europe to put limits on its data-protection imperialism, the EU will have to make the same concessions to the US.
Mr. Baker is a partner at the lawfirm of Steptoe & Johnson.
