ALERT: EU Actively Supports Protectionist Data Localization Policies

Meet the Euro-crats who think that the European Union needs to behave more like Russia and China.

More like Nigeria, Kazakhstan, and Indonesia.

These leaders are pushing not just to punish U.S. firms for successfully building data-focused businesses, but pushing to actively pull data away into localized pods so their governments can protect local companies from competition and can access the data at any time.  Like China.

EU internal market commissioner Thierry Breton claims he wants to make Europe “the most data-empowered continent in the world” in part by cutting its data off from the rest of the world. Breton has said EU rules need to state “European highly sensitive data should be able to be stored and processed in the EU.” Breton told a French newspaper that the EU should use privacy regulation as a weapon against U.S. tech companies, requiring data to be physically stored and processed in Europe.  He called an open internet “naïve.”

In this interview Breton said, “We must go further and demand that European data be stored and processed in Europe, in accordance with procedures that Europe will have set. In other words: it is necessary to structure the information space, as we have organized in the past the territorial space, the maritime space, and the air space. The Gafa [Google, Amazon, Facebook, and Apple] tried to make digital a “no man's land” whose law they would write. It's over. It is time to relocate this information space by opting for processing our data on European soil.” So he has re-characterized an open internet – which has been an aspiration for democracies and free societies around the world – as a digital no man's land that must be divided into protectionist chunks. Breton,

France’s former Finance Minister, wants laws to help European businesses resist subpoenas from the U.S. and elsewhere. According to TechCrunch his governance proposals “will include a shielding provision — meaning data actors will be required to take steps to avoid having to comply with what he called ‘abusive and unlawful’ data access requests for data held in Europe from third countries.”

This sounds suspiciously like the industrial policy France has practiced for centuries, using the direct power and tools of government to coddle and enhance French companies and industries. Since 1712, when the French sent Jesuit priest François Xavier d’Entrecolles to China’s imperial kilns in Jingdezhen, Jiangxi province, to steal the secret of hard-paste porcelain, laying the foundations for the French porcelain industry, the French have happily applied government direction and assistance to steal industrial secrets and manufacturing methods for local companies. Entire treatises have been written about French government-sponsored industrial espionage against British manufacturing in the Eighteenth Century. The French government features prominently in Foreign Policy Magazine’s timeline of industrial spying including, “The FBI confirms that French intelligence targeted U.S. electronics companies including IBM and Texas Instruments between 1987 and 1989 in an attempt to bolster the failing Compagnie des Machines Bull, a state-owned French computer firm. The efforts mixed electronic surveillance with attempted recruitment of disgruntled personnel.” Don’t forget the incidents in the early 1990s when the French security service was caught bugging airplane seats assigned to U.S. tech executives to prop up failing French tech.

As reported in a different Foreign Policy article, “If you’ve been paying attention, you know that France is a proficient, notorious and unrepentant economic spy. ‘In economics, we are competitors, not allies,’ Pierre Marion, the former director of France’s equivalent of the CIA, once said. ‘America has the most technical information of relevance. It is easily accessible. So naturally, your country will receive the most attention from the intelligence services.’  Unlike the U.S. and most of its other allies, Mr. Marion clearly sees French government intelligence as an arm of France’s allegedly private industry. The article continued, “The spying continues even today, according to a recent U.S. National Intelligence Estimate. The NIE declared France, alongside Russia and Israel, to be in a distant but respectable second place behind China in using cyberespionage for economic gain.”  No wonder that Breton admires the Chinese methods of industrial and tech protection.

Germany wants in on the protectionist data localization scheme too, as its Economy Minister Peter Altmaier advocates for launching a European cloud storage system called Gaia-X to pull EU data away from Google, Amazon, Microsoft, and friends. As soon as the recent Schrems II decision was released, striking down some EU/US data transfer options, Data Protection offices in Germany issued interpretations of the ruling that would make it impossible for U.S. companies to the U.S. See our discussion of the decision and local reactions.

According to Politico, “leaked documents outlining Europe's grand digital strategy include talk about fostering an environment that will "lead to more data being stored and processed in the EU," as well as an "open, but assertive approach to international data flows. Not only would [EU data localization] undermine the EU's own insistence on free data flows in negotiations with trade partners, it would also put the bloc in a league with authoritarian regimes in Russia and China, which use localization rules to clamp down on the circulation of information — splintering the notional worldwide web into country-sized shards.”

The article quoted Alex Roure, of the Computer & Communications Industry Association (CCIA) lobbying group, to say that he has not seen a "single case" where data localization benefits privacy, security, or the economy. "If it’s to protect local incumbents, that would be problematic."

To this end, The EU just last week proposed new rules on data governance to benefit EU companies. The new rules create nine “data spaces” including industry, energy, and health care. The official press release from the EU makes clear that the EU plans to use these rules to cripple American tech companies by forcing EU data into government-operated data pools to benefit European businesses. They are finally saying the quiet part out loud.

This kind of protectionism may be what happens when our allies are left on their own, unsupported, and unchecked by a U.S. government that has withdrawn as a positive player on the world stage. Is data localization the future of EU policy, dividing the internet down into fortress zones? For now, the direction seems clear. Maybe a new U.S. administration can convince our allies that an open internet is in everyone’s best interest.