US fires warning shot over Europe’s plans for protectionist ‘Schengen cloud’

eu-us-tradeAnd so it begins. The US government – via the auspices of the Office of the US Trade Representative – has fired a warning shot over the heads of the Eurocrats in Brussels who want to build a ‘European internet’, a taster of what could rapidly descend into an international trade war if not checked.

Plans to ring fence Europe with a “great firewall” actually date back to 2011 when the proposal emerged from a meeting of the Council of the European Union’s Law Enforcement Work Party (LEWP). According to public record, at a meeting in February of that year:

the Presidency of the LEWP presented its intention to propose concrete measures towards creating a single secure European cyberspace, with a certain ‘virtual Schengen border’ and ‘virtual access points’ whereby the Internet Service Providers (ISP) would block illicit contents on the basis of the EU ‘black-list’.

[Schengen refers to a European treaty that allows for visa-free freedom of movement within the EU, but which [theoretically] strictly controls entry to the European continental region to outsiders. Most EU nations are signatories to the Schengen Treaty with the notable exceptions of the UK and Ireland, both of which have expressed concerns about the impact on immigration.]

But the idea of a ‘Euro-internet’ has been re-ignited over the past 12 months with the NSA spying scandal used as justification to push the concept harder than before.

The governments of France and Germany are particularly enthusiastic, the latter backed up with support from its national telco champion Deutsche Telekom AG (DTAG), which actually wants to go one further and set up a German-only internet.

(The French are still miffed about the rest of the world’s indifference to Le Minitel, so aren’t perhaps likely to be terribly keen on that idea.)

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Merkel – not happy

German Chancellor Angela Merkel – whose cell phone was famously hacked by the NSA, much to her headline-grabbing highly public indignation – said prior to a meeting with French President Francois Hollande:

“We’ll talk about European providers that offer security for our citizens, so that one shouldn’t have to send emails and other information across the Atlantic. Rather, one could build up a communication network inside Europe.”

US reaction

But this idea has been shot down in flames by the US Trade Representative in its latest annual report where it states:

Recent proposals from countries within the European Union to create a Europe-only electronic network (dubbed a ‘Schengen cloud’ by advocates) or to create national-only electronic networks could potentially lead to effective exclusion or discrimination against foreign service suppliers that are directly offering network services, or dependent on them.

The USTR report makes clear that the US government regards the ‘Schengen cloud’ argument as a front for naked protectionism by the EU:

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 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.

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.

What adds a particular frisson to this latest tension is that the US and the EU are currently mid-negotiation over a trade treaty to give mmultinational organisations more rights to sue national governments over claimed breaches of trade rules.  Questions about a European firewall aren’t likely to encourage co-operation much.

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Reding – also not happy

Meanwhile there are voices within the European Commission, such as Viviane Reding, the European Commissioner for Justice, Fundamental Rights and Citizenship, openly calling for the scrapping of the Safe Harbor agreement which was put in place to enable data sharing with US-based companies.

With Reding and her colleagues also using NSA as an excuse to push for a pan-European Cloud Computing strategy and tougher data protection laws in the US, there are certain parties in the European Commission who have much to be grateful to Edward Snowden for.

But whether their political zealotry is matched by an awareness of the potential international trade ramificiations remains sadly unclear.

Verdict

Trouble ahead if this Europe-only internet nonsense isn’t stopped in its tracks.

The idea of such a system is transparently open to abuse and attracts howls of righteous indignation from Brussels when it’s practised by the likes of China or Iran or Turkey.

Flinging up digital borders is entirely contrary to the open principles of the internet, smacks of protectionism and digital envy of the US and is ultimately in no-one’s best interests.

Harsh reality: the cloud industry is dominated by US providers. The harder the European Commission makes it for those providers to operate in Europe, the less likely they will be to invest on a wide scale and European countries will be the real losers.

At the recent Think Cloud for Government conference in London, the European Commission’s head of unit for software, services and cloud, Ken Ducatel, alluded to the fact that the current batch of commissioners – including Reding – will be replaced in September.

I can’t help but think there’s a lot of damage you can do in 6 months when you know you’re running out of time.

 

 

 

Stuart Lauchlan

Stuart Lauchlan

Stuart Lauchlan has been tracking and commenting on the enterprise IT market for 23 years during which time he's managed to amuse, inform and irritate buy and sell side participants in equal and appropriate measure. Lauchlan also helps companies understand the needs of technology readers.
Stuart Lauchlan

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