Time's running out for Safe Harbor detente as Davos mirrors the transatlantic data divide

With less than a week to go to come up with a fudge solution, how are those Safe Harbor Redux negotiations coming along?

Well, according to US Commerce Secretary Penny Pritzker, pretty well. She told reporters at the World Economic Forum last week that:

We’re down to the last few issues. My hope is that we’ll get all of this done shortly.

She added:

Trade is at stake. Our economy is at stake. The digital trade back and forth between the US and Europe is about $260 billion per year and a lot of jobs. We’re working to try and resolve issues that would be affected if Safe Harbor went away.

It’s important we address the issues raised by the EU, address the issues raised by the European Court of Justice, and bring Safe Harbor to the 21st century. We need to move forward. It’s very important for transatlantic trade.

Since the European Court of Justice last year declared Safe Harbor to be unsafe, the US and European authorities have been trying to cobble together a last-minute replacement - having only had a couple of years previously to come to an agreement!

Pritzker says that there is now a “comprehensive offer” on the table with “seven pathways for EU citizens to address their concerns” which “very much aligns with the requirements of the European Court of Justice.

So that’s all good, isn't it?

On the other hand, a spokesperson for the European Commission (EC) seemed rather less confident, stating:

There have been some movements on the US side, which is welcome, but we need further clarification on transparency and effective oversight.

That was also the angle taken by Andrus Ansip, Vice President for the Digital Single Market at the EC, who warned:

I would like to say that we made progress, and we have to wrap up those negotiations and we have to deliver. Because time is running out, of course.

I ask for a bulletproof solution, but if it will be not bulletproof, then we can be absolutely sure the European Court of Justice will intervene once again. So this is a process.

He added:

It's so easy to ask for more. Americans say they would like to get more. Europeans said they would like to get more. But time is running out.

While 2 February is now when Safe Harbor runs out - the weekend gets in the way of a tidy 31 January date - in reality, whatever ends up on the table then will still have to be voted on and signed off by the European Union member states and the European Parliament.

It will then undoubtedly face legal challenges from a variety of civil rights bodies as well as calls from the more draconian forces within the Commission to move the goal posts.

So, all told, it’s going right down the wire and beyond. It’s hardly an impressive result from two years worth of negotiations.

Cultural divide

Davos provided a useful talking shop for negotiators to get together. It also highlighted the contrast between European and US attitudes, outside of the policy makers posturing. Maurice Lévy, Chairman and Chief Executive Officer of French-Headquartered Publicis Groupe, explained:

Consumers have not seen how important private data was and they have shared that very generously. Today there is a very important question about who owns the data. We know who sells the data, but who owns it?

In Europe, countries have been damaged in the way that data has been used. They are very very strict about the use of private of data.

This is very different to the US, he argued, both culturally and legislatively:

For example, in France you cannot store data about religion or race. I was shocked the first time I was working in the US when they asked to give them the breakdown between Jews, gays, black, white, whatever. This was absolutely shocking for me. But it was a request from the City of New York and we had to comply. In France if you put on file that someone is homosexual or a Jew or a Muslim you can be taken to court because you are building a database of discrimination.

This cultural divide has knock-on implications in Europe, said Lévy:

The temptation by the state is to be highly restrictive about the information On top of this they are extremely worried to see that two or three companies are controlling most of the information and that the information is stored in the US and not in a European cloud.

All this will lead to legislation, which is not always a good thing. When you start elaborating rules on something which is moving so fast, you make decisions that are already outdated and which after two years will be hugely outdated.

The right thing to do is to put all of the people in a room - the people who are selling the data, the people who are using the data, the representatives of the consumer - and making sure that we have reasonable use of the information. Otherwise we will have a huge problem in society.

From a US corporate perspective, Salesforce CEO Marc Benioff flagged up what kind of problems are building up, both commercially and societally:

If you look at the Balkanization of data, that comes from fear and that comes from ignorance and that leads to nationalism and that slows down technology advancement.

This shouldn’t be happening as there’s been plenty to time to come to terms with these issues, he added:

Why is that happening? Because these world leaders come in and they say, ‘We’re shocked, we’re shocked that this is happening’. Well, for 20 years we’ve been articulating what is going to happen with data. Why have they not been paying attention? Because the ‘urgent’ is consuming the ‘important’. We know other technologies are coming.

Policymakers need to assume new responsibilities, Benioff urged:

We have a Minister of Finance in this country and a Minister of Foreign Affairs in that country. I think that every country needs a Minister of the Future, someone who’s just going to pay attention to what’s going to come. Let those people deal with the crisis of the day, because we can’t afford any more for these guys to throw up their hands and say, ‘We had no idea this was happening.’ You can look at the transcripts of the World Economic Forum for the past 20 years and it’s all been right there, it’s all been quite clearly communicated.

It’s all about finding a balance now, one that doesn’t tip too far in any direction, advised Erik Brynjolfsson, Director, MIT Initiative on the Digital Economy:

We have to be realistic about striking the balance in the right way. It’s an example of how new technologies are creating new opportunities. There are trillions of data points that will be created by the Internet of Things, but as we do that we have to come with new regulations.

It used to be that the laws of physics constrained the sharing of information. If someone did a transaction and there was a receipt in the cash register, it was very hard for that information to be shared with people on the other side of the planet.

When everything is digitized, the laws of physics don’t constrain so we have to come up with our own rules and regulations. I wouldn’t want to be too aggressive though about stifling that innovation, lest we do more bad than good.

My take

That last point by Brynjolfsson mirrored comments by Facebook Chief Operating Officer Sheryl Sandberg earlier, when she took aim at the Commission propensity to create regulations that she said stifled Silicon Valley innovation:

Well-designed regulation can unlock new opportunities and help small businesses and industries to scale. Poorly designed regulation can do the opposite.

I’ve long argued that efforts by the Commission to drive through ever tougher regulatory regimes risk consigning Europe to the digital slow lane and border on the protectionist.

Whatever fudge the US and the EU cook up next week will be far from the end of the story.

Disclosure - at time of writing, Salesforce is a premier partner of diginomica.