Page 12 - index

Seeking a Balance in U.S. Economic and National Security

Interests

By Alan McQuinn

Congress recently passed legislation to curtail several of the National Security Agency’s (NSA)
surveillance programs, focusing primarily on limiting the agency from directly collecting bulk
phone records on U.S. citizens. While this reform was a solid first step in the right direction to
protect the civil liberties of U.S. citizens, Congress has not yet addressed the economic
concerns raised by pervasive electronic surveillance. That is critically important, because the
perception that the U.S. intelligence community engages in widespread electronic surveillance
continues to severely undercut the U.S. tech industry’s global competitiveness. Foreign
customers fear that U.S. companies may be more vulnerable to NSA surveillance than their
non-U.S. counterparts. Until U.S. policymakers address these concerns, U.S. companies will
continue to face a disadvantage selling their products and services abroad.

The Information Technology and Innovation Foundation (ITIF) released a report two years ago
in which it estimated that if U.S. cloud computing providers experienced even a modest drop in
their expected foreign market share due to concerns over U.S. surveillance then it could cost
the United States between $21.5 billion and $35 billion by 2016. However, since that initial
report, it has become clear that the whole U.S. tech sector has suffered as a result of the NSA
revelations, not just cloud computing firms. Indeed, the economic impact of U.S. surveillance is
likely to far exceed our initial estimate. That is the key finding of a new ITIF report updating the
original analysis. The new report catalogues a wide range of examples of economic harm done
to U.S. businesses and concludes there is no end in sight to these continued losses. Making
matters worse, not only are foreign customers shunning U.S. companies, but foreign
governments are also using surveillance fears to create protectionist policies that keep out U.S.
businesses.

The economic costs of U.S. surveillance
Foreign customers have started to pass on U.S. technology in favor of foreign alternatives. For
example, Cisco saw its sales interrupted in Brazil, China, and Russia because of reports that
the NSA had secretly inserted backdoor surveillance tools into its routers, servers and
networking equipment. In fact, during a quarterly earnings call, Cisco CEO John Chambers
even cited the NSA as the factor behind steep sales decreases, saying “I do think (the NSA
revelation) is a factor in China.” Similarly, IBM, Microsoft, and Hewlett-Packard also have
reported diminished sales in China as a result of U.S. surveillance tactics.

At the same time, foreign companies have made the U.S. digital surveillance policy a focus of
their own marketing strategies. German cloud companies have started to bill themselves as
“Cloud Services: Made in Germany,” while Finish companies like F-Secure make the pitch that
they never share their users’ data with other governments or companies. This strategy has
proved effective and F-Secure saw its user-base grow to over one million within the first nine
months of operation.

12 Cyber Warnings E-Magazine – June 2015 Edition
Copyright © Cyber Defense Magazine, All rights reserved worldwide