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Foreign governments are also dropping contracts with U.S. firms in favor of foreign providers.
For example, the German government dropped Verizon over fears that the NSA used their
services as spy tools. In addition, China recently took prominent U.S. tech firms off of its
approved purchase lists, ostensibly due to U.S. cyberespionage. Because the Chinese
government owns some of the world’s largest banks and those organizations can only buy
products on these lists, loss of access hurts several U.S. tech companies, including Apple,
Cisco, and Intel’s McAfee.

Foreign countries claim U.S. surveillance justifies protectionism
Foreign governments are using U.S. surveillance as justification for protectionism. While these
countries say they are trying to protect their citizens from the prying eyes of the NSA, it is clear
that many of them are focused more on misguided attempts to spur their own economies than
by any real efforts to limit surveillance. By creating rules that advantage domestic firms over
foreign firms, many countries believe they will build a stronger domestic tech industry. For
example, some in Europe have called for preferences for domestic providers and even a system
that keeps European data in Europe, called the “Schengen area for data,” as means to promote
deployment of European-focused cloud services. As a result, Amazon started running Internet
services out of Germany for its European business partners in an effort to downplay threats of
online spying.

There is also a trend in countries, such as Australia, China, and India, of creating laws that
prevent certain data from leaving the country’s borders. This effectively requires cloud
computing firms to build data centers in those countries or risk giving up market access. For
example, in 2014 Russian implemented policies that would require Internet-based companies,
such as Google or Facebook, to store personal data of Russian users within the country’s
borders.

However, these protectionist policies not only limit the number of services that a country’s
citizens and businesses can enjoy, but also harm that country’s productivity and
competitiveness. For example, Xero—a cloud-based accounting software company that
provides back-end computing to increase the productivity of its customers—has encountered
barriers from countries that restrict the flow of data, like China. They also unwittingly hurt the
long-term ability of a country’s own firms to compete in global markets by sheltering them from
international competition.

So how can the United States reverse this trend?
The globally networked economy demands commerce without geographical restrictions. To
push back against the trend by some countries to erect geographic borders on the Internet and
create a level playing field for the U.S. tech sector, the United States should lead by example
and establish the most compelling global standards for transparency, cooperation, and
accountability. First, the U.S. government should clearly inform the public about the data it
collects domestically and abroad and work with its allies to create similar commitments abroad.

Second, the U.S. government should strengthen its treaties with other nations—called mutual
legal assistance treaties (MLATs)—which allow law enforcement agencies to cooperate and

13 Cyber Warnings E-Magazine – June 2015 Edition
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