Businesses Need a New Privacy Shield Now

Last month, while addressing the Munich Security Conference, President Biden declared that “the transatlantic alliance is back.”

For businesses on both sides of the Atlantic, this is welcome news. The flow of goods, services, and investment between the U.S. and the EU is unmatched by any other bilateral relationship, and it supports the jobs of 16 million American and European workers. We at the U.S. Chamber are ready to roll up our sleeves to tackle the disputes that have plagued transatlantic commerce in recent years and address shared challenges. But results are needed.

Swiftly negotiating a new EU-U.S. Privacy Shield must be at the top of policymakers’ agenda. More data flows between the U.S. and the EU than anywhere else in the world. These flows underpin the global financial system, advance life-saving medical research, enable cybersecurity cooperation, and make the day-to-day of cross-border commerce in the digital age possible. In 2018, EU-U.S. trade in digital services was valued at over $400 billion. This has likely grown, as the pandemic has forced businesses to rapidly adapt by turning to digital technology.

The past year has been an uncertain one for transatlantic data flows. In July, the European Court of Justice invalidated the previous Privacy Shield agreement, which enabled over 5,000 mostly small and medium sized businesses to trade across the Atlantic while complying with the EU’s General Data Protection Regulation. At the heart of the Court’s concern was U.S. government access to European data, not U.S. commercial privacy protections. Since then, however, Europe’s privacy regulators have gone far beyond the Court’s decision to take aim at so-called “standard contractual clauses,” a legal tool used by 85 percent of businesses to move personal data out of Europe. Prominent EU officials have also called for data localization—a trade barrier the European Commission has repeatedly advocated against in other markets—and a favorite tool of digital protectionists in Beijing and Moscow.

If data flows are disrupted, European business could lose ground—putting at risk the EU’s standing as the world’s top exporter of digital services—and Europe could be transformed into an information island. Such a move would also undermine transatlantic cooperation on digital policy. At a time when Europe is trying to advance its “technological sovereignty” with proposals like the Digital Markets Act, which seem tailor-made to attack U.S. companies, a new Privacy Shield would be a much-needed early win.

The clock, however, is ticking. As early as next month, the Data Protection Commissioner of Ireland may succeed in invalidating Facebook’s standard contractual clauses. This would set an unnerving precedent. Even the Irish Commissioner admits that it would likely cause “massive disruptions” to data flows with consequences for the entire business community.

A new Privacy Shield is needed in weeks, not months, to head off these disruptions and bolster all data flows between the EU and the United States. The agreement should address the Court’s concerns via an executive order from President Biden, which itself should leverage the U.S.’s robust legal and institutional framework for protecting civil liberties.

Thankfully, the European Commission has handed negotiators a roadmap. Last month, it released a draft “adequacy decision” for the United Kingdom, which found the country’s privacy regime, including its safeguards on government surveillance, “essentially equivalent” to Europe’s. The draft decision is a testament to how democratic governments can come together at the negotiating table when the stakes are high.

Yes, these are complex issues, but time is a luxury we don’t have if we’re to avoid a costly split in the transatlantic digital economy.

With the Biden Administration in place, there is positive momentum and political will to move the agenda forward. It’s time to get a win on the board, and soon.

About the authors

Garrett Workman

Garrett Workman is the former Executive Director for Europe and the Executive Director of the U.S.-UK Business Council at the U.S. Chamber of Commerce.

Evangelos Razis

Evangelos Razis is former Director at the U.S. Chamber of Commerce’s Center for Global Regulatory Cooperation.