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Five predictions for the EU-U.S. Safe Harbor showdown

Jay Cline | Oct. 28, 2015
Several indicators point toward a compromise outcome.

european flag in karlskrona 2011
Credit: Wikimedia Commons

The European Union’s highest authorities on data protection from its 28 member states issued a statement on Oct. 16 stating that unless the National Security Agency modifies its surveillance procedures by the end of January, they may launch a coordinated enforcement campaign against U.S. companies that have privacy protections they deem inadequate. Moreover, they added, any member state has their support to immediately initiate similar enforcement actions on its own accord.

If the U.S. stays the course on its surveillance program, will Europe follow through on its enforcement plan? This will be the main topic of conversation this week as data-privacy commissioners from around the world gather in Amsterdam.

Here are five scenarios I see unfolding in the coming months.

1: Europe won’t shut down transatlantic commerce over privacy.

Europe deeply values privacy, but it also needs jobs and loves American technology. If Europe’s data-protection authorities (DPA) start preventing data transfers of U.S. companies, the U.S. firms could decide to pack up and go home. With unemployment holding at 11% across the euro zone, any ruling party seen as causing more job loss will take a hit in the polls.

Two other indicators support this prediction: history and game theory.

  • History: The 1998 showdown. We’ve been down this path before. When the EU passed its Directive on Data Protection in 1995, it said it would begin enforcing its crossborder data flow restriction in 1998. Foreseeing an impossible impasse, the European Commission in 1997 began negotiations with the U.S. Department of Commerce and by 2000 had concluded the Safe Harbor Agreement. Facing a shutdown of transatlantic trade, both sides found a compromise.
  • Game theory. Nobel prizewinner John Nash, who’s better known than most mathematicians thanks to the movie A Beautiful Mind, gave us “game theory” tools to predict the outcome of showdowns. When you array the different possible outcomes of the Safe Harbor endgame into a standard game-theory table, the “Nash equilibrium” — see Diagram 1 — is the scenario where the EU imposes a few headline-grabbing fines, but avoids an all-out shutdown of data flows.

game theory
Diagram 1: Game theory points to limited EU fines. This table arrays the two main strategies of U.S. companies against EU regulators’ main two paths. The optimal outcomes for the U.S. are ranked in red, where one is the best and four is the worst, with corresponding EU rankings in blue. The arrows indicate the direction of higher rankings relative to the opponents’ strategies, and the circle indicates the Nash equilibrium, where both parties converge on a shared preferred outcome. Click on image to enlarge. Credit: Jay Cline


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