DATA PROTECTION : US FEARS SPY SCANDAL WILL HURT BUSINESS.

The revelations by US National Security Agency (NSA) contractor Edward Snowden of mass-scale surveillance of e-mails and phone calls could hurt US firms competing in the digital world as trust in their ability to secure data dissipates. That is the big worry of the US business community in the wake of the scandal that has erupted over the NSA's Prism programme. "Foreign companies are happily using Prism as the latest in a series of clubs to beat US companies over the head," said Jake Colvin, vice-president of the National Foreign Trade Council, in Washington on 24 July. Speaking at a discussion organised by the Information Technology and Innovation Foundation, a think tank, Colvin was especially concerned that US cloud service providers would lose business when data storage contracts get negotiated. As for more business-to-consumer service providers like Facebook, Colvin thought the risk was lower that consumers would switch to a non-US provider.

These fears were shared by the US State Department official responsible for international communications and information policy from 2009 to 2013. "In Europe, there is an element of industrial policy in all of this," said Ambassador Philip Verveer. He meant that European officials often promoted the notion that data were less secure in the US because it helped European firms in the data processing sector to draw business away from US firms. Verveer said it was "surprisingly difficult" in his past job at the State Department to explain to other countries that US firms were obliged to comply with lawful requests from the US government to hand over data. The Prism scandal "has changed the atmospherics" in that discussion, he added. As well as losing business contracts for data storage, Americans are worried that foreign governments will use Prism to increasingly require data to be stored in a particular country. Josh Meltzer, a fellow at the Brookings Institution think atank, argued that such localisation requirements would impose extra costs on companies without making the data more secure.

The next meeting of EU and US officials to discuss the fallout from Prism will take place in late September in...