Keeping the data flow alive

The free flow of data between Europe and the US remains in danger of grinding to a halt, after the latest talks on data protection broke down two weeks ago.

The talks are stalling because the two sides hold fundamentally different views. The US is pushing hard for self-regulation, while the EU insists all its trading partners comply with its data protection directive.

The US and the EU have been battling each other over privacy issues for nearly as long as they've been fighting about bananas. According to US international trade secretary, David Aaron, trillions of dollars are at stake if the two sides don't come to an agreement before the June deadline. They are meeting again in early April to continue the negotiations, but whether that session will be any more successful is a moot point.

Adrian Friend, interim European director of Truste, a US industry body that supports self-regulation, explains the American philosophy: "It really boils down to how you look after your consumers. European consumers are used to looking to government to deal with these issues. In the US, consumers would rather rely on themselves and on third parties."

Whether or not that accurately characterises the wishes of US consumers, it is obvious the US isn't about to back down. Last week, President Clinton welcomed a new self-regulation initiative from the Better Business Bureau. Called BBBOnline, it would give a stamp of approval to any company that follows its guidelines on data privacy.

But Europe's representative at the talks, John Mogg, still wasn't convinced that the scheme offered the enforcement and individual access to private information that the EU is looking for.

The latest privacy flashpoint comes courtesy of Microsoft, and it provides a good example of what is at stake if the two sides don't iron out their differences. A small US software firm discovered this month that the Windows 98 operating system attaches a unique ID number to a computer. That number can then be used to trace the author of particular Word or Excel document.

Privacy International has already taken action against Microsoft for this alleged breach of privacy. "Our complaint requests that the Data Protection Registrar take legal action to order the paralysis of that information," explains Simon Davies, president of Privacy International. "If Microsoft ignores a government official's order, there can be all sorts of repercussions. The DPR could order an end to the flow of information to Microsoft."

Davies says the US is deluding its citizens when it says nothing will happen while negotiations are ongoing. The EU position has hardened, he insists, and the only talking they're doing is to educate the US on the new law.

"At any moment, any EU citizen can take action against a company for violating the Data Protection Act," he warns. "Microsoft and Intel in the same month have proved they don't give a damn about personal privacy."

The UK's Data Protection Registrar, Elizabeth France, doesn't agree, and says true negotiations are taking place. She says the EU's tough stance on data protection - it promises to cut off data supply to anyone without adequate privacy protection - has left the US in a difficult position. "I think we've got ourselves in a bind," she says. "If you tell a superpower they're inadequate, they don't like it."

France says whatever deal is struck with the US needs to work worldwide. Countries like Russia and China will eventually be going through similar negotiations with the EU on data protection. "We don't want to reach an agreement that might be okay in only one context, because it will be there on the table for other countries," she says.

France's warning is well-timed: the self-regulation lobby, in the form of Truste, has its eyes on Eastern Europe. Friend returned last week from a tour of Eastern Europe, and says initial responses to Truste's scheme were good. He agrees that countries like the Czech Republic, Hungary and Poland, which may eventually join the EU, will most likely opt for government protection. But he claims others, like the Ukraine and Russia, would benefit from a respected brand like Truste or BBBOnline.

So it's not just the US that stands to lose the data flow. Unless the EU can convince the rest of the world that government-backed data protection is the answer, we stand to lose a great deal of trade. The US could outmanoeuvre us yet, leaving Europe alone with its human rights protections - and a steady supply of Carribbean bananas.