Sunday, March 30, 2008

US Surviellance Laws Hurt U.S. Businesses

A recurring theme on this blog is that foreign data privacy protections can have effects in the U.S. Generally, the posts that deal with this have been about what positive effects of foreign privacy protections might spill over onto U.S. consumers (see, e.g., here). However, this article from the Globe and Mail illustrates another effect that foreign privacy protections can have in the U.S. - they create new markets where U.S. companies are at a competitive disadvantage. The specific situation described is as follows: a Canadian University was having IT problems and needed a solution. Google was looking for customers for its online collaboration products. It sounded like a marriage made in heaven. Except that Google is subject to the USA Patriot Act, which the U.S. Federal Government can use to snoop on people's private communications. That, of course, is incompatible with Canadian privacy law. As a result, there's a kink in what would otherwise be the perfect marriage between a university and Google: those using the University's spiffy new IT tools were told not to use them to transmit any private data, including grades.

On one hand, I'm tempted to laugh at a story like this. Honestly, to me there's something humorous about a university getting a bunch of cutting edge IT tools, then not being able to use them for even the most mundane tasks, like reporting student marks. However, on the other hand, incidents like this could be represent a serious problem for American businesses. Because (unlike the U.S.) many foreign countries actually have great respect for individual privacy, their consumer populations have the ability to form an entirely new market, the market made up of people who care about privacy. As shown by the article in the Globe and Mail, because U.S. law is actively hostile to individual privacy, U.S. companies can only compete for this new market at a severe disadvantage relative to foreign companies. Now, for a monster organization with a huge and well developed stable of products like Google, competition might still be possible. However, for the most part, my guess is that U.S. companies will not be able to overcome the structural disadvantages imposed by this country's disregard for privacy.

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