In today’s digital age, data flows are essential to businesses of all sizes and in all sectors of the economy. Data flows underpin the global financial system, advance life-saving medical research, enable cybersecurity cooperation, and make day-to-day cross-border commerce possible.
Data flows are the lifeblood of the U.S.-EU trade and investment partnership, with more data flowing between the U.S. and the EU than anywhere else in the world. Yet, transatlantic data transfers have been in disarray since July 2020 when the European Court of Justice invalidated the Privacy Shield amid questions over the U.S. government’s lawful surveillance practices.
The Court’s ruling also raised questions about standard contractual clauses, essentially jeopardizing the legal tool used by 90% of companies to transfer data out of Europe. The result: companies are beginning to be caught in the crossfire of investigations and legal actions injecting uncertainty around cross-border data transfers. Many firms, particularly small and medium-sized enterprises, are already enduring market access disruptions due to the global pandemic and now face further risks to their transatlantic business operations.
It’s Time for a New Agreement on Transatlantic Data Flows
The U.S. and EU must work together to swiftly finalize a new EU-U.S. Privacy Shield agreement that brings legal certainty to data transfer mechanisms. This must be the top priority for both the U.S. and EU to avoid disruptions to data flows that could have massive consequences for businesses, customers, and workers on both sides of the Atlantic.
13 Reasons We Need a Transatlantic Data Flow Framework
- Data Flows Are Economically Significant: The data transfer relationship between the U.S. and EU is worth about $7.1 trillion. Global data flows now contribute more to global growth than global trade in goods.
- International Trade is Spurred by Data Flows: International trade underpinned by data flows reached nearly $700 billion in exports from the U.S. and nearly $500 billion in imports. The U.S. has the largest amount of trade supported by data flows, followed by Ireland, Germany, the Netherlands, Switzerland, and France.
- Transatlantic Data Transfers are Ties that Bind: Around half of all data flows in both the United States and Europe are transatlantic transfers. Additionally, transatlantic cables carried 55% more data flows than transpacific routes, and 40% more data than between the U.S. and Latin America.
- Data Flows Enable Trade in Services: The U.S. and Europe are each other’s top partners in digital services trade, and they are the two largest net exporters of digitally-enabled services to the world. The U.S. exported over $245 billion in digitally-enabled services to the EU in 2019, while the EU exported 129.9 billion euros in digitally-enabled services to the U.S.
- Data Flows Advantage Foreign Investment: In 2018, U.S. companies with operations in Europe supplied $490.5 billion in digitally-enabled services, double U.S. digitally-enabled exports to Europe. Similarly, European companies in the U.S. supplied $273.8 billion in digitally-enabled services, double Europe’s digital services exports to the U.S.
- Services Growth Depends on Data: For both economies, the fastest growing services sector is business, professional, and technical services, which accounted for nearly half of all digitally-enabled services exports from the EU to the United States and vice versa in 2019.
- Businesses Rely on Data Transfer Frameworks: 5,300 companies relied on the EU-U.S. Privacy Shield to seamlessly transfer data across borders in order to conduct their business activities.
- Data Flows Give Small Businesses Opportunity: Over 70% of the companies registered under the EU-U.S. Privacy Shield were small and medium-sized businesses.
- Data Flows Open New Markets: Cross-border data flows open markets for U.S. and EU businesses; EU businesses have access to a market of over 300 million consumers and U.S. businesses have access to a market of 450 million consumers.
- European Business Needs Legal Certainty: A study by a leading European business group found that the EU would be better off by €2 trillion by 2030 if it secures cross-border data transfers.
- European Businesses Use the Privacy Shield: 259 European headquartered companies were active Privacy Shield participants before its nullification, and that number was growing each year.
- Advanced Manufacturing Depends on Data Transfers: Global value chains in manufacturing, transport, and other industrial firms mean that today’s manufacturing firms increasingly rely on cross-border transfer of data. In fact, it is estimated that digital services provided 25% of manufacturing inputs in 2017.
- Data Flows are Vital for Transatlantic Collaboration: Transatlantic data transfers enable an array of essential activities, including multi-country clinical trials for innovative medicines such as COVID-19 vaccines, cybersecurity threat information sharing, and anti-fraud and anti-money laundering efforts.