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Transatlantic Free Trade Zone? But only when the U.S. provide improved data protection!

Barack Obama's call for a free-trade agreement between the United States and the European Union in his State of the Union address yesterday was immediately welcomed by the EU. There are many indications that such a transatlantic free trade zone will bring economic advantages for both sides.

Given the growing - also economic - importance of electronic transactions, this immediately raises the question of a common level of data protection on both sides of the Atlantic. For some time US-representatives (also from the Obama administration) battle the plans for enhancing European data protection. In their regard even existing data protection standards in the EU are too severe.

In giving new impetus to a transatlantic free trade zone, I expect from European policy makers to broach the insufficient level of data protection in the U.S.

Looking into data protection in the U.S. the diagnosis is not assuring. Generally applicable rules for data protection in the private sector still are lacking. Measures taken in this area present the outlook of a more or less incomplete patchwork situation. The data protection rules in the 50 U.S. states are mostly inconsistent and incomplete. Only in certain sectors, such as health care, we can find data protection rules at all.

The Safe Harbor Agreement concluded between the EU and the U.S. cannot compensate for these deficits. First of all, it recur on voluntary commitments of companies to comply with the Safe Harbor rules – consequently, a company not joining the agreement does not have to follow these rules. Secondly, the requirements of the Agreement itself lag well behind the requirements of European data protection law.

It is true that in recent years, there were a few announcements from the U.S. Congress and the Administration to improve data protection in the United States - but so far little has happened. A final push dates from February 2012. Almost simultaneously with the proposals of the European Commission on the European data protection reform, the Obama administration announced the strengthening of consumer rights in the digital world ("Consumer Privacy Bill of Rights"), which is supposed to be implemented by the Congress preferably with a statutory provision. However, since its submission we have not heard of any respective activities, neither from the U.S. Senate nor from the House of Representatives. Also the request in the White Paper to expand the powers of the Federal Trade Commission in order to enforce the codes of conduct, which was addressed to the Congress, has not been implemented yet. The draft essentially relies on self-regulation and thus also underachieves binding data protection rules, as provided for in the European data protection law.

The Federal Trade Commission, which monitors compliance with data protection rules in the business sector, released a report in 2012 entitled "Protecting Consumer Privacy in an era of rapid change" where companies are recommended to develop and to implement best-practice solutions, such as the principles of "privacy by default" and "privacy by design". In addition, consumers should be granted more rights of control over their data, for example by higher transparency and simplified options.
The Federal Trade Commission has called on Congress to ensure by clear rules for companies that the use of privacy-friendly solutions will not lead to economic disadvantages. Regulation relating to data security and data loss as well as adequate rights of information for data subjects was also required. However, referral to Congress still is pending.

I hope that the inspiring idea of a transatlantic comprehensive trade agreement will not only raise economic growth but also advance the efforts for good data protection in the U.S. and in the European Union. Competitive devaluation at the expense of civil liberties and civil rights must not happen! After all we can observe that good data protection is recognized worldwide to be a considerable asset in competition – first and foremost in a free-trade zone.

Yours sincerely,
Peter Schaar

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