Updated August 9, 2019April 14, 2020
EU Data Protection Rules and U.S. Implications
Data Privacy and Protection in the
United States and Europe
U.S. and European Union (EU) policymakers are focusingfocused
on protection of personal data online with recent and
proposed with new and proposed
legislation and enforcement actions. Data
breaches at
companies such as Facebook, Google, and
Marriott have
contributed to heightened public awareness.
The EU’s
General Data Protection Regulation (GDPR)—
which took
effect on May 25, 2018—has drawn the
attention of Congress, U.S. U.S.
businesses and other
stakeholders, prompting debate on
U.S. federal and state
data privacy and protection policies.
Both the United States and the 2827-member EU assert that
they are committed to upholding individual privacy rights
and ensuring the protection of personal data, including
electronic data. However, Differences in U.S. and EU approaches to
data privacy and protection issues
, however, have long been
sticking points in U.S.-EU economic and
security relations, in part because of differences in U.S. and
EU legal regimes and approaches to data privacy. The
GDPR highlights some of those differences and poses
challenges for U.S. companies doing business in the EU security relations.
The GDPR highlights some of those differences and poses
challenges for U.S. companies doing business in the EU.
Although no longer a member of the EU, the United
Kingdom (UK) remains bound by GDPR through 2020 and
intends to incorporate GDPR into UK data protection law.
The United States does not broadly restrict cross-border
data flows and has traditionally regulated privacy at a
sectoral level to cover certain types of data. The EU
considers the privacy of communications and the protection
of personal data to be fundamental rights, which are
codified in EU law. Europe’s history with fascist and
totalitarian regimes informs the EU’s views on data
protection and contributes to the demand for strict data
privacy controls. The EU regards current U.S. data
protection safeguards as inadequate; this has complicated
the conclusion of U.S.-EU information-sharing agreements
and raised concerns about U.S.-EU data flows.
The transatlantic economy is the largest in the world, with
goods and services trade of $1.2 trillion in 2018Figure 1. U.S.-EU
trade of information and communications technology (ICT)
services and potentially Trade of ICT and Potentially ICTEnabled (PICTE) Services, 2017
ICT-enabled services was over
$307 billion in 2017 (see Figure 1).
Figure 1. U.S.-EU Trade of ICT and Potentially ICTEnabled (PICTE) Services
Figure 1).
What Is the GDPR?
The GDPR establishes a set of rules for the protection of
personal data throughout the EU. It seeks to strengthen
individual fundamental rights and facilitate business by
ensuring more consistent implementation of data protection
rules EU-wide. The EU hopes the GDPR will further
develop the EU’s Digital Single Market (DSM), aimed at
increasing harmonization across the bloc on digital policies.
The GDPR identifies what is a legitimate basis for data
processing EU also views the GDPR as underpinning efforts to
foster the EU’s digital transformation and bolster the EU’s
technology sector vis-à-vis Chinese and U.S. competitors,
while protecting privacy rights and European values.
The GDPR identifies legitimate bases for data processing
and sets out common rules for data retention,
storage storage
limitation, and record keeping. The GDPR applies
to (1) all
businesses and organizations with an EU
establishment that
process (perform operations on) personal
data of
individuals (or “data subjects”) in the EU, regardless
of of
where the actual processing of the data takes place; and
(2)
entities outside the EU that offer goods or services (for
payment or for free) to individuals in the EU or monitor the
behavior of individuals in the EU. Processing certain
sensitive personal data is generally prohibited.
Stronger and new data protection requirements in the
GDPR grant individuals the right to:
Receive clear and understandable information about
Source: Bureau of Economic Analysis interactive data Table 3.3.
The transatlantic economy is the largest in the world, with
goods and services trade of $1.3 trillion in 2019; the UK
accounted for 20%. U.S.-EU trade of information and
communications technology (ICT) services and potentially
who is processing one’s personal data and why;
who is processing one’s personal data and why;
Consent affirmatively to any data processing;
Access any personal data collected;
Rectify inaccurate personal data;
Erase one’s personal data, cease further dissemination of
the data, and potentially have third parties halt
processing of the data (the “right to be forgotten”);
Restrict or object to certain processing of one’s data;
Be notified without “undue delay” of a data breach if
there is a high risk of harm to the data subject; and
Require the transmission of one’s data to another
controller (data portability).
The potential high penalties for noncompliance have
attracted significant attention, since a company or
organization can be fined up to 4% of its annual global
turnover or €20 million (whichever is greater). Fines are
assessed by the national supervisory authority (a Data
Protection Authority, or DPA) in each member state and
subject to appeal in national courts. The GDPR also
requires some companies to hire data protection officers.
GDPR: Year One
Source: Bureau of Economic Analysis interactive data Table 3.3.
https://crsreports.congress.gov
EU Data Protection Rules and U.S. Implications
GDPR Implementation
Many U.S. firms have made changes to comply with the
GDPR, such as revising and clarifying user terms of
agreement and asking for explicit consent. While it creates
more requirements on companies that collect or process
data, some experts contend that the GDPR may simplify
https://crsreports.congress.gov
EU Data Protection Rules and U.S. Implications
compliance for U.S. firms because the same set of data
protection rules apply across the EU. Also, companies
established in the EU that engage in cross-border data
processing primarily only have to liaise with the
supervisory authority DPA of the
EU country where the firm is
based (the “lead” authority),
possibly decreasing
administrative costs. However, a firm is
still subject to
oversight and enforcement by the supervisory authority of
every country where it does business.
The GDPR and U.S.-EU Privacy Shield
Under the GDPR, the U.S.-EU Privacy Shield continues to serve
as a mechanism to transfer data for U.S. and EU firms that meet
EU data protection requirements. Participation by a company in
Privacy Shield does not necessarily guarantee full GDPR
compliance. A case challenging Privacy Shield’s validity is pending
before the EU’s Court of Justice.
DPA of
every country where it does business. Some member states
have criticized the system as many of the largest digital
firms are based in a few countries and overseen by those
states’ DPAs, creating enforcement delays and logjams due
to limited resources.
U.S. firms have voiced several concerns about the GDPR,
including the need to construct a compliance bureaucracy
and possible high costs for adhering to the GDPR’s
requirements. While large firms have the resources to hire
consultants and lawyers, it may be harder and costlier for
small and mid-sized enterprises (SMEs) to comply, possibly
deterring them from entering the EU market and creating a
de facto trade barrier. Some U.S. businesses, including
several newspaper websites and digital advertising firms,
opted to exit the EU market rather than confront the
complexities of GDPR. Some industry surveys show that
GDPR’s restrictions on the use and sharing of data may be
limiting the development of new technologies and deterring
potential mergers and acquisitions.
The GDPR and U.S.-EU Privacy Shield
Under the GDPR, the U.S.-EU Privacy Shield continues to serve
as a mechanism to transfer data for U.S. and EU firms that meet
EU data protection requirements. Participation by a company in
Privacy Shield does not necessarily guarantee full GDPR
compliance. A case challenging Privacy Shield’s validity is pending
before the EU’s Court of Justice.
Although the GDPR is directly applicable in EU member
states, implementing legislation is required to enact certain
parts of the GDPR (e.g., appointment of a supervisory
authority; ability to levy penalties). Critics note that the
GDPR permits diverging national legislation in specified
areas (e.g., employment data) and contend that this could
lead to uneven implementation or enforcement. They also
note the potential for localization trade barriers in areas
where divergence is allowed.
The EU reports that GDPR has increased European
citizens’ awareness of their rights. Since taking effect,
European DPAs have received almost 145,000 GDPR
complaints and have initiated a range of enforcement
actions, including issuing fines. In January 2019, France’s
DPA (or CNIL) imposed a €50 million fine on Google for a
“lack of transparency, inadequate information and lack of
valid consent regarding the ads personalization.” In July
2019, the United Kingdom’s DPA (the ICO) issued the
largest penalty to date, imposing a €230 million fine on
British Airways for a data breach that affected half a
million passenger records, including users’ name, address,
login, payment card, and travel booking details.
comprehensive national legislation may be needed to better
safeguard privacy, especially online. Stakeholders
representing consumer and industry groups have issued
proposals, with some advocating for the United States to
adopt an approach similar to GDPR. The United States has
played an important role in international discussions and
has begun to address data privacy and data flows in recent
free trade agreements. With no multilateral rules on crossborder data flows, experts contend that the GDPR may
effectively set new global data privacy standards, since
companies and organizations will strive for compliance to
avoid being shut out of the EU market or penalized, and as
other countries seek to introduce rules modeled on the
GDPR. It may also be easier and cheaper for some U.S.
companies to apply GDPR protections to all users rather
than maintain different policies for different users. Such
developments could limit U.S. influence in trade
negotiations such as the ongoing World Trade Organization
(WTO) plurilateral negotiations related to digital trade.
Other elements of the GDPR are controversial. The
GDPR’s right to be forgotten requires data controllers to
delete personal data when it is no longer needed or when an
individual requests it. Some question whether the right
applies only to those accessing the Internet from the EU, or
if the GDPR requires that a company delete specific
information globally. Another issue is that the GDPR right
to erasure could clash with freedom of information, and, for
U.S. firms, with the First Amendment. The GDPR includes
exceptions and recognizes the need to balance the right to
personal data protection with freedom of expression, but
advocates worry that Internet companies may be quick to
grant erasure requests to avoid possible legal challenges,
which, over time, could erode information online. Many
stakeholders view the GDPR as pitting the “right to be
forgotten” against the “right to know.”
U.S. officials voice concerns about the GDPR’s impact on
the WHOIS database (managed by the Internet Corporation
for Assigned Names and Numbers, or ICANN) used by law
enforcement and cybersecurity researchers to identify
hackers and malicious Internet domains. To comply with
the GDPR, ICANN restricted the amount and types of data
available on WHOIS, potentially limiting its effectiveness.
The GDPR and ePrivacy Regulation
The EU is considering a new ePrivacy Regulation to ensure
privacy of electronic communications in the digital era that
would complement the GDPR’s data protection requirements.
The regulation would require traditional telecom providers as
well as messaging services (e.g., WhatsApp and SnapChat) to
obtain explicit user consent for online tracking (use of cookies),
and limit the amount of time that tracking data may be stored.
Some analysts suggest this could hinder the online advertising
industry and others dependent on tracking data. The regulation
has proved controversial in the EU and remains pending.
Policy Implications
Also see CRS Report R45584, Data Flows, Online Privacy,
and Trade Policy, by Rachel F. Fefer.
While the United States has traditionally regulated privacy
at a sectoral level to cover certain types of data, in 2018,
California passed a consumer privacy law and other states
are considering similar legislation. Some U.S. policymakers
and Members of Congress are examining whether
Rachel F. Fefer, Analyst in International Trade and
Finance
Kristin Archick, Specialist in European Affairs
https://crsreports.congress.gov
EU Data Protection Rules and U.S. Implications
Since taking effect, European DPAs have received a steady
stream of GDPR complaints—almost 145,000 in its first
year—and have initiated various enforcement actions.
These have included issuing fines for a range of violations
against companies such as Google and Facebook, as well as
smaller entities and organizations. In July 2019, the UK’s
DPA issued the largest penalty to date, imposing a €230
million fine on British Airways for a data breach that
affected half a million passenger records, including users’
name, address, login, payment card, and travel booking
details. The EU is set to review the implementation of
GDPR, including international data transfers, in June 2020.
The GDPR and ePrivacy Regulation
The EU is considering a new ePrivacy Regulation to ensure
privacy of electronic communications in the digital era that
would complement the GDPR’s data protection requirements.
The regulation would require traditional telecom providers, as
well as messaging services (e.g., WhatsApp and SnapChat), to
obtain explicit user consent for online tracking (use of cookies),
and limit the amount of time that tracking data may be stored.
Some analysts suggest this could hinder the online advertising
industry and others dependent on tracking data. The regulation
has proved controversial in the EU and remains pending.
GDPR and COVID-19
To track the spread of Covid-19, some EU governments are
using anonymized, aggregated mobile phone data from
telecom firms. Some countries, like Poland, go further,
mandating persons who may have Covid-19 to install a
mobile tracking app. The scope of data collected varies by
country. The EU Data Protection Supervisor has stated that
limited data collection with certain constraints (e.g.,
temporary data retention) is GDPR compliant and that the
“right to the protection of personal data is not an absolute
right.” EU officials call for an EU-coordinated app rather
than country-specific apps. Some privacy advocates raise
concerns that such data collection will set a precedent that
lasts past the pandemic. As U.S. officials also begin
considering using mobile tracking apps and data analytics
to combat Covid-19, some Members of Congress express
interest in examining the possible benefits of such
measures, as well as privacy and other data-related issues.
Policy Implications
While the United States has traditionally regulated privacy
at a sectoral level to cover certain types of data, in 2018,
California passed a consumer privacy law and other states
are considering similar legislation with varying rules. While
the state laws have similarities with the GDPR, they do not
fully replicate it. U.S. policymakers and Members of
Congress are assessing the need for comprehensive national
legislation, and multiple online privacy bills have been
introduced. Some consumer and industry groups have
advocated for a U.S. approach similar to the GDPR.
The United States plays an important role in international
discussions on data protection and has begun to address
data privacy and data flows in free trade agreements,
including in the U.S.-Mexico-Canada Agreement. With no
multilateral rules on cross-border data flows, the GDPR
may effectively set new global data privacy standards, as
firms and organizations strive for compliance to avoid
being shut out of the EU market or penalized, and as other
countries seek to introduce rules modeled on the GDPR.
Such developments could limit U.S. influence in trade
negotiations, such as the ongoing World Trade
Organization (WTO) plurilateral negotiations related to
digital trade. Also see CRS Report R45584, Data Flows,
Online Privacy, and Trade Policy, by Rachel F. Fefer.
https://crsreports.congress.gov
EU Data Protection Rules and U.S. Implications
Kristin Archick, Specialist in European Affairs
Rachel F. Fefer, Analyst in International Trade and
Finance
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