Google’s Schmidt: Impact of NSA surveillance is ‘severe and getting worse’

Some of Silicon Valley’s top leaders issued a stark warning to the federal government Wednesday: If the National Security Agency continues its surveillance practices to the point where it forces foreign nations to localize data, it will destroy the economic impact the tech sector has on the American economy.

Google Executive Chairman Eric Schmidt said the global impact of the NSA’s programs has been “severe and is getting worse,” and foreign governments’ suggestion to move data within their own borders would essentially amount to a trade barrier.

“What’s going to happen is governments will do bad laws of one kind or another and they are eventually going to say, ‘We want our own Internet in our own country because we want it to work our way,’ and the cost of that is huge in terms of knowledge, discovery, science, growth, jobs, etc.,” Schmidt said, speaking at a roundtable event in Palo Alto, California, organized by Sen. Ron Wyden, D-Ore.

Colin Stretch, Facebook’s general counsel, echoed Schmidt’s sentiments about data localization, saying it goes against the foundation the Internet has been built upon.


“The Internet is a medium without borders,” Stretch said. “The notion that you would have to place data centers and data itself that’s used to serve particular communities and counties within a region is fundamentally at odds with the way the Internet is architected.”

Wyden, a long-time critic of the NSA’s programs, has called for an end to the agency’s “digital dragnet” on the grounds that it doesn’t make the country any safer and only serves to harm the U.S. economy.

“When the actions of a foreign government threaten red-white-and-blue jobs, Washington gets up at arms,” Wyden said. “But, even today, almost no one in Washington is talking about how overly broad surveillance is hurting the U.S. economy.”

Wyden highlighted a number of recent surveys and studies that found the spying programs would have a negative effect on U.S.-based cloud computing companies’ growth. An August 2013 report from the Information Technology and Innovation Foundation claims those companies stand to lose $22 billion to $35 billion due to fallout from the NSA’s practices.

The potential cost is something Ramsey Homsany, general counsel for online file storage company Dropbox Inc., sees as a burden for thriving startups that don’t have the capital needed to overcome scores of international regulations.


“We’re a wildly successful company, but IBM just announced they’re going to spend a billion dollars to go build local data centers in Europe,” Homsany said. “Despite our great investors, we don’t have a billion dollars lying around.”

In order to stem the tide and repair trust in both the U.S. government and American technology products, Microsoft Corp. General Counsel Brad Smith called on Congress to pass the USA FREEDOM ACT during its brief November session, calling the bill’s passage vital to restoring trust in American leadership.

“The one asset that the United States has that is even stronger than our military might is our moral authority,” Smith said. “This decline in trust has not only affected people’s trust in American technology products, it has affected people’s willingness to trust the leadership of the United States.”

Schmidt agreed that something needs to be done — quickly.

“If this kind of thing continues, we have a much more serious problem on our hands,” Schmidt said. “One of the great hopes for the average person in the world is connectivity and education on their mobile phones. Imagine the impact on their education, their culture, the safety of women, all of the things mobile devices change in rural villages or developing countries. There’s a patriotic reason, an economic reason, a moral reason to worry about this trust breakdown.”


You can watch the entire panel below.

Greg Otto

Written by Greg Otto

Greg Otto is Editor-in-Chief of CyberScoop, overseeing all editorial content for the website. Greg has led cybersecurity coverage that has won various awards, including accolades from the Society of Professional Journalists and the American Society of Business Publication Editors. Prior to joining Scoop News Group, Greg worked for the Washington Business Journal, U.S. News & World Report and WTOP Radio. He has a degree in broadcast journalism from Temple University.

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