Is the Anti-NSA "Competitive Disadvantage" Argument as Strong as Civil Libertarians Think?

The National Security Agency’s assault against privacy has troubled many civil libertarians.  Since fighting for civil liberties is often a losing battle politically, especially when set against the claims of “national security,” many civil libertarians are trying to come up with arguments for dialing back surveillance that policy makers find more convincing.

One argument is that the civil libertarians are pushing these days is the claim that the surveillance-friendly American legal regime puts American companies at a competitive disadvantage when compared to companies of non-American origin.  The articles that I have seen seriously arguing this point all cite a short report called How Much Will PRISM Cost the U.S. Cloud Computing Industry? put out by an organization named The Information Technology and Innovation Foundation.

The idea of competitive disadvantage carries a number of assumptions: first, that there are other countries whose legal regimes are less surveillance-friendly than the United States and, second, that a business or customer has sufficient information to make an informed decision between them.

Unfortunately, I think both of these premises are false.  First, using ITIF’s own report, we can undermine the first assumption:

While the reputations of U.S. cloud computing providers (even those not involved with PRISM) are unfortunately the ones being most tarnished by the NSA leaks, the reality is that most developed countries have mutual legal assistance treaties (MLATs) which allow them to access data from third parties whether or not the data is stored domestically. The market research firm IDC noted in 2012, “The PATRIOT Act is nothing special, indeed data stored in the US is generally better protected than in most European countries, in particular the UK.” In Germany (yes, the same country that wants to suspend data transfers to the United States) the G10 act gives German intelligence officials the ability to monitor telecommunications without a court order.

A Time Magazine article mentions the Chinese Cloud Valley initiative, but is anyone really going to favor the Great Firewall of China over the NSA in terms of surveillance?

The second assumption is also, I think, pretty weak.  The surveillance capabilities of a nation-state are often unknown or at best murky.  What power the surveillance apparatus may have may be extra-legal (that is, pretty much unregulated), or rely on novel interpretations of the law.  Case in point: the NSA.  

So, I don’t think the “competitive disadvantage” argument is that strong on the face of it.

A version of the argument I find more convincing is that countries don’t compete on actual privacy records but perceived privacy records.  That is, the more damning stories about American surveillance that get printed, the less psychologically appealing it is to customers to purchase American Internet / computer products, regardless of an actual hard-nosed, rational comparison of the relative merits of various countries’ privacy regimes.  But this version of the argument leads to the recommendation of tweaking the propaganda / news reporting on various countries’ surveillance rather than altering the underlying fundamentals of the surveillance apparatus, so I don’t think that’s a very productive point to argue if one is concerned about actual privacy.  Furthermore, this version of the argument casts the leadership qualities of business people in a questionable light, and I am sure one would not want to malign the entrepreneur-heroes that drive the world economy!