Global Glance: June 13, 2016

A quick look at intriguing international stories

By John Bostwick, Managing Editor, Radius

Welcome back to Global Glance. This week we look at:

• How German authorities fined companies for sending data to the US
• Why China’s investments in Germany trouble many in the EU
• A fascinating cultural observation from Jurgen Klinsmann

Three Companies Fined by German Authorities for Sending Data to the US

Last Wednesday, we published a post by Stuart Buglass on the legal ramifications of a possible Brexit. He noted that one significant consideration for companies with UK presences relates to data transfers. The situation is complex, but basically, due to a bill permitting mass surveillance, the UK may find post-Brexit that its data protection laws don’t pass muster with the European Court of Justice (ECJ). An unfavorable ECJ ruling would greatly complicate the compliant transfer of data from EU member states to the UK. This is pretty much the current situation in the United States, where companies can no longer rely on the US-EU Safe Harbor agreement, invalidated by the ECJ last year.

UK Brexit voters now on the fence should consider these implications in light of a recent story out of Germany. Reuters reported on Monday that German authorities have fined three companies, including Adobe Systems and a subsidiary of PepsiCo, for continuing to operate under the now-defunct Safe Harbor agreement when transferring personal data from the EU to the US.

The Reuters article explains that the fines are not large — the combined equivalent of about $32,000 — in large part due to the cooperation of the companies involved. A Hamburg data protection commissioner is quoted as saying, “The fact that the companies have eventually implemented a legal basis for the transfer had to be taken into account in a favorable way for the calculation of the fines.” The commissioner added, however, that any future infractions will bring “stricter measures.”

Reuters adds that the fines were a result of the Hamburg commission’s investigation into 35 multinationals operating in that city. The investigation is “the most high-profile example of a regulator cracking down on companies for not changing the way they move data to the United States.” It’s also a clear warning to US companies with EU operations that have been lax in changing their data-transfer policies and practices, and a warning to UK voters who think that leaving the EU will necessarily reduce red tape.

For those of you who can read German, you can check out the Hamburg Data Protection Authority’s June 6 press release on the investigation. Coincidentally, the same day of the release, The Christian Science Monitor published an opinion piece titled, “Is Your Data Really Safer in Europe?” The authors are Kenneth A. Bamberger and Deirdre K. Mulligan, who recently published the results of a five-nation study examining in part how corporate workers charged with protecting data privacy perform their duties.

Bamberger and Mulligan note in their CSM piece that on May 30, European Data Protection Supervisor Giovanni Buttarelli released a formal opinion on the EU-US Privacy Shield agreement, which is being developed to replace the Safe Harbor agreement. They believe that Buttarelli’s opinion “reinforces a widespread belief that European countries are tough, and the US is lax when it comes to protecting personal privacy.”

In Bamberger and Mulligan’s opinion, protecting data is a critical worldwide concern, but that “focusing only on the US would indulge two widespread fallacies about the relative levels of privacy protection in the US and the EU.” Those fallacies are “that Europe uniformly better protects its citizens against intrusive government surveillance” and that the US is “a global laggard in protecting personal privacy.” Basically, the results of their study show that while the US has ambiguous data protection regulations, its enforcement of the rules and corporate practices are actually relatively robust. An interesting finding that this reader hopes isn’t used as an excuse to draft lazily-written and confusing laws.

China’s Investments in Germany Trouble Many in the EU

In early 2014, The Wall Street Journal published the article “China Finds New Investment Opportunities in Germany,” which outlined the then-recent, steady rise of Chinese investment in Germany as a means to “park money” in a safe place and acquire technologies “to help [China] clean up the environment and compete in high-end manufacturing.” One expert quoted said that the two countries were “in a honeymoon period.”

Just over two years later, it appears that honeymoon is over, at least as far as many Germans are concerned. Last Thursday, the Journal posted another article on the subject, this one with the far more sinister-sounding title, “China’s Deal Makers Have German Tech Firms in Their Sights.” The budding investment trend noted in 2014 is now in full flower, with Chinese companies “on course to set record investment levels in Germany this year … and at this pace will soon surpass the record 28 German acquisitions racked up in 2014.”

Last week’s Journal explains that these acquisitions are troubling many Germans. The targets are technology companies “touted as crucial players in a [German] national initiative to digitize manufacturing and link factories to consumers via the internet, called Industrie 4.0.” Of particular interest is Chinese Midea group’s $5 billion offer for Kuka, a German robotics firm. Roland Klose, a German finance authority, explains in the Journal article: “Automation and Industrie 4.0 are supposed to be of long-term, strategic importance for German industry, [and] the €4.4 billion for Kuka isn’t much money for access to key technologies.”

The Journal adds that German unions and company shareholders have also expressed concern over the trend. German Economics Minister Sigmar Gabriel said, “We must consider we have one of the most open economies in Europe and are competing with companies that don’t come from open market economies.”

A Financial Times editorial by Sebastian Heilmann takes up the subject of Chinese investments in Germany and other EU countries. Heilmann’s overriding concern here is “the market-distorting effects of [China’s] state-capitalist model” on the European Union. He writes: “The real danger for Europe arises when state-owned companies, who are currently the majority of Chinese investors in the EU, embark on a state-driven and debt-financed global buying spree. … The EU and its member states need to prevent China from exporting the distortions of its state capitalist model to their M&A markets.”

Jurgen Klinsmann’s Fascinating Cultural Observation

You could make a (breezy) argument that Germany’s most prominent export to the US in recent years has been Jurgen Klinsmann, the charismatic German-born head coach of the US men’s national soccer team. Fans all over the world know that Klinsmann and the rest of the US Soccer Federation are now hosting Copa America, a soccer tournament with some of the world’s greatest national teams, including South American powerhouses Argentina, Brazil and Colombia.

In advance of the tournament, The Wall Street Journal interviewed Klinsmann, who is fluent in four languages and has lived in the US for nearly 20 years. And whatever you think of someone who’d cut Landon Donovan before the 2014 World Cup, Klinsmann is almost always good for unvarnished comments, as when he said in 2013 that Clint Dempsey, one of the US’s most accomplished players, “hasn’t done s---.”

Klinsmann is interesting in part because he views soccer as a reflection of culture, and he’s well-equipped to do so having played professionally in Germany, England, France and Italy. In his opening remarks on being introduced as US coach in 2011, he said that soccer “should reflect your mentality and your culture. If you talk about Brazil, you know how Brazil plays. You know about Argentina, you know about Italy. They sit back and wait for one mistake, and if you do, they’re going to kill you.”

Here’s a passage from this month’s Journal interview with Klinsmann, notable not for what it says about soccer but about the differences between Americans and Europeans: “People from Europe … don’t understand the fact that society is driven by the educational system in the US. In Europe no one would ask you where you went to college. They would ask you what did you study, but they would never ever ask you whether you went to the University of Berlin or Amsterdam or Paris.”

You don’t have to be, like me, the father of a high school-aged American kid to know that Americans place an elephantine emphasis on what particular college or university a person gets into and attends. The European emphasis on what a person studied rather than where he or she graduated from perhaps reflects a culture that is more interested in matters of the intellect than matters of prestige. Who knows? Whatever the case, Klinsmann may have unwittingly given US expats in Europe some excellent advice in the event the subject of college arises at or outside work.