[Asia Economy Reporter Kwon Jae-hee] U.S. information technology (IT) companies are facing a dire crisis in overseas markets. They are on the verge of withdrawal from China and the European Union (EU), the first and second largest overseas markets respectively, due to the Hong Kong National Security Law and the annulment of the data transfer agreement.
U.S. IT companies such as Facebook, Google, and Twitter have stated that they will not provide user information to the government and police in relation to the Hong Kong National Security Law, which came into effect on the 1st, exposing them to pressure from Chinese authorities. Most U.S. IT companies operate in Hong Kong because their services are blocked in mainland China, but the enforcement of the Hong Kong National Security Law has given the government de facto censorship rights, causing problems.
Articles 9 and 10 of the Hong Kong National Security Law stipulate that "the Hong Kong government shall take necessary measures regarding schools, organizations, the media, and the internet for national security, and strengthen propaganda, guidance, supervision, and management activities over them."
Accordingly, Hong Kong police can request user information from U.S. IT companies or order deletion based on the Hong Kong National Security Law.
The Wall Street Journal (WSJ) also reported that the enforcement of the Hong Kong National Security Law increases the likelihood of conflicts between U.S. IT companies and the Chinese government.
In response, Google has decided to scrap its entry into the Chinese cloud business, a new growth engine, and is reportedly considering withdrawing from the Hong Kong market as well. Google's move is expected to influence the China strategies of other Silicon Valley companies.
The EU market is also expected to be a rough road for U.S. IT companies. The European Court of Justice (ECJ), the highest court in the EU, ruled the "Privacy Shield," a personal data agreement between the U.S. and the EU, invalid. The Privacy Shield was an agreement signed in 2016 between the U.S. and the EU to protect Europeans' personal data when it is commercially transferred to the U.S. More than 5,000 U.S. companies use the Privacy Shield, effectively ending the special access rights that U.S. companies enjoyed over personal data within Europe.
The Associated Press analyzed, "'Privacy Shield' enabled thousands of companies, from giant IT firms like Facebook to small financial companies, to transfer data from Europe to the U.S., and this ruling inevitably disrupts their business."
Since this ruling is from the highest court, appeals are impossible, and depending on the application method, it may be enforced on some large companies such as Amazon, Facebook, Alphabet, and Apple. WSJ reported that these companies may have to relocate data centers to Europe or withdraw from the region.
U.S. Secretary of Commerce Wilbur Ross stated, "I am very disappointed with this ruling."
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