The end of US clouds in Europe?

 

How should Europe riposte to the Trump tariff wars? I visited with some friends in Madrid recently.

I was surprised how quickly the consensus was reached:  “it’s time to liberate ourselves from the US cloud providers.”

As background, if you don’t already know, the global market is dominated by three US cloud service providers:  Amazon, Microsoft, and Google, in that order of dominance.  It’s no secret that all three of these entities run giant tech monopolies in other markets, which they leveraged into the cloud market.  The cloud market isn’t particularly high-tech.  It’s more about scale:  the bigger you are, the more you can build a global infrastructure network and lower costs for all.  There are lots of smaller local competitors, but none can match the scale of the US giants.  

But Trump has changed the global understanding of the risks of entrusting your critical national infrastructure to three US companies.  Could Trump order these US companies to terminate their services, immediately, in Europe or any other country?  What was once unthinkable, is now a possible (hopefully, improbable) scenario.  European business and political leaders are now asking what they would do if the US government ordered these US cloud services to terminate them.  Bedlam hardly describes what would happen.  Relying heavily on US cloud providers is reckless, leaders are realizing.

There have long been criticisms of US cloud providers.  In Europe, for example, they have been criticized for utilizing tax haven structures in Ireland and Luxembourg to earn vast revenues, while paying tiny taxes.  Want to compare the income tax rates of a Madrid bus driver to the tax rates paid by Amazon, Microsoft, Google in Europe? Guess which is higher. 

Europe already has lots of laws on the books that could be used to drive forward to a US cloud-free future.  Europe’s main privacy law, the GDPR, has prohibitions on transferring personal data from Europe to the US, as long as the US does not have “essentially equivalent” data protection laws.  (I’ll blog on this separately, but the chances for the European Court of Justice to decide that any new data transfer scheme between Europe and the US meets that test are about as high as my chances to win the Paris marathon next weekend.)

In purely trade terms, the US runs a huge trade surplus with Europe in digital services, with cloud services high on the list.  As Europeans look at ways to riposte to Trump’s trade war, consider the risks to US cloud providers.  If I was a US West Coast cloud executive, I’d be quaking in my birkenstocks.  Meanwhile, the sky over Madrid is cloud free.