June 7, 2013 9:55AM

Government Spying on Foreign Customers Is Bad for U.S. Business

I’ll leave the privacy/​con law issues related to the latest government spying reports to my Cato colleagues who know about these things. I just wanted to mention one economic aspect of all this. Orin Kerr notes the following over at the Volokh Conspiracy

Here’s an excerpt from a forthcoming article of mine … :

The reality of global Internet access means that U.S.-based Internet services often have a heavily foreign customer base. Consider Gmail, the popular e‐​mail service provided by Google. Google is headquartered in California, and its servers currently reside there. But Gmail’s business is truly international, and slightly less than 30% of Gmail’s users reside in the United States. This chart shows the percentage of Gmail’s users that are in a handful of different countries as of 2012:

United States 29.7%

India 8.9%

Japan 3.4%

Russia 3.3%

Brazil 3.2%

United Kingdom 2.9%

China 2.7%

Iran 2.6%

Facebook’s user base is even more heavily foreign than is Gmail’s user base. To be sure, using Facebook has become as American as apple pie: About 54% of Americans presently have a Facebook account. At the same time, only about 16% of Facebook’s users are located in the United States. The rest, about 84%, access Facebook from abroad. For United States‐​based services like Gmail and Facebook, United States users form a small subset of its global customer base.

It sounds like the PRISM program takes advantage of that by giving the NSA access to the computers of the major U.S. based providers so it can search for the information of non-U.S. persons—subject to the NSA’s judgment of who is a non-U.S. person—and monitor them in realtime.

It seems to me that this revelation can’t be good for these companies in terms of use by non‐​Americans. Who wants to use a communication service that the U.S. government uses to spy on you? Not many people, I’m guessing. As a result, there may be a great opportunity here for foreign‐​based internet companies to market themselves with a slogan along the lines of, “We won’t give the U.S. government access to your email account.” So, in addition to all of the obvious downsides of a massive government spying operation, we may also be driving foreign customers away from U.S. businesses.