European Union plans to build a separate communications network to prevent data from passing over US networks is being opposed by the US, which claims that it would breach international trade laws.
The opposition of the US to the plans comes at a delicate stage of negotiation between the US and EU over a trade treaty that would give more power to multinational organisations - including communications companies - to sue national governments over claimed breaches of trade rules.
"Recent proposals from countries within the European Union to create a Europe-only electronic network (dubbed a 'Schengen cloud' by advocates) or to create national-only electronic networks could potentially lead to effective exclusion or discrimination against foreign service suppliers that are directly offering network services, or dependent on them," claimed the US Trade Representative in its annual report.
The EU plans are at an early stage, with representatives of Germany and France currently discussing how the network will be built and funded, and how the data will be kept secure. The talks so far exclude the UK, which has been complicit in US information-gathering efforts.
However, the office of the US Trade Representative claimed that it would place an impediment to cross-border data flows and, hence, to trade.
It continued: "Any mandatory intra-EU routing may raise questions with respect to compliance with the EU's trade obligations with respect to Internet-enabled services... Accordingly, USTR [the US Trade Representative] will be carefully monitoring the development of any such proposals."
Proposals to build a ring-fenced communications network in Europe follow a year of revelations from US National Security Agency (NSA) whistleblower Edward Snowden, who revealed how widespread US surveillance of global web activity had become.
The leaks showed that the NSA, together with Britain's GCHQ, had cracked web giants' security, subverted computer security standards organisations and even eavesdropped on global leaders' mobile phone calls.
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