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Illustration: Sarah Grillo/Axios

U.S. companies have begun to face costly problems abroad while they wait for American and European partners to hammer out a new privacy deal after the EU voided a key international pact last year.

What they're saying: U.S. businesses that operate internationally say they've lost "tens of millions" of dollars thanks to the legal logjam, according to Jules Polonetsky, CEO of the Future of Privacy Forum, an industry-backed nonprofit. "European companies are being cautious and not going ahead with transactions until there is clarity."

What's happening: Businesses that share data with Europe used to largely rely on an agreement known as Privacy Shield to provide them with liability protection, but Europe's highest court struck it down last July, and consequences have begun to surge across data-dependent industries.

  • U.S. email marketing company Mailchimp was implicated in April when the Bavarian data protection authority ordered a European magazine to stop using the service to send its newsletters.
  • Microsoft announced last week it would begin storing and processing EU cloud customer data in the EU, citing its commitment to meeting EU data protection laws, including GDPR. Storing data locally is something large companies can pull off due to the expense. For smaller companies, it's more likely they lose business completely when faced with regulatory risk.

Enterprises that need data for research and policymaking are also feeling the pain.

  • In April, the Federation of European Academies of Medicine and the European Science Advisory Council reported that uncertainties around sharing health data outside the EU puts essential research, including about vaccines, at risk, with thousands of collaborations with the U.S. already affected.
  • Also in April, Portugal's National Data Protection Commission ordered its census bureau, Statistics Portugal, to suspend sending census data to the U.S. because the bureau was using Cloudflare, a U.S. company.

"There have been very public decisions that show the system is starting to break," Polonetsky said.

The big picture: U.S. businesses have resisted embracing the EU's stringent data privacy rules, and U.S. lawmakers have so far failed to pass national privacy standards — though states like California have moved ahead on their own.

As the two sides of the Atlantic alliance move out of sync, companies are paying a price.

  • Securities and Exchange Commission filings from dozens of different businesses filed this year say the ongoing confusion over the legality of U.S.-EU data transfer may hurt finances, operations and service offerings overseas.

Catch up quick: The case that ultimately struck down Privacy Shield was brought by Austrian privacy advocate Max Schrems, who complained that clauses in Facebook's data contracts don't adequately protect Europeans from government surveillance in the U.S.

  • Schrems also launched the case that upended the previous agreement governing data flows between the U.S. and Europe, known simply as the Safe Harbor.

In addition to Privacy Shield, which is mainly used by small and medium-sized businesses, companies rely on Standard Contractual Clauses to make data-transfer agreements comply with regulations.

  • The legality and usability of those have also been in flux, though Bruno Gencarelli, head of international data flows and protection for the EU, said in late April businesses would get updated clauses to use "within weeks."

What's next: Observers believe the U.S. and EU may be close to a new deal.

  • In March, the Department of Commerce said Secretary Gina Raimondo and European Commissioner for Justice Didier Reynders were "intensifying negotiations" on a new Privacy Shield framework.
  • Yes, but: It's not clear that any new agreement can both satisfy U.S. companies and meet Europe's much higher privacy bar.

Go deeper

Census reveals a more diverse, urbanized America

Illustration: Shoshana Gordon/Axios

The U.S. is more diverse, more urbanized and growing slower overall than in past decades, according to data from the 2020 census released on Thursday.

Why it matters: The decennial census provides a snapshot of the ever-changing demographics of the U.S. — and sets up the partisan fight over how states will redistribute electoral power for the next decade through redistricting.

Why 401(k) rollovers are so annoying

Illustration: Aïda Amer/Axios

If you happened to change jobs recently, you may have tried to transfer your retirement account from your former employer into an Individual Retirement Account or your new employer's 401(k) plan. If so, you probably encountered a bureaucratic gantlet — and you're not alone.

Why it matters: Kludgey processes around retirement account transfers result in people losing track of their funds, giving up important tax advantages, or otherwise disadvantaging themselves and being less prepared for retirement.

The hard math behind America's labor shortage

Data: Bureau of Labor Statistics, Congressional Budget Office; Chart: Axios Visuals

Yes, the pandemic has created unusual temporary labor market dynamics. But in the bigger picture, the 2010s were a golden age for companies seeking cheap labor. The 2020s are not.

The big picture: In the 2010s, the massive millennial generation was entering the workforce, the massive baby bo0m generation was still hard at work, and there was a multi-year hangover from the deep recession caused by the global financial crisis.