Chairman and Vice Chairman of the U.S. Senate Select Committee on Intelligence, Sen. Dianne Feinstein (D-CA) and U.S. Sen. Saxby Chambliss (R-GA), speak about the National Security Agency collevting phone records on June 6, 2013 in Washington, DC. - 

The furor over U.S. Internet surveillance could hit transatlantic trade. A senior European lawmaker says the revelations could potentially derail plans for a U.S.-EU free trade deal.

Negotiations to free up the world’s biggest trade relationship -- worth more than $600 billion a year -- are due to begin next month. So far they have been overshadowed by the issue of farm subsidies and French concerns about the protection of their language and culture. But Hannes Swoboda, a leading member of the European Parliament, told the Financial Times that data protection has now shot up the agenda.

“The issue is very critical for us in Europe,” he says. “There will be growing resistance against an agreement with the U.S. unless there are some clear guarantees from their side that our European principles of data protection are respected.”

U.S. companies have been pressing for fewer restrictions on cross border data flows and they resent European rules which strictly limit the type of data which can be collected, the length of time it can be stored, and how it will be used. 

Privacy campaigners in the U.K. argue the revelations about the PRISM surveillance program will make a free trade deal much more difficult to achieve.

Nick Pickles, director of Big Brother Watch in the U.K., says PRISM has undermined the whole cause of free trade.

“People may well not see the U.S. as a place they can trust to do business with and that has got to have massive repercussions for the global economy,” Pickles says.

But other  observers point out that state surveillance has not apparently deterred European companies from doing business with China. And the head of the National Foreign Trade Council in the U.S., Bill Reinsch, says he does not believe the PRISM revelations will make any difference to EU-U.S. trade talks.

“The division between the two sides is already so deep, I’m not sure this will make it much worse," he says.