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Online censorship: A new flank in the US-China trade wars?

Online censorship: A new flank in the US-China trade wars?
Published 28 Apr 2016   Follow @DrSarahLogan

Remember Hillary Clinton's internet freedom agenda? In a groundbreaking speech in 2010, Clinton outlined her State Department policy for promoting internet freedom in the context of human rights and democratisation. This meant funding anti-surveillance tools, chiding repressive governments, and funding efforts to support online democratic activism in troubled states.

Although not untroubled, the policy marked Clinton's State Department as progressive and forward looking and championed the US' status as the birthplace of the web and the home of tech innovation. This placed the US in stark contrast to countries which engaged in repressive online censorship — most clearly China and, at the time, Arab states racing to quash the online elements of what would become the Arab Spring. Since that speech, internet freedom faded from US foreign policy prominence. This is unsurprising in the post-Snowden and post-San Bernardino context, where US tech dominance has been shown to be closely linked to US policy goals in a rather less open manner than Clinton may have envisaged and where the Obama Administration has openly campaigned against strong personal encryption. 

However, last week the issue of internet freedom emerged once more, again in the context of China, but this time from the Office of the US Trade Representative (USTR). Two paragraphs in the 2016 Trade Estimate Report for the first time added China's Great Firewall to an annual list of trade impediments. The report argues that over the past decade this firewall has 'posed a significant burden to foreign suppliers, hurting both Internet sites themselves and users who often depend on them for business.' These two paragraphs mark an important turning point in US policy on internet freedom, framing the issue outside the stirring rhetoric of human rights and instead in the dry technicalities of international trade.

So why the shift? The answer highlights the power of the US tech lobby; Google, for example, is the third largest corporate lobbyist in America. Although it championed the US tech industry, Clinton-era internet freedom policy was not an unmitigated gift to the US-based digital giants of the online world. The policy hamstrung internet companies by shaping their entry into the largest emerging internet market in the world in the context of US human rights discourses, putting them in a difficult position given that it is impossible to do business in China's online sphere without interacting with a government with scant regard for such discourses. [fold]

As early as 2007 the First Amendment Coalition, a non-profit advocacy group with significant tech representation on its board, had requested the USTR treat internet freedom as a trade issue. These calls only intensified after Google left China in 2010. Indeed, in 2010, the Executive Director of the First Amendment Coalition published an op-ed arguing for almost exactly the approach taken in the 2016 report.

The issue has gained currency as Chinese tech giants continue to expand outside China, including into the US. As of May 2015, four Chinese companies were ranked in the top 15 global internet companies by market capitalisation. Adding salt to the wound, this expansion uses American finance and expertise.

For example, Alibaba's 2014 initial public offer was the largest in NYSE history, underwritten by four major US banks, including Goldman Sachs and JPMorgan Chase. Now the third most valuable internet company in the world, ahead of Amazon and Yahoo!24, Alibaba has also announced plans to expand into the US and European markets. Other Chinese tech giants such as Baidu and Sina Weibo are also expanding outside Chinese borders, directly challenging US dominance. This takes place in a cloud of accusations of Chinese cyberespionage and IP theft against US companies. Meanwhile, Google cannot operate in China, the Government just this month suddenly and substantially reduced Apple's Chinese operations and in 2015 banned a range of US tech firms from accessing Government procurement contracts.

The appointment of a Robert Holleyman as the US Trade Representative in 2014 underscores the shift in the US approach to internet freedom. Holleyman spent 13 years as the head of the Business Software Alliance, which represents technology heavyweights such as Apple, Intel and Microsoft. In his nomination testimony to the Senate Finance Committee in August 2014, Holleyman stated that alongside mounting a robust response to China's ever-growing presence in global trade, he would ensure that the US would lead the establishment of the rules of digital trade globally, not just in the Chinese context. He told the committee he would fight for rules to guarantee the free flow of data across borders and to stop discrimination against goods and services traded online rather than physically.

The success of this new approach to Chinese censorship is not guaranteed. It will depend firstly of course on favourable rulings at the WTO. Outside of the fact that any such case will be breaking new ground, GATT and GATS were designed in the 1990s, before the internet's force as an economic multiplier was fully understood. This means the definitions of both goods and services are unclear as they apply to internet services and associated technology goods. The arcane workings of the WTO are difficult to fathom and the outcomes of deliberations which hinge on these definitions are not a given, however the US appears to be betting that this will soon change.  

But outside of any positive outcome from WTO deliberations, China will still have to agree to and implement any decisions. Here, the likely outcome is clearer. China has long failed to liberalise many sectors of its economy as fully as its trading partners may wish, and the internet sector is no exception because of both its security implications and its size. Even more so than its predecessors, the current regime sees the internet sector as underwriting its political legitimacy: censorship has increased apace in recent years, and even recent months. But the internet sector is also one of the country's most profitable: the three biggest Chinese internet companies — Baidu, Alibaba, and Tencent — have become the largest private sector companies in China by capitalisation and revenue. This means they are not only powerful in terms of the politics of information but also as private economic actors, meaning the Government is likely to tighten its hold on the the sector. 

In an unusually cruel twist for the likes of Google, then, the tech sector is one of the brightest stars of both the US and Chinese economies and is — thanks in no small part to earlier iterations of US policy — closely associated with national identity and values on the global stage. The latest round of battles has no clear outcome, but America's recent approach opens up a new flank. This time, it heeds the advice of its golden industries and seeks to ferry them through China's Great Firewall instead of demanding they stop at its borders, left to gaze longingly on the riches within.

Photo by Bao Fan/ChinaFotoPress/Getty Images

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