“As China and the United States engage in high-level negotiations over a possible trade deal, it’s puzzling to see what’s been left off the table: the Chinese internet market. China blocks or hinders nearly every important foreign competitor online, including Google, Facebook, Wikipedia in Chinese, Pinterest, Line (the major Japanese messaging company), Reddit and The New York Times. Even Peppa Pig, a British cartoon character and internet video sensation, has been censored on and off; an editorial in the Communist Party’s official People’s Daily newspaper once warned that she could “destroy children’s youth.”
China has long defended its censorship as a political matter, a legitimate attempt to protect citizens from what the government regards as “harmful information,” including material that “spreads unhealthy lifestyles and pop culture.” But you don’t need to be a trade theorist to realize that the censorship is also an extremely effective barrier to international trade. The global internet economy is worth at least $8 trillion and growing, yet the Trump administration has focused chiefly on manufacturing, technology transfers and agriculture, and does not seem to have pressed for concessions on this issue.
Sheltered from American, Japanese and European competition, Chinese internet businesses have grown enormously over the past decade. Nine of the world’s 20 largest internet firms, by market value, are now Chinese. Some of this growth reflects the skill and innovation of Chinese engineers, a vibrant start-up culture and the success of Chinese business in catering to local tastes. But it’s hard to believe that this has been unaided by censorship.
And the barriers to foreign competition have more than just economic effects. Without any better options, Chinese users are forced to put up with companies like Tencent, which owns the private messaging app WeChat, and the online payment company Ant Financial, whose privacy violations are, amazingly, even more troubling than those of Facebook and Cambridge Analytica. By tolerating Chinese censorship, the United States encourages other countries to do the same.”
Posts Tagged By Tim Wu
“Over the last year or so, Mark Zuckerberg of Facebook and other American tech leaders have issued a stark warning to those who want to see more competition in the industry. It goes something like this: “We understand that we’ve made mistakes. But don’t you realize that if you damage us, you’ll just be handing over the future to China? Unlike America, the Chinese government is standing behind its tech firms, because it knows that the competition is global, and it wants to win.”
This — Big Tech’s version of the “too big to fail” argument — has a superficial nationalistic appeal. It’s certainly true that the Chinese technology sector is growing and aggressively competitive, and that many of its companies are embraced and promoted by the Chinese state. By one count, eight of the world’s 20 largest tech firms are Chinese. That would seem to suggest a contest for global dominance, one in which the United States ought not be considering breakups or regulation, but instead be doing everything it can to protect and subsidize the home team.
But to accept this argument would be a mistake, for it betrays and ignores hard-won lessons about the folly of an industrial policy centered on “national champions,” especially in the tech sector. What Facebook is really asking for is to be embraced and protected as America’s very own social media monopolist, bravely doing battle overseas. But both history and basic economics suggest we do much better trusting that fierce competition at home yields stronger industries overall.
That’s the lesson from the history of Japanese-American tech competition. During the 1970s and into the ’80s, it was widely believed that Japan was threatening the United States for supremacy in technology markets. The Japanese giant NEC was a serious challenger to IBM in the mainframe market; Sony was running over consumer electronics, joined by powerful firms like Panasonic and Toshiba. These companies enjoyed the support of the Japanese state, through the Ministry of International Trade and Industry, which pursued a nationalistic industrial policy thought to be infallible.”