On August 5, 2020, the U.S. mounted a systematic attempt to splinter the global Internet. It released a policy that tries to leverage US information services providers to force the rest of the digital economy to indiscriminately exclude Chinese businesses. The US “Clean Path” initiative, announced in April of this year, was designed to pressure European carriers to avoid purchasing 5G equipment from Huawei and ZTE, in order to establish China-free communications paths between the US and its embassies in foreign countries. The new initiative does not seem to be confined to protecting government communications, however. Pompeo claims to be protecting “our citizens’ privacy and our companies’ most sensitive information” by eliminating interoperation with any and all Chinese providers.
Secretary Pompeo’s broader “Clean Network” initiative is a watershed in US Internet policy. It embraces national barriers to Internet connectivity. It signals to every nation, not just China, that any foreign internet-based service provider, including American ones, should be considered a national security threat. It completely abandons WTO-based free trade agreements for telecommunications equipment and services. Protectionist policies based on national origin are applied not just to the application layer, but across the board: to telecom equipment providers, cloud services, app stores, hosting, undersea cables. China’s Cybersecurity law looks liberal in comparison.
The day after Pompeo’s bombshell policy announcement, two executive orders were released banning specific apps, one on TikTok the other on WeChat. The executive orders will prohibit US app stores, credit card companies and software providers from any commercial transactions with TikTok and WeChat. The US Commerce Secretary can punish American companies and individuals that violate the orders with $1 million fines and imprisonment.
Cynical use of national emergency laws
Portraying TikTok as a threat to national security barely passes the giggle test. Numerous data breaches reliably attributed to Chinese state actors have occurred since 2010. Some of them, notably the Office of Personnel Management and Equifax hacks, successfully exfiltrated large amounts of incredibly sensitive data about US citizens and government officials. But here’s the glaring omission in the threat narrative around Chinese companies: none of these breaches relied on the victims’ use of Chinese apps, equipment vendors or handsets. The risk of sensitive data being exposed is inherent in the digital economy and is not linked to the national origin of any vendors in the supply chain. Chinese-attributed attacks in Australia also lack any nexus with Chinese commercial companies. Better cybersecurity practices, not national origin restrictions, are the correct response to those problems.
When the threat claims mounted against Huawei and TikTok are applied to WeChat, a chat app with a tiny sliver of the US users and one that everyone knows is unencrypted and could be monitored by Chinese authorities, the claim that a threat to the nation lurks in the app is obviously outlandish.
The Trump administration’s framing of Chinese vendors as a national security threat is purely instrumental. One could even call it disinformation. A “national emergency” or “national security threat” allows the Executive branch to unilaterally implement protectionist policies. No need to bother with legislation or due process. The legal foundations of the Executive Orders are the International Emergency Economic Powers Act (50 U.S.C. 1701 et seq.) and the National Emergencies Act (50 U.S.C. 1601 et seq.) The relevant laws allow the President both to declare emergencies and to take a number of actions in response. But the factual determinations underlying the President’s declarations are flimsy. What harm (as opposed to speculation about possible harm) has occurred through use of TikTok? Where is the emergency? Note that Trump invoked national security to justify tariffs on Canada and Europe, too.
Both Congress and the courts can overturn a declaration of emergency. In the border wall case, Trump abused the National Emergency laws to override Congress’s refusal to appropriate funds to build his wall. This led to an extended battle with inconclusive results. Given the antipathy towards China in Congress and the enormous amounts of political capital that had to be spent to slow or stop the wall “emergency,” it is unlikely that the TikTok emergency will inspire much resistance.
As an ironic testimony to the American double standard here, the day after the US Executive Orders banned TikTok and WeChat apps on the grounds that they threaten the privacy and security of nation’s citizens and businesses, the Wall Street Journal reported that “A small U.S. company with ties to the U.S. defense and intelligence communities has embedded its software in numerous mobile apps, allowing it to track the movements of hundreds of millions of mobile phones world-wide.”
Is it a new Cold War?
As we predicted a few months ago, the US has chosen to make the global information economy the key battleground in the US-China conflict. But we now think it was a mistake to dignify this conflict with the ‘Cold War’ label. In the US-Soviet conflict, it made sense to speak of a war conducted indirectly through proxies and threats; it was actually a military confrontation, even if it was “cold” rather than “hot.” Large contingents of troops faced each other in Europe. There was a credible threat that the revolutions and political transformations caused by World War 2 would be controlled or manipulated by the Americans or the Soviets, leading to strategic advantage for one side or the other. Security concerns triggered an arms race, with both sides openly targeting each other with weapons of mass destruction.
This is not a Cold War. While construed as a security threat, the U.S. split with China is almost entirely about economics; or more precisely, about the long term political effects of economic competition. As best we can interpret the US government’s actions, it fears that if China obtains a strong foothold in globalized markets for information and communications technology, it will become a peer in the international arena. At worst, China will leverage access to its own market and its technology to establish the kind of global hegemony that the U.S. used to enjoy. In the mercantilist mindset of the Trump administration, we are always playing a zero-sum game. The fact that TikTok and Huawei are commercial success stories that made it in the market is something to fear, not welcome.
What is the goal?
As far as we can tell, the only real goal of insisting that all businesses connected to China are agents of the Communist Party is to isolate and cripple Chinese ICT industries. The purpose of that crippling process, presumably, is to maintain the U.S. lead in high-tech industries and continued US dominance of the capability for globalized surveillance. This nationalistic, zero-sum take on technological development and innovation sees the digital economy as an extension of the military; any improvement in China’s capability detracts from the U.S.’s capabilities and power. (Apparently, it is the U.S., not China, that believes in civil-military fusion). America’s economic nationalists ignore the business and consumer benefits of a more competitive and globalized digital economy. TikTok is actually a poster child for that: it is an innovative app that bridged and adapted to American markets and regulatory policies, was reliant on Western venture capital and introduced competition to Facebook and other incumbents who many Americans complain are too monopolistic. This is to be sacrificed on the altar of Trumponomics.
But there is a serious flaw in this strategy. It is very short-sighted. It assumes that China’s economic growth and technological advancement can be halted through a blockade. This seems far-fetched, to put it mildly. China itself is a market with the potential to be bigger than the US and Europe combined. Its economy will certainly suffer from the limitations, but it will not shrivel and die. If our strategy is to dominate and exclude the Chinese economy rather than learn to adapt, benefit from and co-exist with it, we are pursuing an impossible goal. The technological know-how growing there will not be erased, it will simply be directed inwards. Shutting out China now will not make it go away, but it will generate decades of resentment and countermeasures that will not be pleasant. That form of competition may indeed evolve into a zero-sum game. What option will China have, other than to develop its own technical ecosystem, disconnected from ours, and seek to lure other countries into it? Further, by insulating the US market from competitors, innovators and capital from China, the U.S. hurts itself.
The Trump administration has crossed a line with these latest anti-China measures. The ramifications will be global and, if they are not quickly reversed by a new administration, long lasting.