Countering China's digital authoritarianism

Despite China's claims that it has moral and national security concerns about western internet companies, protectionist industrial policy is the real reason for its closed-shop attitude - claim Hosuk Lee-Makiyama and Fredrik Erixon

The recent Facebook revolutions in Tunisia and Egypt demonstrate that the political impact of the internet is unprecedented. It extends beyond national borders. On the other hand - attempts to curb the Twitter revolution in Iran and calls for a "civilised internet" at the recent G8 meeting, in Deauville, illustrate that online censorship is about to take centre-stage in world politics. Leaders are torn between freedom of speech and cyber security.

Many countries restrict the internet and apply censorship. And yet, China is the only country that enforces censorship for economic reasons. In short, the Chinese government engineers a system of censorship that has the effect of boosting domestic operators at the expense of foreign businesses.

China is the only country that legally and technically distinguishes the origin of the service provider and discriminates against foreigners. The country has a clear protectionist agenda to protect its domestic IT sector and online services, in particular. All form of foreign-owned social media is blocked in China, while search engines and various media are regularly shut down on the grounds of moral standards. Domestic counterparts with same functionalities and contents are left undisturbed.

As a consequence, two of the largest companies in the world – namely, Yahoo and Google - have decided to leave China or at least radically reduce their presence.

The reason being they want to avoid exposing their businesses or clients to erratic censorship and surveillance. In their absence, local copycats have taken up the market. And how they benefit from discrimination is clear - the same day that Google announced that it was considering leaving China, the stock prices of the Chinese search portal Baidu saw a 16 per cent jump.

Today, China's domestic industrial-policy ambitions – thinly veiled as moral or national security concerns – are disseminating to other technologies and countries. China is asserting control over both mobile and fixed-line telecommunication services, through state-controlled operators. It has started restricting mobile apps and a worrying number of authoritarian states and democracies are following this same pattern.

Such discrimination against foreign business balkanises the IT industry and breaks up open networks. But it also damages China's technology upgrade and ability to increase growth. China has benefitted remarkably from trade in IT goods. Now, it is increasingly losing its position as a result of increasing labour costs. Although, it performs very badly when it comes to evolving into a more advanced service economy. It cannot climb the value-added chain. As a result, China's export of IT services is only one-tenth of India's.

In the end, there are very few carrots and sticks that the world community can use to push a country like China to change its practices. Moral suasion appears to be the only option that countries could resort to. It is important to increase diplomatic efforts, but one should not expect it to yield results in isolation. Therefore, few countries have set themselves the ambition of changing censorship practices in a country like China with traditional diplomacy. It would be wrong to say that traditional diplomacy has failed, but it will not take us far in addressing the existing problems.

A potentially more efficient strategy is the arena of international trade. The World Trade Organisation is a rule-based body and China is a member. Under the said rules, discriminating against foreign services providers - by arbitrary blocking or by other means rendering them useless - does not meet the strict conditions according to which imports may be restricted. Such violations can be taken to dispute settlement and China – who is a great beneficiary of free trade – respect its apolitical rulings.

Furthermore, China has already failed to defend censorship on foreign DVDs in a WTO dispute. It seems unlikely that the argumentation supporting internet censorship is going to be successful either.
Therefore, the actions taken by Beijing do not only violate the rights of its citizens and other countries, but more importantly - they violate the economic rights under trade agreements that China has agreed to.

China today has the world's largest internet population. It outgrew the number of internet users in the United States, back in 2008. China carries increasing weight in defining the future of the internet in and outside China – and the Facebook/Twitter revolutions show that the ramifications of digital authoritarianism affect more than only flow of information and media.

Hosuk Lee-Makiyama and Fredrik Erixon are directors of the European Centre for International Political Economy