Fair Trade Suffers When China Censors The Internet. It's Not Just A Human Rights Issue.

MEMORANDUM

To: President Elect Barack Obama
Hilary Clinton, U.S. Secretary of State nominee
Ron Kirk, U.S. Trade Representative nominee
Julius Genachowski, Obama Transition Team - Technology

From: Michael A. Santoro and Wendy Goldberg

Re: Chinese Internet Censorship: It's About Fair Trade, Not Just Human Rights

Almost all discussion of the harm done by China's strict censorship of the Internet focuses around its human rights implications. However, by restraining the ability of U.S. companies to fairly compete in the world's largest market, serious damage is also being done to America's free trade interests by its largest trading partner. The list of companies caught in this dilemma will continue to grow. Today, these include companies like Google, Microsoft and Yahoo!; tomorrow China's censorship policies will affect the growth of social networking companies like Facebook and MySpace.

The Obama Administration needs to reconfigure the relationship between the government and the companies providing what is now one of our most significant national products.

One key to the recovery of the American economy will be a focus on America's core strength in information services and technology. This is an area in which our country has had a significant global comparative advantage -- but today we are in danger of losing that advantage, in large part because of trade restrictions imposed by China, our largest trading partner. We are accustomed to thinking of censorship purely as a human rights issue, but for information providers and technology companies, censorship acts as a trade barrier, and China's current censorship of the Internet imposes restrictions on the ability of innovative companies like Google, Yahoo! and Microsoft to compete fairly and provide their best product.

You can see the damaging effects of censorship on competition in the Internet industry if you look at the dramatic shift in market leadership. In 2002, when the Internet market was in its infancy, Google had a 24% share of the Chinese search market as compared with then-upstart Baidu, which had a mere 3% share. By August 2008, Google, which has a dominant share of the U.S. market, had been reduced to just 19% of the Chinese search market while Baidu had 65%. This certainly wasn't a result of Baidu delivering a superior product -- rather, Chinese government censors forced Google to provide an inferior product with a much less robust search engine. Search "Tiananmen Square" and you get pictures of happy Chinese tourists flying kites. Type in "Falun Gong,"and on Google.cn and you will get a message saying "These search results are not complete, in accordance with Chinese law" -- and possibly a visit from your local Internet watchdog. Try to start a blog discussing democracy or human rights and you can go to jail.

Censorship gives an unfair market advantage to Chinese internet providers like Baidu, which doesn't need to present a superior product to lead the market - it needs simply to offer operational and editorial compliance with what the government wants, or what Baidu thinks it wants. Baidu, by the way, is the company that sold its censorship services for the equivalent of a $250,000 payment from Sanlu, a large milk producing company, to block search results related to the melamine contamination of milk products that sickened tens of thousands of Chinese children.

The U.S. government has so far refrained from supporting the interests of the U.S. information industry in China, with Congress in particular opting to use Chinese censorship as an opportunity to criticize Internet executives in a public forum rather than as an opening to assist America's Internet sector. To date, the government's approach has taken the form of Kabuki theatre, as outraged Congressional representatives questioned representatives of Google, Yahoo! and MSN about their companies' commitment to upholding human rights in their drive for profits. To be fair to the politicians, they are not entirely wrong; in 2005, Chinese journalist Shi Tao was sentenced to ten years in prison after Yahoo identified him to Chinese authorities as the owner of a specific e-mail account. Shi Tao was accused by the government of leaking "state secrets" to a pro-democracy website. (This "state secret"? A memo that the state propaganda machine had sent out to Chinese journalists containing instructions on how they should suppress press coverage of an upcoming anniversary of the 1989 Tiananmen Square uprising.)

While U.S. technology companies have not been entirely without blame, they most recently worked with NGOs and human rights activists to adopt a set of voluntary guidelines for operating in China and other countries that censor the Internet. However, these voluntary efforts won't amount to much without the support of their home government -- and the U.S. Congress has not done anything to improve the situation. Western Internet companies are as much the victims as the perpetrators of Internet censorship in China; as they struggle alone with the difficult task of reconciling their human rights duties with their duties to shareholders, they have little chance of effecting any meaningful change in China. The United States government needs to stop playing the blame game and start figuring out ways to help American companies combat censorship.

The United States, Canada, and the European Union recently won an important WTO-based concession from China which may have a positive effect in moving this issue forward. In November 2008, a formal complaint based on China's WTO obligations was settled by agreeing to allow financial information providers, including Thomson Reuters, Dow Jones and Bloomberg, to distribute financial news independently of the Chinese-controlled Xinhua news agency. These news organizations will now be able to set up shop independently of Xinhua and establish direct commercial relationships with Chinese subscribers -- and make it much harder for the Chinese government to censor news about the country's economy. While the issues are more complex in the case of broad Internet services, the idea that censorship and control of information violates fundamental trade principles has now been firmly established.

The U.S. government has to date declined to make Internet censorship into a WTO issue. However, the European Parliament, by a margin of 571-38, passed a proposal that, if approved by the European Council, would require the European Union to classify Internet censorship as a barrier to trade. The one piece of legislation introduced in Congress took a very different approach from the European legislation (and was never even close to coming up for a vote). Instead of making Internet censorship into a trade issue, H.R. 275, the Global Online Freedom Act, proposed to punish U.S. Internet providers by subjecting them to financial liability for engaging in certain acts of censorship on foreign soil. The contrast between truly the constructive action of the European Parliament and the purely political reaction of the U.S. Congress highlights the general lack of leadership and decisive action from the U.S. government on the Internet and trade policy and its impact on human rights in China.

Recommendation: It's time to incorporate Internet companies into a modern calculation of American economic interests. While we aren't used to thinking of Internet companies as drivers of American economic prosperity, a precedent exists - during the first Clinton Administration it took a leap of imagination to understand that intellectual property represented America's most important economic interest and needed to be protected as such, a fact which has now been well established. Now we require a similar leap of imagination to protect America's 21st Century economic interests. Start with a high-level dialogue to give your government a better understanding of the Internet business paradigm (hint: it's not a series of tubes), how Internet companies operate, and how censorship prevents them from providing their best and most competitive product. Listen to the problems that Internet companies face in China rather than preach at them. Then you can better judge if it makes sense to start a new trade action against China or join the European Union's effort.

There is an additional benefit to this approach. Using well-established trade principles to address human rights conditions in China is a measured and potentially effective way to influence positive social and political change in the coming decade.

Michael A. Santoro is an Associate Professor of Business Ethics (with tenure) at the Rutgers Business School. He holds a Ph.D. in Public Policy from Harvard University, a J.D. from New York University, and an A.B. from Oberlin College. His book, China 2020: How Western Business Can--and Should--Influence Social and Political Change in the Coming Decade will be published by Cornell University Press in May 2009. Prof. Santoro's first book Profits and Principles: Global Capitalism and Human Rights in China was widely praised, and in April 2000 Prof. Santoro testified before the United States Senate Finance Committee on the human rights implications of China's entry into the World Trade Organization.

Wendy Goldberg is an Internet industry communications and policy strategist based in New York City. During President Bill Clinton's first term, Goldberg served in the Small Business Administration, which was at that time a Cabinet-level agency. She has a Masters Degree in Public Administration from the Harvard Kennedy School.

Comments

[1will]

The Chinese government has no interest in fair trade and our government is relying on the Chinese to buy up all of our debt and finance our recovery. You won't see fair trade with China in your lifetime.

[americaforme]

Trade action to China in this area is redicules. Do you think that China will give up her rights to control this media, think again. China is not a slam dunk, situation. Her poverty lessons learned, will never give full vent to media. The global mystic is just what it is, mystic.

[Asean4Obama]

Thank you for this article. I always follow HP on anything that it publishes about the Fareast and Asia.

You are of course correct that China censors the Internet but the MM in the US does self-censorship. The Middle East is a typcial example how US media manipulates news and this has been going on for many many years. In China, foreign news are very ballanced and if you look CCTV9 (http://www.asinah.net/china/CCTV9.html) you will notice they just report the news without much special editorial on spinning the news in one direction.

China has had many progress in the past 30 years but they will not take advise from the West that had a long history of violence against their nation or Asian's in general.

The British, Dutch, French and Portuguese setup colonies throughout Asia and stole their natural resources not long ago. They never paid any compensation to the countries after they won independence and many countries fall into Chaos soon after.

The only time in modern history where the US and China worked together on politics was by propping up the Khmer Rouge in Cambodia that cost more then 1 million deaths.

Anyone who has the time to read about the history of China, please visit
http://www.asinah.net/china/history.html or for a fair understanding of all the minority races in China
http://www.asinah.net/china/nationalities.html

[shanghaislim]

As much as we all love the internet and the freedom it brings to us............

.............think of the ABUSE and HAVOC that anyone can reek on a computer these days.

Not a fun proposition trying to control 500 million users when your whole country, system and way of life COULD and it's future hang in the balance?

[shanghaislim]

Should any body tell you "How to Raise Your Children?" especially if their children have grown to be out-of-work, drug addicted and morally challenged.

Basically, China is trying to provide and keep a sense of structure that eluded Western Countries.
A moral structure of a society that isn't the Wild West where "Anything Goes".

We in the west have lowered the bar to the bottom by allowing TOO much of every type of freedom imaginable. Example...­.....shoul­d freedom of speech allow a Neo Nazi group to march down the streets of an ethnic neighborhood, causing mayhem destruction and violence??? Is that the definition of Free Speech. A line must be set. We have no line anymore. China has a chance to set their line at their moral compass.

[SammyD]

China is and will be the new economic model so I suggest we ask them what the rules will be for the future.

[shanghaislim]

.................as spoken by Bill Gates. (Good Source)

[indyleftist]

People should be using proxy servers no matter what country they live in
Especially if you are politically involved in any way.
They are all watching

As for China, I would suspect most people already use proxy's. During the Olympics that's how all of the western journalists worked. I know in Iran where the internet is also criminalized the vast majority of people know how to use proxy servers to get around the government safegaurds

[cylindar]

China has a long way to go before it can sit at the big league table. They are in for a massive economic decline and probably plenty of social unrest. Nobody really takes China seriously as they are not a serious nation.

[MagisterLudi]

Silly stuff, of course.
Here's a prediction: China will be a powerful nation long after United States will be a footnote in history. Let's check back in about 500 years, shall we?

[ghormax]

Don't believe the nationalist history of China. The country is nowhere near 3,500 years old. The People's Republic of China was founded on November 1, 1949. Perhaps we can date back China to 1912 when the Republic of China was founded. Before that, China was occupied by the Manchu. Furthermore, China was also conquered in 1271 by the Mongols. The suggestion that this is all a long linear history is nationalist rhetoric.

The question, therefore, should be: how long can the Communist dynasty last?

[shanghaislim]

US = 233 years

CHINA = 3500 years (dating ONLY from the Shang Dynasty)

[victorsays]

As a minority, I think China has every right to censor the internet. US used the media and their capital as a subversive tool to undermine foreign country and to sell their version of "Americanisn" (which is just another word for a "white centric worldview"). The US, under the pretext democracy, wants to expand markets for capital, to flood the country with US capital and control the local economy, and to subject locals under foreign rule. Democracy is long taint by conolonialism.

China is looking out for its own interest in censoring the internet. China learned her lesson of Taiping Rebellion and the Opium war, where Jesuit and Christian missionary acts as Western imperialism's liason. To allow free reign to foreign invasion of the media will pollute the minds and ruin a country of 1.3 billion when there is not middle class to withstand the onslaught of Americanization.

Another reason is US produce 90% of internet pornography in the world that is racists against Asian and misogynistic. Look at the pornography and the filth that US produce.

The internet will be free in China when China becomes as competitive as the West to withstand the Western propaganda machine.

How many of you actually understand China's worldview? The problem with the West is its self-righteous and rejection of non-white's concern. In another world, the West is racist in its self-righteous and promotion of Western democracy.

[shanghaislim]

Fantastic post!!!

I have spent the last 10 years living and working all around China.

My Chinese friends are proud of their country and would never think of leaving for some heathen place like America in their minds. They would like to vacation.

But the average Chinese in a fair size city has all the needs, wants and freedoms available to him to lead the same quality life as we do.

[ghormax]

I have been to China, too, and the censorship is a real problem even for those not interested in politics. My Yahoo! E-mail account was blocked because it contained a word that accidentally also refers to a software with which you can circumvent the Great Firewall. The word is Freenet, which is also an Internet provider in Germany and I got e-mail bills from them. I wonder what happens when you use your Freenet E-mail address to send e-mails to China!

[shanghaislim]

So don't use freenet. It is not as if ALL your access was blocked, just the access you chose.

The Chinese people are quite ingenuitive remember? When they need access you find ways to get it. I live in Shanghai and travel often to Beijing.
I rarely have ever had problems getting to any site other than sites that I had no business own. (Death and Gore sites/Porn Sites/Political Subversion and Weapon Making, etc. ..........ooooh and Wikipedia is blocked in China!!!) But Wikipedia is a site, while useful, is uncontrolled for questionable and untrue facts?

[MagisterLudi]

1a.China censors political speech. Reasons given: preventing chaos and disharmony; maintaiining cohesion and country's unity; preventing foreign- funded NGOs wreckiong havoc ala Georgia, Russia( Yeltsin days) and Ukraine.
1b.United States doesn't censor political political. Well, may only by failing to provide forum to those out of mainstream.. And having mechanisms to discourage third party candidates.

2.a China has almost total economic speech freedom. It exceeds that of the United States. Reason: less lawyers and governmental control.
Unfamiliar with this aspect of Chinese economic freedom? Try http://www.alibaba.com/
2b.United States censors commercial speech. .Some reasons given: desire not to p-off advertisers, vendors, sponsors, stockholders, politicians, management etc.; lawsuit exposure, protection of trade secrets. Fill in the blanks.
This is my petit recit ( as per J.F.Lyotard) and I am sticking to it :-)

[ghormax]

China has no working legal system. It's economic speech does not extend to government controlled companies. In many aspects, China has introduced Dickensian conditions and the workers are suffering the consequences. China needs to set clear regulation in business or risk more social conflict (which is already a big problem).

[shanghaislim]

Sorry, man, while you have visited China, I have lived here for the past 10 years. What you are saying is only a small percentage (in fact the same small percentage as the US) of companies operating outside acceptable standards.

No working legal system? Tell that to my lawyers. One educated at Harvard the other Georgetown and the hundred or so other top lawyers I know practicing in China.

I have worked closely with both our (US) govt and the Chinese govt over this period of time and had many chances at seeing the vast difference between their political system and their social system.

[yappnmutt]

google, yahoo and microsoft are having a difficult time competing in china because the chinese prefer to buy chinese centric products when they can. censorship issues have nothing to do with it.

chinese culture doesn't have a culture of recognizing intellectual property as a protected right. if intellectual property is to be protected then a cultural change must be implemented into the chinese psyche. in a profound way the free use of someone else's idea promotes competition and therefore rapid improvement and distribution of the idea, not just theft. it doen't inhibit new ideas, the lack of intellectual ideas actually promotes new ideas critical to progress across the spectrum.

human rights and censorship issues are mostly an internal issue. the chinese people, unlike americans, aren't shy about protesting against gov't action. the chinese gov't fears its populace much more than the usa gov't fears its citizens. the gov't's fear of its people makes it much more responsive to its people's needs and wants not less responsive.

its a bit ironic to worry about china's censorship and human rights violations given the path the usa has been on the last 8 years.

[yappnmutt]

that should read---the lack of intellectual property protection laws actually promotes new ideas critical to progress across the spectrum.

[shanghaislim]

NOW it is a fantastic article!!! :-)

[FairTalk]

You are spot on!

[ghormax]

I think it is legitimate and important to worry about censorship in ANY part of the world. The US especially under Bush has betrayed its promise set by the Founders. The US, although alway imperfect, has changed the world in terms of human rights. We should never give this up or risk losing everything we have fought for.

[MagisterLudi]

I don't dispute the right of commercial enterprises to edit their content.
In the West we call censorship "editorial control." Or "changes made to prevent legal exposure."
or "limiting hate speech" or "protecting the children" ( this is a good one).
But Chinese limitation of political speech is -- censorship. No ambiguity, no PC label.
Frankly, I don't the distinction as a relevant one.
I would consider jailing a blogger a terrible thing. Same goes for a long jail sentences meted to an American hacker.
Political freedom without economic one is meaningless. In the West, political freedom has been combined with considerable economic oppression.
Chinese Communist Party with its cadre of highly educated technocrats, was able to create a system of almost total economic freedom, combined with serious political limitations ( one party rule).
It's an interesting hybrid. History will show how stable it is.
Regardless, information will find a way...

[FairTalk]

Here in the US we have Republicans and Democrats. One party rule with two heads.

Supposed to have a representative government, yet minorities are hard to find in congress.

Corruption is the problem, and as long as humans are involved, there will be no perfect system.

[ghormax]

So, we need freedom of speech and the freedom to expose abuse!

[FairTalk]

China has a right to defend herself, and her many citizens who do not know that the western media is "free" and what is writen is very likely false information.

As for email, internet, and faxes, I myself have observed how these were used to instigate demonstartions in China, including inciting violence.

Until western powers stop using these methods to disrupt China, putting 1.3 billion people at risk, I will continue to support China taking whatever action they need to defend themselves from the vile lies and propagands streaming into China .

[victorsays]

I agree. What guarantee do the Chinese have that the West wont's spread lies and undermine social stability? The West has every incentive to keep China as the a sweatshop for their comfortable Western live style.

The Chinese have every right to live as well as the West. With a country of 1.3 billion people, the Western governments only have incite violence in the millions of ethnic minority to cause trouble and headache for people under the name "democracy". the US didn't even have Democracy until more than 200 years after they proclaimed "All men are created equal". Bullshit.

The Chinese technocrat as smart enough to see that there are Uncle Tom's Chinese out there who are will to do the bidding of the US to undermine social stability.

[ghormax]

Why do you equal the Chinese government for the Chinese? China is a very diverse country, which is an immense challenge for a centrally organized government that wants to control everything. This is clearly a Herculean task and China has never been very successful (even though it was much better during Mao's time). Economic growth simply means less control.

What is stability anyway? Is stability lack of accountability? I like to compare China to a pot of boiling water with the lid on. At any moment it can blow off. This is not because of foreign influence (which is minimal) but more the result of failed polices. Now, how long will they keep the led on? They try hard with censorship, etc. However, we know from other cases in history, even complete isolation may not help much if the breaking point is reached.

[PlaceboStudman]

While I fully agree that the internet should be considered in a broad definition of economic interests of the US, I have to ask, how do we, or anyone convince China and other countries to reduce their iron fist grasp on the media? We need to work on overhauling the entire concept of censorship from a country whose leaders are still known for condemning, jailing and torturing people who attempt to express religious freedom or political dissent. When we figure out how to fix THAT, then we can worry about the medium of HOW they are censored. Right now, This is a question of WHAT we do as far as censorship, not HOW we do it.

[ghormax]

Censorship cannot work on the Internet because it is decentralized. While there are things that should be forbidden (for instance: child pornography, terrorism), the best approach is monitoring problematic websites (anything from fundamental Islamic and Christian websites to violent websites) and learning how we can adjust to this new outpouring of secret human desires and dark secrets.

The only way to really control all content is to disable the Internet. I am against that. I think the best way is to learn to live with it.

When a government forbids something it becomes more interesting to many people and you can always find a way to get to this information.