Tick TikTok goes globalization

April 03, 2023 11:01
Image: Reuters

The spectacle of the US Congress grilling TikTok CEO Shou Zi Chew on March 23 could one day be remembered as a turning point in the history of globalization. Over five hours of aggressive questioning, Chew – who is not Chinese but Singaporean – did a magnificent job defending his company’s Chinese ownership in the face of Congress’s limited understanding of the tech world.

The Biden administration views TikTok as a potential national-security threat and wants its Chinese-owned parent company, ByteDance, to sell the platform to a US-owned company or face a possible ban. Chew, however, proposes that ByteDance retain its majority ownership of TikTok but have its US operations run entirely by the Texas-based tech giant Oracle, which would store all US user data on its servers and monitor how TikTok’s algorithms recommend content. Meanwhile, the Chinese government has said that it would oppose a forced sale.

But the odds of Chew’s “Project Texas” convincing Congress or President Joe Biden seem slim. US lawmakers have little confidence in the Chinese government’s intentions – and with good reason. For years, Chinese hackers, presumably state-sponsored, have been relentlessly attacking the United States government and US-based companies and siphoning off trillions of dollars in intellectual property. Although exact numbers are difficult to come by, the pervasiveness of Chinese hacking has raised alarm bells among experts worldwide, particularly in ASEAN countries.

The bipartisan push to restrict TikTok reflects the growing distrust of China, which is one of the very few things that Democrats and Republicans in Washington can agree on. While China itself has a “great firewall” that effectively blocks US-owned internet platforms, the proposed US ban could accelerate the shift toward deglobalization.

But bashing TikTok may prove easier than banning it. With 150 million US users, it is one of the country’s most popular apps. American adults reportedly spend an average of 56 minutes per day on the platform. From the standpoint of domestic politics, there is a world of difference between the proposed TikTok ban and the recent US ban on selling and importing communications and video equipment from Chinese manufacturers like Huawei.

In addition to the scores of TikTokers who make their living on the platform and would become collateral damage if it was prohibited, the app is extraordinarily popular among voters under 30, with polls showing that nearly two-thirds of young people oppose a ban. Given that this age cohort leans heavily Democratic, their opposition could threaten Biden’s re-election chances. Democratic congresswoman Alexandria Ocasio-Cortez, beloved by Millennials and Gen Z’ers, has already come out against the ban (naturally, she took to TikTok to express her concerns).

Chew certainly scored some points with younger people. If banning TikTok is about protecting American voters from spying and manipulation, he argued, then Congress should devise a plan that also addresses abuses on US-based platforms (all of whom are salivating at the prospect of their biggest competitor being shown the door). After all, the Cambridge Analytica scandal has shown that misinformation and privacy violations on Facebook ultimately helped former US President Donald Trump win the 2016 election. And psychologist Robert Epstein has argued that Google’s search engine has manipulated voters in favor of Democratic candidates (albeit the quantitative significance is disputable).

So, Chew has a point. All social media platforms seem ripe for government regulation. The Federal Trade Commission is currently considering a crackdown on Big Tech’s commercial surveillance and lax data security practices, while Twitter, long deeply problematic as a source of disinformation and slander, has arguably become worse since Elon Musk took over.

Unfortunately for TikTok, banning Chinese ownership is much easier than regulating Big Tech. Its immense popularity aside, TikTok is just one front in the current tech war between the US and China, which also includes the efforts to convince US allies to bar Huawei from building their 5G networks and the administration’s recent sanctions on the sale of advanced semiconductors to Chinese firms. Moreover, while TikTok’s Project Texas proposal seems sensible, it is hard to believe that Chinese hackers would not have an easier time stealing data from a platform whose parent company is headquartered in Beijing.

The increasingly bitter rivalry between the US and China leaves little hope for a compromise that addresses both countries’ security concerns. For example, China could rethink its own protectionist policies and allow US-owned tech companies to operate in the domestic market, but that would jeopardize the authorities’ iron grip on China’s information ecosystem. Likewise, the US could require TikTok’s American operation to be sold at a significant premium as partial compensation for what the Chinese government has described as a “smash and grab.” But while this solution at least shows some respect for international law, it would be a hard sell given that China has not paid US companies anything for stealing their intellectual property over the years.

Those who downplay the devastating effect that a potential US ban could have on TikTok fail to understand the economics of social media. Advertisers’ ability to reach US audiences is precisely what makes social media platforms valuable. Make any platform illegal, and its value to advertisers will vanish. While some users would undoubtedly try to bypass the ban by using virtual private networks (VPNs), this may prove difficult and would not prevent the loss of advertising revenues.

TikTok is putting up a good fight, but it may lose this battle. US lawmakers are reportedly moving forward with plans to ban the platform. While legitimate national-security concerns associated with TikTok must be addressed, an outright ban would do little to protect Americans from spying and manipulation. Sadly, it could also confirm the beginning of the end of the global internet.

Copyright: Project Syndicate
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Professor of Economics and Public Policy, Harvard University. He was formerly chief economist at the IMF.