TikTok ban and Trump’s extortionist policies

China sees the US demand for opening their and others’ markets, while ordering ByteDance to sell TikTok, as another version of the Opium War. If TikTok owning the data of its users is dangerous to national security, so is Facebook and Google owning their users’ data

August 30, 2020 by Prabir Purkayastha

The Trump administration has given a 90day deadline to ByteDance, TikTok’s Chinese owner, to sell its assets to an American company or shut shop. A number of companies, including Microsoft, Oracle and Twitter are in negotiations with ByteDance to buy TikTok’s US business, which includes Canada, Australia and New Zealand. ByteDance was valued at $140 billion in July and its US business alone is estimated to be in the $20-50 billion range. Of course, with the 90-day deadline gun to its head, ByteDance may have to conclude a fire-sale of its US assets, and that is why Trump wants a cut of the sale price for the US Treasury. More and more, Trump’s trade and tech policies resemble those of an extortionist state rather than a responsible international player’s.

After India’s earlier ban of TikTok, there are reports that ByteDance is in discussions with Reliance Jio to sell its assets here as well. India was TikTok’s largest international market with 200 million registered users.

Both these bans—the Indian and US ones—have the national security threat argument in common: that a Chinese social media company could be sharing its user’s data with the Chinese government. The US government identifying a national security concern regarding its citizen’s data is quite ironic as it has never accepted never accepted similar concerns raised by other countries. Nor has the US agreed to any international regime to limit its intelligence agencies’ access to data of foreign nationals held by US companies such as Facebook and Google. Only last year, it threatened India under USTR 301 over India’s data localization measures.

If personal data of Indians being stored by non-Indian companies is indeed a threat, why is it only so if a Chinese company is involved and not a US or any other foreign company? The weakening of the strong data localization rules, as the Justice Srikrishna Committee’s recommendations advocated, then seem explicitly helpful to US companies like Facebook and Google. Either we must work out rules that apply to all countries and companies equally—or is it that the current Modi government finds no threat from US monopolies or for that matter European monopolies, as they are a part of the US’ strategic block of nations?

TikTok is the only non-US app that has created a huge market in the global social media arena. With its short lip-syncing dance videos and goofy memes, TikTok has taken the world by storm and become the number one downloaded app in the world, ahead of Facebook, Instagram and YouTube. TikTok has an active user base of 800 million compared to Facebook’s 2.7 billion and YouTube’s two billion.

Apart from ByteDance, WeChat has also been ordered to shut shop by the Trump administration. WeChat is widely used by Chinese students and expats in the US to communicate with their friends and relations back home. Its owner, Tencent, is one of the world’s largest tech companies, with a market capitalization of $600-$700 billion. Apart from the importance of its social media and messaging platforms, WeChat is also the de facto platform for business, for it allows Chinese and non-Chinese speakers to communicate via its advanced translation tools for business. The WeChat ban in India has meant that Indian businesses now have an added difficulty in communicating with their Chinese counterparts.

As long as it was the dominant player in telecom or social media, its control over technology and market power was enough for the US. The weakening of its technology edge and losing the price battle in telecom has made it necessary for the US to whip up fears over a “Yellow Peril” and national security, to try and keep Chinese companies out of as many markets as it can.

Picking on a lip-syncing and goofy video platform in a tech war may seem like a strange choice of a battleground for the US. Yet it makes sense if we examine the economic significance of data that these social media platforms accumulate while giving away their tools for free. If a ByteDance is worth $100-140 billion in scant four years of its existence, what does it say about the value of our data in the new digital world? Just to put these figures in perspective, the Walt Disney Company that pioneered intellectual property-based monopolies through its copyright over Mickey Mouse has a market capitalization of about $180-190 billion which took nearly a hundred years to get to; a figure that ByteDance is reaching within a few years of its existence!

While Disney’s rise was based on monopoly over products, intangible as they are, the monopoly created by the law of copyright and other legal rights such as patents and designs or data captured by digital platforms arise out of our and our friends’ interactions with social media platforms. Till now, the US had a global monopoly over this data and only the data of the Chinese was not accessible to its companies. With the Chinese market protected, companies like Tencent, Alibaba—and now ByteDance—have demonstrated the technical capability to create apps that have just as much appeal and reach. Many think that the Great Firewall of China is meant merely for censorship purposes. They do not understand that its key function is to protect the Chinese digital market, and therefore provide a space for Chinese companies.

The threat Chinese apps pose to the market dominance of US players is the driving force behind the ban on TikTok and WeChat in the US. Facebook is much more vulnerable to a disruption in the social media space, as 98.5% of its revenue comes from advertisements, or, simply put, from selling its users to advertisers. As the recent Congressional hearings on monopoly (US House Judiciary Committee antitrust hearings) show, Facebook’s strategy is either to buy out potential competition such as Instagram or to use a variety of other measures to kill competition. One such measure is to instigate the Trump administration into banning TikTok, which Facebook has identified as a key threat.

A few days ago, the Wall Street Journal ran a detailed account of Facebook’s campaign against ByteDance and other Chinese companies and the threat they pose to US tech companies. It identified Facebook CEO Mark Zuckerberg’s meetings and private dinners with key senators and house figures, and with Trump. The message was the Chinese are coming and only American tech companies stand between them and the freedom of Americans. According to the journal, Facebook also funded an advocacy group called American Edge that “has begun running ads extolling US tech companies for their contributions to American economic might, national security and cultural influence”. Currently, Facebook leads all US companies in terms of money spent on lobbying. It also has the maximum to gain from the difficulties of ByteDance and TikTok.

The US and the western world have been telling the rest of the world about rule-based systems and the rule of law. The colonial powers also upheld international treaties and laws—as long as it helped them—and tore them up if they did not serve their purpose. The Opium Wars against China were waged in the name of free trade—meaning, the freedom of European companies backed by their colonial patrons to sell opium in China. Opium was banned in their home countries. The opium came from India and the business houses dealing in opium also became a significant part of Indian big capital. Internationally, business houses and banks that originated in this opium trade became global financial leaders.

The world might have forgotten the Opium Wars, but the Chinese have not. They see the demand for opening their market while ordering ByteDance to sell TikTok or close shop for what it really is: another version of the Opium Wars. But this is not a Chinese challenge alone. Countries such as India have to understand that this is not a battle between the US and China in which we have no stakes or stakes against China. TikTok is only a small part of the larger challenge facing us. Handing over the ownership of our data to any monopoly—Chinese, US or Indian—is a challenge to our democracy and digital rights. This is the key question we need to address.