Next week, AsiaPundit hopes to see some frank disclosure about US internet and technology companies activities in China, with the four most-discussed companies being brought before Congressional hearings. AsiaPundit is naturally expecting much bombast and hyperbole as well. The WSJ item below mentions two suggestions from lawmakers: one is reactionary and hopefully a non-starter, but the other is more measured and could have some interesting implications.:
The hearing will likely produce more embarrassing publicity for the companies, and it may drive legislative momentum among lawmakers concerned about China’s influence on the U.S. economy. Congressional aides are expecting a standing-room-only crowd, and the reception from politicians may be chilly.
"I was asked the question the other day, do U.S. corporations have the obligation to promote democracy? That’s the wrong question," says Rep. Chris Smith, the New Jersey Republican and chairman of the House human-rights subcommittee that is holding the hearing. "It would be great if they would promote democracy. But they do have a moral imperative and a duty not to promote dictatorship."
Mr. Smith plans to introduce legislation next week that would impose restrictions on Internet companies seeking to expand into China but also provide some legal protection from Chinese demands.
The bill would require U.S. Internet companies to keep email servers used for Chinese traffic offshore. That would help prevent the Chinese government from compelling the release of Internet user data. The bill also calls for creation of an office inside the State Department that would make an annual determination about which countries are restricting Internet use. It would provide a framework for users to pursue legal action against U.S. Internet companies over privacy violations.
The disclosures about Internet companies cooperating with the Chinese government are having a wider political impact. Last week, Sens. Lindsey Graham, (R., S.C.) and Byron Dorgan (D., N.D.) cited Internet companies’ efforts to help the Chinese government monitor citizens’ online activity as a reason to permanently revoke China’s most-favored-nation trading status.
A removal of China’s trading status, also known as "normal trade relations," is unlikely to happen. And it shouldn’t. China is making progress in meeting most of its WTO commitments and is opening up faster than anticipated in other areas such as financial services. There is a push internally to accelerate opening and sanctions would clearly hurt reformers in China.
Graham - along with Democrat Charles Schumer - has been pushing to put a 27.5% tariff on Chinese goods over charges that the country is a "currency manipulator." There is little doubt that China’s censorship regime concerns Graham, it concerns most people from free countries, but he will take any opportunity to bash China’s MFN status. The latest outburst shouldn’t yet be taken too seriously.
More interesting are Smith’s proposals. AsiaPundit is withholding full judgement on them for now, but based on the one-paragraph description above they seem relatively non-interventionist. Requiring that servers that contain users’ data be kept offshore would indeed directly limit what US companies could do in China. However, this seems to be the route that is now being taken by the companies themselves. Google is not offering Blogger or Gmail for due to privacy concerns and Microsoft’s altered blog-hosting policy is now attempting a compromise solution. After the highly publicized cases of Shi Tao and Li Zhi, Yahoo most certainly regrets establishing its Chinese e-mail service.
The idea of allowing users to pursue legal action against U.S. Internet companies over privacy violations is far more interesting.
On top of providing some measure of redress for those wrongfully jailed, AsiaPundit also assumes such legislation would extend to Chinese companies with US listings. Roland noted that the Nasdaq-listed Sina provided information in the Li case.
US trials are expensive, and verdicts - particularly those delivered by juries - can be crippling. There are a number of Chinese internet companies already listed in the US and others, such as blog service provider Bokee, that are known to be seeking listings.
Things to consider: Could such a law scare some new listings away from US markets? Also, would its implementation force some interesting disclosures from Sina and others? If providing user information to authorities created significant financial risks, US-listed Chinese companies would surely be required to inform shareholders. This could move things beyond the realm of tech companies and NGOs and into the realm of trial lawyers and investment banks (hence the title of the this post).
Expect much chest thumping from Congress, defensiveness from the search engines and lobbying from everyone.
Related reading:
Silicon Hutong: Time for a Solution
ESWN: The Third Way for Yahoo
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