The “Great Firewall” is a Trade Barrier

China’s notorious online controls, most commonly known as the “Great Firewall” which has long been criticized as censorship by human rights groups and pro-democracy activists, now has earned a new label from the US government: trade barrier[i].

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For the first time, in an annual report on trade conditions, the U.S. trade representative said Chinese filters blocking access to websites “posed a significant burden to foreign suppliers, hurting both Internet sites themselves and users, who often depend on them for business.”  The report also said, “Over the past years, the outright blocking of Web sites appears to have worsened.” [ii]

Around 3,000 website are blocked in China under the country’s policy of internet censorship[iii]. China blocks some of the biggest Internet names including services offered by search engines like Google and Yahoo, video sharing companies like Youtube and Vimeo, social media companies like Facebook, Twitter, Instagram and Flicker, news and business sites like Bloomberg, WSJ and Reuters, and other internet service providers like Dropbox etc[iv].In the 3,000 companies that China has blocked, cooperate names are chosen without a published details of restrictions. The report said much of the blocking appears arbitrary, for example a major home improvement site is swept up by the “Great Firewall”[v].

This censor hinders the accessibility of over millions of foreign companies to Chinese markets and vice versa. More and more companies relying on the Internet for business could be hampered whether through blocked internet sites or workplaces that cannot reach Gmail. Almost 80% of foreign companies that responded to a survey released in January by the American Chamber of Commerce in China said that they were “negatively impacted”, more than half said that they were blocked from using online tools or accessing information, and only 5% said they were not hindered in any way.

The “Great Firewall” have given Chinese Internet companies such as search engine Baidu to gain business by blocking its strong foreign competitors of Google that dominates global markets. The QQ and WeChat are widely used as social media replacements of Facebook, Messenger and Whatapp[vi].

Some of the largest US Internet companies and foreign trade groups have taken actions from different approaches. They have lobbied the US to treat censorship as a trade matter. For example, Google’s deputy general counsel testified before a US Senate subcommittee that the US government should make the matter a central issue in trade talks. China has blocked Gmail, Google Map, Google Drive, Google Cloud, Google Plus and Google photos. In the negotiation with Google, China has conditionally allowed users in China to use some of Google’s functions but this proposal was rejected by Google.

Some internet companies take more positive and flexible moves to comprise the censorship in order to gain access to the vast Chinese market. Facebook has attempted hard to establish rapports with Chinese government. “How can you connect the whole world if you leave out a billion people?” said Facebook CEO Mark Zuckerberg who visited China in March 2016 during which he jogged through Beijing, participated in a two-man panel discussion with Alibaba founder Jack Ma and then held a meeting with the country’s propaganda chief[vii]

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Both American companies and the government understand how important this market to their business, and the new report highlights the growing concerns. The move from the US government side, which is not likely to have immediate repercussions but the US government can file complaint based on WTO rules that requires member governments to publish details of restrictions that might affect business and take other action in retaliation by blocking Chinese internet companies’ access to US market.

mainland-china-mobile-app-market

China has more web users than any other country in the world – nearly 730 million, and the Chinese Internet market is expected to grow considerably as this country continues to industrialize[viii]. Chinese companies heavily rely on the internet to contact world-wide customers and conduct businesses. Closing up the internet and getting into a retaliation war will hurt both sides. This censor represents a big problem to Chines government as it is trying to maintain its political stability and control over information as essential to protecting the Communist Party’s monopoly on power while attempting to adapt to the free market economy system. China has been struggling with this ever since Deng Xiaoping took power and started open the doors to the world. It will be even harder to achieve the balance, with the new economy that is more depend on Internet.

 

[i]Annual National Trade Estimate Report, released on March 31. The insertion was reported on April 1 by Inside US Trade, a trade publication.

[ii] http://www.foxbusiness.com/markets/2016/04/09/us-cites-chinese-internet-filters-as-trade-barrier.html

[iii] “GreatFire.org – Bringing Transparency To The Great Firewall Of China”. Retrieved 9 January 2012.

 [iv] https://en.wikipedia.org/wiki/Websites_blocked_in_mainland_China

 [v] http://www.businessinsider.com/ap-us-cites-chinese-internet-filters-as-trade-barrier-2016-4

[vi] http://www.bbc.com/news/world-asia-china-35875968

[viii] http://www.slideshare.net/Metaps/mainland-china-mobile-app-market-101-what-you-need-to-know/4-2014_Metaps_Inc_All_Rights

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5 Responses to The “Great Firewall” is a Trade Barrier

  1. Interesting topic! I myself suffered from website blocking back in China when I tried to use Google account to register for school. I believe that with the “Great Firewall”, China is able to protect the infant industries, such as social media app Wechat, E-commerce platform Taobao, from the fierce international competition and the profits itself would be constrained within the Chinese border, as GDP and GNP. Once the industries are well-development, the government will be ready be open the gate to foreign competitors.

    By no means, with limited information, there are still plenty of arbitrage opportunities for investing in China. Once the “Great Firewall” is removed, investors will hardly find arbitrage opportunities any more.

  2. Jia Yang says:

    I felt the “The “Great Firewall” is a Trade Barrier” article made a great point about the harm that international firewalls can do to world trade. As Chinese economic growth slows and the nation shifts to a more market-based, consumer-driven economy instead of a manufacturing economy, it is more important than ever to open up socially and be more harmonious with the outside world. The internet provides an incredible productivity booster for businesses worldwide and China’s policy stifles the benefit that such a great technological advance provides.
    I was amazed to learn that 80% of foreign companies surveyed said that they were “negatively impacted” by the Chinese firewall. Even if only half of companies globally experienced problems with the firewall, that would give me cause for concern. The fact that a majority of companies actually feel negatively impacted by the firewall makes the problem even more severe than I would have thought. In addition, only 5% of companies said that they were not hindered in any way. It amazed me that the vast majority of companies could not claim their businesses were not impacted in some way by the Chinese firewall. Clearly, the firewall is more than just an issue of censorship and has a significant impact on economies and world trade. t would be one thing if the people of China did not actually use the sites on the other side.It would be one thing if the people of China did not actually use the sites on the other side of the firewall, but of course, China just creates its own equivalents to the US websites, proving that demand for them is actually strong. I’ve also heard of people getting around the firewall by employing simple, relatively inexpensive technologies. I think US internet companies are on the right track in trying to fight the firewall as a trade matter instead of as a censorship issue. World trade is a much more strategic and interconnected arena than the topic of censorship. Issues of world trade have more objectivity to them whereas the topic of what should be censored and what should not is much more subjective, making it difficult to build an argument or eventually reach a consensus agreement. On the other hand, I don’t think the US should block Chinese access to their internet sites. This might be a step in the wrong direction because it could just anger the Chinese.

  3. hanyuzhang2016 says:

    Adding to my previous points, there are mainly 3 reasons for the web blocking: competitions, sensitive contents and national security.

    Without blocking Google, Wikipedia, Facebook, Baidu, Zhiwu, Weibo won’t success. These domestic firms can bring huge tax revenue to Chinese government while foreign firms don’t contribute to the GNP. On the other hand, the Chinese government tries aggressively to control the flow information inside its borders because of the sensitive topics like unrest in Tibetan areas and criticism of senior officials. To prevent leaving a negative impression about the country, blocking these content is important for the government to manage the country. Last but not least, the government would not allow people to discuss about the various political parties or the government in those International Websites, because they do not have the ability to control them. It is easy to control the Internet Media in China, but they are not able to control the social web on an international level such as Facebook and Twitter.

  4. John Sun says:

    Actually, not all the website mentioned are banned all the time and all the places in China. However, in my eyes, the most severe problem is that the regulation is unstable and and system is opaque. Many big foreign companies have their own VPN, some set their server in Singapore according to my experience. In this way, I don’t see any barrier for them, except for the cost on this. Frankly speaking, I don’t see any possibility that Alibaba and WeChat will get hurt if other e-commerce and instant messaging apps are allowed in China. Of course Google and Facebook is another story. What is unfair is for those small foreign companies who want to get into China, and small Chinese companies who want to go abroad. In this way, I believe the Great Firewall does abandon many business between China and the world.
    Google is the provider of many services, among which I think the searching engine and the mail service are most important for business. Personally, I don’t like Baidu, who though already had the largest market share in China before Google left China, but recently the service provided by Baidu actually worsened since its unshakable ruling position. Some compromise has to be reached between the Chinese government and Google.

  5. wjzhang says:

    When I was in China, I was suffering from the inconvenience brought by the “Great Firewall”. Chinese regulators block access not just to websites operated by human rights or pro-democracy activists but also to dozens of news, entertainment and social media services that operate freely in other countries. “The aim of the internet security inspection system is to guarantee the security and controllability of information technology products and services, safeguard user information security, and strengthen market and user confidence,” the CAC said on Friday. The government may have thought that such control can make the society more stable. But it has done more than it should have done. Moreover, people are always much more clever than they think. No matter how hard the government makes an effort to control the information, hackers will always find a way to break it. Some people even use this opportunity to make money by selling software which can break the block illegally.
    I also agree that the limits have “posed a significant burden to foreign suppliers, hurting both internet sites themselves and users who often depend on them for business.” The move, which isn’t likely to have immediate repercussions, speaks to the American government’s growing concern over Chinese internet regulations and could foreshadow more aggressive actions.

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