Google vs. Chinese censorship: What are the trade options for the US government

The potential outcome of a  WTO case is formed by the technical realities on the ground in China applies to principles of WTO law is a complex issue – often overseen by recent commentators. ECIPE published a working paper in November, detailing how there are strong protectionist elements to Chinese censorship and how WTO rules would be applied to them. The study can be found here.

Considerations for the US government

A push for the “Digital Economy” is the centre piece of the current US trade policy. China is now the largest online population in the world. The Chinese market is simply too important for the US to let trade-distorting regulations pass without action.

But in the new centralised US foreign policy under Clinton, the censorship issue has already risen above Kirk's pay-grade. And from the State Department’s perspective, the gains of a WTO case are unclear. China and the United States are in a state of economic co-dependency while trade tensions between them two are rising again. They are currently engaged in disputes over everything between intellectual property rights to raw materials. In the wake of the economic crisis, search engines were not necessary the next trade conflict the US wanted to pursue, if given a choice.

There are also a couple of other considerations that the US government needs to take account of.

First, China is also unlikely to scrap its internet censorship as a consequence of a WTO ruling. Nor can the US government complain at the WTO about all Chinese censorship practices. A case against Chinese censorship needs to surgically target those elements that are likely to violate its WTO obligations. Such a move, however, runs the risk of igniting critique against the US government for putting commercial interests before human rights considerations.

 Second, a strict application of WTO rules may have a hampering effect on future concessions from trading partners. In the last round of informal discussions in Geneva, a large country (eyed by US exports) refused to make further commitments since its anti-terrorist laws may become subjects to complaints as a trade restriction. But the US desperately needs more concessions on the table in order to sell the Doha-round to domestic business interests, who see little or no merit in the talks.

What WTO rules actually prohibits

When China joined the WTO in 2001, it committed itself to an unrestricted access to its online market. This applies equally to foreign-owned business inside China, or businesses from abroad. By then, search engines and Google's business models were well established and should have been no surprise to Chinese trade negotiators - and they were perfectly free to exclude it from the list of markets available to foreign businesses. The Appellate Body (the high court of WTO disputes) has already argued likewise for newer technologies, namely online distribution of music. It threw out the argument that WTO rules could not be applied to services that did not exist at the time China signed up to the WTO.

Thus, China must provide unrestricted market access without unduly discrimination against foreign business. It is clear that "slowing down" access to web sites (rendering them useless) and arbitrary blocking only occurs to foreign web sites. Some of China's past interferences are more flagrantly protectionist: like re-routing user visitor traffic from Google to Baidu. And there are still many reports of how laws do not apply equally between Chinese and foreign web sites: Google was subject to crackdowns for pornography while Baidu was left untouched - but bloggers in China noted how both sites returned almost identical search results.

The Chinese regulators are well aware of their legal position and their drafting errors: This is probably why last month, the licensing requirement (so called the ICP-license) for owning a web site in China was extended to apply equally to web sites abroad - giving the Chinese authorities a carte blanche to shut down any web site of their disliking. If this requirement would come to be enforced, it will be in violation of WTO rules as well, as it literally nullifies China’s commitments top open the markets.

Only weak defence from China

China is unlikely to budge on this highly strategic issue from public pressure and diplomatic sable-rattling alone. Yet, it can only mount a weak defense.

It claims Internet sites are not “online services“ but in fact “value-added telecom services“. The EU has complained that it could lead to absurd situations where a bank must apply to become a telephone operator to run an online service. 

The WTO authorises China, and other members, to make certain exceptions based on the insisted level of public morals and maintaining order. But the Chinese must prove that censorship is an absolute necessity for that purpose – in reality, many Chinese web users dodge the Chinese Firewall using proxies and encrypted connections (VPNs) without country falling into chaos. Also, the "least trade restrictive measure" available must be enforced – so China cannot simply block foreign search engines, given the existence of lesser restrictive methods of selective filtering techniques and existing procedures for self-censorship.

Conclusion – outcome of a WTO case

If the US government takes China to the WTO for dispute settlement it is likely to win, if it narrows the case to practices that have been outright protectionist. The government cannot overhaul Chinese censorship by WTO law.

Yet it is important that the US and other governments find other means to negotiate with China over the damages to online and high-tech firms from Chinese censorship action. The result of a WTO case would be a good starting point for such a negotiation.