In China

Lauren Klein | Cristina Gomes

Globalization & U.S. International Economic Policy

Chinese Internet Market• From 1997 to 2006 Internet use grew from half a million to 123 million: 60% growth each year.

• Since 2008, the Chinese Internet market has been bigger than the U.S. one, which has 227 million with 74 % of penetration.

•As of 2010 there are aproximately 400 million users out of 1.3 billion population.

• It will continue to become the biggest Internet market in the World.

•Total advertisement in the Chinese Internet amount to $2.5 billion dollars.

Chinese users spend 34 hours per week online

However, Internet has become a tool for entertainment, rather than a source for political information.

Internet regulation works through a combination of active filtering and full blocking of Web sites and services – the Chinese “Great Firewall.”

82% of the Chinese citizens support some type of censorship related to porn, violence or other harmful information to society.

Chinese Internet Market

Google came to China in 2005, after it developed a Chinese language interface.

In 2006 Google bought the domain Google.cn and was granted an ICP license that legitimized its presence.

From a PR perspective Google was hit in the Western media.

In 2002, Baidu had only 2% of the market share and now has 60%, What happened?

Baidu has more expertise related to cultural interest in entertainment and is supported by the government.

The total size of the search market in China is $1 billion dollars. It is expected to grow 40% in 2010.

Google’s history in China

In January 2010, Google announced that they would pull its business out of China.

Reasons include: - Cyber attacks on its server targeted at gmail accounts of human rights activists and a Business decision.

The Chinese operation for Google is small, roughly 1% of the total global revenues of $23.6 billion.

They rerouted Google.cn to Google.com.hk which could potentially be blocked in themainland in the near future.

Google’s history in China

Google’s history in China

Options for Google• Go through a WTO compliance procedure.

• Work with a multi-stake technology association.

• Increase collaboration with Human Rights groups.

• Increase support to technological efforts to bypass firewalls and censorships.

Go through a WTO compliance procedure

Four Modes or ways of services:

- Mode 1or “cross-border supply” - is defined as having all services supplied from one country to another.

- Mode 2 or “consumption abroad” - is defined as consumers purchasing services in another country.

- Mode 3 or “commercial presence” – is defined as a foreign company opening subsidiaries or branches to provide services in another country.

- Mode 4 or “presence of natural persons” – is defined as individuals who are travelling from their own country to supply services in another.

Most favorite Nation principle, which means that all countries inside the WTO have equal rights in relation to each other’s markets.

What would be the basis for a WTO complaint?

WTO precedent – online gambling contested by Antigua&Barbuda against the U.S

A resolution was published by the UN on June 30, 2000, that defined web-search portals to be under “data processing services.”

China has no restrictions for “data processing services” under mode 1 and 3 when they signed in 2001.

Go through a WTO compliance procedure

Go through a WTO compliance procedure

• Revenues through advertisements that come up with the results of the search.

• Censorship of the Internet harms revenues for these companies which means China is not abiding by the WTO rules.

•Chinese firewall blocks entire sites instead of blocking words, which makes it harder to defend the firewall in relation to moral and political censorship.

•The economic rights of the site and business are taken away.

• Censorship rules under GATS and GATT are related to the protection of public morals, but this is not how China censors.

Filtering would be less trade restrictive!!

Go through a WTO compliance procedure

Main argument for a WTO complaint:

Filing a complaint in the WTO will not be used to eliminate censorship in China. It will be used to make censorship more commercially friendly in the Internet environment by using active filtering instead of entirely blocking sites.

If Google and the U.S. administration don’t use WTO to address the underdeveloped and uncommitted countries to its rules, where else would they go?

Global Network Initiative (GNI), based in Cambridge and founded in 2008.

GNI works with several Internet and media companies, such as Google, Microsoft, Yahoo!, academics and human rights organizations to create best standards in Internet and filtering policy across borders.

These associations give members good Public Relations at a minimal cost.

Google could help groups like this grow in order to ensure the free flow of information and free trade

Work with multi-stake holder technology association

Google should also consider working with human rights groups

Examples: Free Press, Center for Democracy and Technology and Human Rights Watch.

In order for the U.S. to file a complaint in the WTO, it is necessary to increase political support

Collaboration with human rights groups

Google should consider investing in technology that allows its users to bypass the Firewall.

The Global Internet Freedom Consortium, is operated by volunteers that built a software that is able to constantly switch the users IP and works from servers around the world.

Aproximately 1 million users use this in China.

As Google moves out of the Chinese market, might be of their interest to support such organizations.

Support technological efforts to bypass firewalls

Conclusion

•The recomendation is to take a multi-pronged approach, but the WTO complaint• is necessary to effectively Influence the Chinese Internet market.

•China is committed to “data processing services” under GATS.

•This is not a new issue for the WTO.

•The question is, does the U.S. want to fight for this market–

• The main foreign policy of the United States is the spread of democracy “through the free frow of information.”

• The chinese Internet market is huge and being a member of the WTO comes with a responsibility of free trade that China must commit to.