What’s Behind the US Tech War on China?
In China’s case there are three possibilities, three different policy objectives representing three different factions in the White House, and I think these have been merged into a single policy approach that can incrementally rachet up pressure if a particular tactic fails to achieve strategic objectives.
Editor’s Note: The Trump administration’s latest ban on Huawei and TikTok has increased tensions between the United States and China. In this episode of 5,000 Miles to China, China Matters talks to Josef Gregory Mahoney, Professor of Politics at East China Normal University in Shanghai. He shares his insights on the recent US block acts against TikTok and why the ban doesn’t make sense.
China Matters: Trump still wants US to get piece of any TikTok sale while the Chinese government has introduced new rules that could allow Beijing to veto any deal. From your point of view, what are the concerns from both sides in the TikTok deal and what could be the worst-case scenario for TikTok and ByteDance when the governments are involved?
Josef Gregory Mahoney: The circumstances are really quite incredible, and not just because Donald Trump basically wants to appropriate partly a foreign company, effectively nationalizing a foreign industry—which is really hard to believe given longstanding US values against such behavior. It’s especially incredible because what we have here is a globally popular app for kids, essentially, and while adults and marketers have paid a lot of attention and maybe even been fans, TikTok’s content is meme-oriented and really comes out of the guichu (鬼畜) form that was developed and popularized among Chinese youth by Chinese providers like Bilibili.
There’s no questioning the success of the app or its generational appeal, across cultures, and it really indicates a type of global convergence of culture, especially among young people. That said, you know, a lot of these apps are fads. They rise and fall like pop stars within a few years as the culture shifts and the next generation seeks to distinguish itself with its own commodity fetish-focused identity. So while we should conclude that all this concern and posturing over TikTok is ridiculous and grossly unfair to the company, we might also think it’s doubly ridiculous because TikTok’s lifespan was probably limited anyway.
That said, I suspect the respective US and Chinese bans are both more concerned about who gets access to TikTok’s American and Chinese user data, which is probably the most sensitive and durable thing of value the company has.
The thing that doesn’t make sense is this idea that by selling TikTok to a US company, the US then mitigates the so-called Chinese danger. Well, if that’s the case, then why can’t Huawei sell its products to US companies? Now I know that some might say the key difference comes down to hardware vs. software. But the primary concern raised against Huawei is software. So if a Chinese ‘black box’ threat for hacking and spying and malicious code is so real, which is what the US alleges against Huawei, then does American ownership of TikTok’s Chinese code effectively resolve Trump’s concerns about TikTok?
And if so, then does it all comes down to who owns the code and controls updates and holds the data? If that’s the case, then should we pretend these TikTok problems, however real or imagined, will dissipate with “responsible” American ownership, as though American companies don’t exploit or mishandle data, don’t get hacked or bought by foreign influences, and don’t get used for spying by the US government or others? And if a US company bought it and then wanted to sell it later to a European, Russian, or Indian company, what then?
Perhaps it all comes down to the power of imagination: if can imagine problems that might exist, then one can also imagine those same problems no longer exist. But I’m not sure after all of this is said and done that consumers or shareholders will be so reassured.
Ultimately, the worst case scenario is that China blocks the app’s sale, the app ban is upheld in the US and elsewhere, with no legal relief, and the company either folds or continues in a smaller form until it becomes culturally passe or reemerges as a new product.
China Matters: TikTok argued in the suit that Trump’s order was a misuse of the International Emergency Economic Powers Act because the platform is not “an unusual and extraordinary threat.” What’s your take on the statement?
Josef Gregory Mahoney: US presidents past and present have repeatedly pushed the limits of executive and emergency orders, and there has been little to stop them. Trump recently has even turned, very darkly I think, to the lawyer from the George W Bush Administration who wrote the legal briefs justifying torture, to help him expand his executive privileges. In fact, the use of these types of orders are largely the result of a broader failure in governance, starting with the legislative branch, which has long ceded more power to the president than the framers intended.
I believe Trump’s use of the Act in this case is an abuse of power, clearly, and I think TikTok should challenge it robustly; and I think many firms, not just tech firms, not just Chinese firms, but also American, Japanese, European, and so on, in their own self-interest ought to write amicus briefs to support TikTok’s side. Indeed, what Trump has done really opens Pandora’s box for all sorts of potential abuses of power affecting commerce globally.
However, Trump has three things on his side that will be difficult to overcome in US courts. The first is that this action, as he describes it at least, directly intersects with foreign policy and national security, where the president’s power is relatively unchecked constitutionally. Second, because the executive can control intelligence reports, both content and access, it will be practically impossible to argue against his position in court. Third, consequently, the court is likely to defer to the president because under ‘separation of powers,’ the court cannot limit a power the president can legitimately claim, even if his motivations and justifications are entirely suspicious and occupy a gray area at best. Furthermore, we are unlikely to see anyone joining TikTok’s side because it’s an election year circus and the stakes are too high. Indeed, US public opinion is not very positive these days for American tech companies either, and for reasons that are not very different from those Trump claims against TikTok.
China Matters: China said it will continue to take necessary measures to safeguard Chinese companies’ legitimate rights and interests after Trump’s latest sanctions against Huawei. What could the measures be? What kind of situation will American companies in China might face when Trump is playing hard on Chinese tech companies in US?
Josef Gregory Mahoney: Beijing’s new moves, including the export ban, are powerful responses that have caught some observers by surprise. It’s clear that the Chinese side, both enterprises and the government, have been moving quickly in recent years to build local capacity and remove critical supply chain chokepoints. The outstanding weakness here remains semi-conductors and chip manufacturing, but I suspect the Chinese side is better prepared for this than reports indicate, and anyway, it continues to buy chips from the US as well as less hostile places, including South Korea and even Taiwan. Ironically, one problem of course is that blocking China from buying American tech increases the trade deficit and increases Chinese self-sufficiency. And increasingly limiting China in effect to agricultural purchases almost makes the US like a third-world agri-supplier for China, which is all the more ironic with hunger a growing problem in many American communities devastated by COVID-19. All in all, this seems both ridiculous and self-defeating.
I think this is where Beijing has had the hardest time understanding the US. Because it’s so self-destructive, it’s hard to believe the US is willingly doing this to itself. And I think this is where the tit-for-tat stops on the Chinese side. On the one hand, why punish American companies like Apple for producing in China? Why block their sales? This would only harm Chinese consumers and workers and negatively impact Chinese tax revenues, as well as feed negative views on China around the world. And Huawei certainly isn’t hurting for handheld sales in the Chinese market. Rather, it appears to be thriving in part because of the competition, and because of Trump’s economic nationalism.
On the other hand, where Beijing has or had security concerns it has already put its own blocks in place, for example, Google, Facebook, the new export ban, and so on. Similarly, we can look at how some American firms have adjusted in stride, like Apple, which is now storing its Chinese user data on Chinese servers, or segregating apps in different national app stores. Ultimately, I think it’s reasonable to assume that Beijing will act reasonably, and therefore is unlikely to impose gratuitous bans that run contrary to China’s actual economic interests and that serve no real security value.
China Matters: What do you make of the timing of Trump’s latest move to ban Huawei? Why is it the US didn’t think of the latest sanctions sooner if its intention was to “kill Huawei”?
Josef Gregory Mahoney: The way Washington announces attacks on Huawei or TikTok, alleged spying or consulate closures indicates above all that it wants a drip-drip approach that plays well in media, particularly during the ongoing presidential campaign, where Trump has heralded his tough stance on China approach as one of the key reasons to re-elect him. It’s clear that there’s a schedule, a game plan, with key players coordinating their messages to hit media cycles and reinforce each other, including Vice President Pence, Secretary Pompeo, the Director of National Intelligence, the FBI director, and of course Trump himself.
So Trump wants to drag this out, a death by a thousand cuts, because he gets more political benefit from doing so. If he was really concerned about national security and not just his own job security, then he could act a lot more aggressively. Just ban real or potential everything once and for all.
However, Trump also knows that acting too quickly would destabilize US markets and lead to shortages in critical goods. Yesterday I was in a grocery store parking lot and a piece of garbage on the ground caught my eye, a little Chinese certificate of quality for face masks that someone had dropped while masking up to go inside. Symbolically, it’s a remarkable piece of litter. And I just ordered a new Apple computer needed for my daughter’s online schooling, through the Apple website because all of their stores are still shut down due to the outbreak, and then I tracked its shipment from China to Korea to my home. In fact, whether online or in shops, still an astronomical number of high, low and no tech products Americans buy come from China. That reality won’t change quickly, despite what Trump says or wants. Indeed, there’s been no real reshoring of manufacturing jobs in the US despite that being a signature objective of his first campaign. Instead, tens of millions have lost their jobs due to American’s inability to deal effectively with COVID-19.
China Matters: China and US reviewed its phase one trade deal last week. We’ve seen very polite boilerplate statements from both sides. But when it comes to a tech war, it seems things are different as the tensions are indeed escalating. Why is this case? And how can a tech war between China and US have influence on bilateral relations?
Josef Gregory Mahoney: I have repeatedly questioned the true purpose of this so-called ‘phase 1.’ The two key announcements came at moments when Trump wanted to boost US markets because reports were emerging that the financial sector was turning against him, and again to overlap his recent Convention, where he wanted to claim some success in the trade war while still beating the decoupling drums of Cold War or worse.
There appears to be a growing consensus among US policymakers and business leaders that a war between the US and China is coming, sooner or later. No one really wants one I think aside from a few foolish and bloodthirsty hawks but there’s this narrative that has taken hold, promoted for years by people like Michael Pillsbury and Graham Allison—neither who actually know very much about China—and others who talk incessantly about the ‘coming war with China’—a phrase that one hears often both inside the Beltway and throughout popular media. And given the frequency of American war-making, it’s not a big leap to make, particularly with analysts indicating that China will draw even with the US militarily by the 2030s—although this might come sooner given the astounding American setbacks associated COVID-19. Consequently, if the US thinks war is an eventuality, and even on an accelerated schedule now, then perhaps sooner is better than later, given America’s onrushing decline and China’s rise.
I think Trump on the whole is reluctant to go to war, certainly in his first term, although I worry he might spark a limited but potentially expansive conflict in the South China Sea if his polling numbers against Joe Biden worsen before the election. Nevertheless, generally speaking, Trump’s negotiating strategy, with Iran and North Korea, and everyone else, has been to bully, provoke a crisis, and then use that leverage to settle on his terms. In fact, this hasn’t worked very well aside from relatively minor deals with allies like Mexico and Canada.
In China’s case there are three possibilities, three different policy objectives representing three different factions in the White House, and I think these have been merged into a single policy approach that can incrementally rachet up pressure if a particular tactic fails to achieve strategic objectives. The first is a full-court press for a trade deal favoring the US, one that helps contain China a bit, slows China’s growth, and gives the US time to regain its footing. The second is to provoke crises that destabilize China’s leadership, that weaken it militarily, and that in turn produce a change in leadership or a broad based change in Chinese policymaking. Third, should the first two approaches fail to be equalizers, then push them further into open conflict, a hot war. In this respect, I see the trade war as something that aims to debilitate China economically if not politically, and failing that, serve America as a repositioning tactic for further aggression. The problem with all of it, however, is that a really sober analysis indicates that none of these approaches are likely to produce the outcomes Trump desires, except possibly his re-election in November.