International Trade

Recent campaigns by governments in Iran and China to shut down access to websites have heightened international conflicts over online censorship. For ages undemocratic governments have stifled freedom of speech to exert greater control of opposition forces. Yet online censorship is now about to move to the centre of world trade policy. Lately online censorship has become a tool of industrial policy, blatantly discriminating against foreign suppliers. Repressive and disgraceful, current methods to censor online content are also protectionist.

China is the most obvious case of new trade conflicts over censorship. For years its Great Firewall has filtered Chinese access to foreign websites and imposed bans on media sites and online services with user-generated content – like YouTube, Blogger and Flickr. But measures have recently geared up and now attacks core business and revenues. Several foreign online services – like the Chinese and English versions of search engines Google and Bing, or email service providers Gmail and Hotmail – have recently been shut down by Beijing without much warning. Beijing has also initially demanded Green Dam filtering technology on all desktops sold in China, and efforts to censor online activities are likely to spread from online services to hardware producers and application developers.

Overall, regulatory hurdles have become a prominent feature in Chinese online market. There are new import restrictions on network equipment that employ common encryption methods rather than the one developed by Chinese authorities. Licensing requirements, as for cheap internet-telephony services like Skype, are maintained with greater force as new competitors could cut revenues for incumbent operators. Trade law alone cannot address all these problems satisfactorily. Nor can it do away with censorship in China. But it is arguably clear that Beijing has stretched its censorship methods too far to be compliant with its trade commitments in the World Trade Organisation (WTO).

In its accession to the WTO in 2001, China agreed to give unrestricted access for (in WTO parlour) cross-border supply of online processing services. At the time of China’s accession, it was not clear, for instance, how a search engine should be classified. But guiding principles before its accession and subsequent classifications have put search engines in a category in which China gives unrestricted access.

While nerdishly technical, classifications are of central importance to trade law. In this case it determines whether trade law is applicable or not. A recent dispute shows the WTO takes a dynamic approach to determining coverage. The United States was found to violate its WTO commitments when it banned online gambling, despite the fact that online gambling was unheard of (and consequently not classified) at the time when the US made its commitments.

By imposing bans on certain providers it is using measures which are excessively trade restrictive. Beijing is also using measures arbitrarily: Google (and Gmail that is completely unrelated to the issue) recently got shut down on the pretext of pornographic material being displayed in search results while Baidu was untouched despite it displaying similar search results. Measures are sometimes blatantly boosting domestic firms at the expense of foreign: a few years ago Chinese authorities re-routed all traffic to Google to Baidu, then a little known local site but today the major search engine in China with increasing appetite for foreign expansion.

China is aware of its commitments under the WTO. Since its WTO accession China has moved from a strictly government-enforced model of censorship to more of decentralized self-censorship, where access to the Chinese market is conditioned on servile co-operation and constraint. Authorities have increased its online surveillance and filtering, and increasingly block access to foreign websites though its firewall. But Beijing prefers websites to use self-censorship to avoid domestic political opposition against direct censoring by the government.

China’s online surveillance and filtering are a problem, but this particular form of censorship has also made China more vulnerable to a WTO trade dispute. When a government is using surveillance and filtering as much as Beijing does it cannot argue that a complete block of access is the only feasible way to deal with a situation when, for instance, an internet search generates results with links to sites that are unlawful in China. As Beijing also has established an administrative procedure to deal with online suppliers in such situations, bans or shut downs appear unnecessary. The fact that Chinese authorities have the technology and procedures to act differently gives even stronger support to claims that Beijing has acted in a disproportionate and overly trade-restrictive way.

If China does not change its censorship practices it is likely to soon face a WTO dispute. The online market in China is too big for the EU and US governments to let trade-distortive practices pass without action. As an increasing number of exporters to China is damaged, including hardware suppliers of computers and information technology products as well as online service suppliers, and pressure to take action will increase. For China, whose export success has been dominated by its integration in the supply chains of Western ICT firms, that should be a big worry.

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