TikTok and the future of trade war

How the next wave of technology is upending the global economy and its power structures
Apr 22, 2024 View in browser
 
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By Derek Robertson

A TikTok sign hangs on their building in Culver City, California.

A TikTok sign hangs on their building in Culver City, California, on March 11, 2024. | Damian Dovarganes/AP

The TikTok bill that passed the House over the weekend isn’t just a high-profile shot at an ultra-popular app — it’s a historically unusual move that in itself could create problems for the law.

By naming a single company, and by seemingly reversing the U.S.’s longstanding policy on data and the open internet, it calls into question how the law would be enforced, exactly what it will change and whether it can survive a constitutional challenge.

Experts strained for a comparison, reaching back decades or even longer to find moments in which Washington attempted so sharply to rewrite its relationship with a global industry.

“There’s just no analogue in history to what passed the House,” said Will Rinehart, a senior fellow at the American Enterprise Institute.

The bill passed by the House of Representatives Saturday would force the sale of social media app TikTok by its Beijing-based parent company ByteDance, and effectively ban it if a sale doesn’t happen within a year. It could become law as soon as this week if the Senate takes it up and President Joe Biden signs it.

It’s far from clear what would happen next. One reason for the uncertainty is just how unusual it is for Congress to take a direct shot at a single, powerful company.

“There are not too many historical parallels that come to mind regarding TikTok,” said Dartmouth University trade historian Doug Irwin. He said the United States has occasionally deployed tariffs against foreign firms in anti-dumping cases, but that “TikTok is unusual in singling out a specific firm to be banned potentially from the U.S. market.”

The AEI’s Rinehart wrote a policy paper in January analyzing the spiraling policy implications of an earlier draft of the legislation, and found that it raises serious questions about the limits of executive power over trade, American “soft influence” over foreign technology and freedom of speech.

“The bill would ban a massive communications platform, which means the courts will probably be deciding if it violates the First Amendmentm,” Rinehart said.

“It’s telling that some are trying to compare the current TikTok divestiture bill to the WWI-era Trading with the Enemy Act,” he said, “because a century ago, First Amendment law was substantially less developed.”

While the Constitution forbids targeting specific individuals or corporations with legislation, workarounds for national security or the broadly defined public interest are common. In 2020 the Committee on Foreign Investment in the United States cited privacy concerns in forcing a Chinese company to sell the gay dating app Grindr, citing privacy concerns.

But Grindr has a fraction of the user base and market capitalization of the behemoth TikTok, making the latter a uniquely difficult case. Its size alone makes the “forced sale” provision a huge question mark.

The fast-moving TikTok bill — along with the ad hoc nature of Congress’ ongoing attempt to prevent the Chinese government from accessing potentially sensitive American data — has trade and policy experts alarmed about the uncertain future of an internet first envisioned as a “global free trade zone.”

Susan Ariel Aaronson, a trade historian and professor of international affairs at George Washington University, sees the bill as an abrupt about-face on data flow across borders by the Biden administration. It is also something of an about-face on TikTok itself: Biden initially revoked a Trump-era order that would have banned TikTok outright.

“I am totally amazed that this is going on,” she said.

Even China hawks are flabbergasted: Julius Krein, founder of the right-leaning, economically populist policy journal American Affairs, who supports the bill, wrote in an email that he was “not aware of another example of forced divestiture resulting from an act of Congress.”

The section of H.R. 8038, the “21st Century Peace through Strength Act,” that would force the sale targets “foreign adversary controlled applications.” Those are defined specifically as “a website, desktop application, mobile application, or augmented or immersive technology application that is operated, directly or indirectly” by ByteDance, TikTok or any subsidiaries or successors of the two.

More broadly, it also includes any companies “controlled by a foreign adversary” as currently defined in U.S. code (including North Korea, China, Russia and Iran).

Historical comparisons to the TikTok legislation are vague and imperfect. I.M. Destler, a trade historian at the University of Maryland, compared it in an email to POLITICO with a 1980s-era scandal surrounding a subsidiary of the computer company Toshiba, which worked elaborately behind the scenes to sell technology to the Soviet Union’s navy. That led not only to an import ban on Toshiba, but to a half-dozen members of Congress publicly smashing Toshiba products with a sledgehammer.

But while the war between the United States and the Soviet Union might have been “cold,” it was still considerably more adversarial than the delicate diplomatic back-and-forth today between the U.S. and China, two nations that share an intricate trading relationship.

China is widely expected to protest the forced sale, as it did with efforts by the Trump administration to ban the app, and has already ordered Apple to remove Meta apps from its App Store.

Aaronson, the trade historian, views the effort to force TikTok’s sale as part of a troubling trend toward isolation in the digital sphere, citing India’s TikTok ban in June 2020.

“India is the main wrecker of trade agreements… do we really want to be seen as that?” she asked. “Why are we trying to create this coalition? We're totally hypocritical now, and it very much worries me because you can't lead if you're inconsistent.”

Some policy activists, however, see the bill as an unexpected yet welcome return — to not just a pre-internet approach to regulating trade, but an almost pre-modern one. Ganesh Sitaraman, a law professor at Vanderbilt University, has argued in a series of essays for POLITICO Magazine that to regulate social media as “platform-utilities” akin to banking, shipping, or radio can give the U.S. a legally viable means of insulating sensitive systems from potentially hostile foreign actors.

TikTok, he says, is no different.

“Since the founding generation, the United States has had restrictions in many utility-like sectors… because policymakers recognized that there are important national security concerns at stake when foreign actors can control or influence these basic inputs,” Sitaraman wrote to POLITICO in an email. “Requiring that tech platforms have U.S. ownership fits comfortably within this long history."

 

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viva musk

Supporters of Jair Bolsonaro take part in a demonstration.

Supporters of former Brazilian President Jair Bolsonaro take part in a demonstration spurred by Brazilian court orders to suspend accounts on the social media platform X in Rio de Janeiro on April 21, 2024. | Bruna Prado/AP

Elon Musk’s right-leaning fan club now encompasses a decent chunk of the Brazilian political system.

The Associated Press reported last night on the parade of applause directed Musk’s way at a rally supporting the country’s former President Jair Bolsonaro, with one giant sign reading “Brazil Thanks Elon Musk.” Musk is currently embroiled in a Brazilian court investigation of Bolsonaro supporters’ alleged dissemination of false information, in which a justice has ordered Musk to remove the offending accounts from X, something he has refused.

“He is against the will of the people and, therefore, democracy,” Musk said on X yesterday of Brazilian Justice Alexandre de Moraes.

Thus, the Bolsonarians rallying to Musk’s side: Gustavo Gayer, a pro-Bolsonaro member of Brazil’s congress, said the protestors “are people who love liberty, who will not give up and will not kneel down to dictators.” And the big man himself got in a word: “He is the man who preserves freedom for all of us,” Bolsonaro said of Musk at the rally.

ibm + ct

One of America’s historic computer companies is throwing its weight behind an ambitious effort to regulate AI at the state level.

POLITICO’s Mallory Culhane reported this morning for Pro subscribers on the move by IBM to support Connecticut’s S.B. 2, which would regulate deepfakes, set a series of reporting and assessment requirements for AI developers, and set up AI workforce training, just to name a few of its strictures.

Chris Padilla, IBM’s vice president of government and regulatory affairs, told Mallory IBM “strongly supports this legislation as it will balance innovation with protecting the needs and interests of consumers, and it applies a risk-based approach that recognizes that one-size-fits-all AI regulation simply does not work,” and that the bill is “an outstanding model which other states and the U.S. Congress would be wise to follow.”

The bill, if passed before the Connecticut Legislature closes on May 8, would be the first such bill in the nation.

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