Banning foreign-owned technologies can be counterproductive - but what's the alternative? Image: REUTERS/Florence Lo/Illustration
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- The banning of video-sharing app TikTok by various countries is emblematic of a growing tech cold war.
- Bans of this kind could have long-term implications – both good and bad – in areas such as competition, trade, and investment.
- Regulators should instead take a more nuanced approach to overseeing this sector. Here's a guide.
The 2020 US election put social media companies under a fierce spotlight. While many platforms stepped up to their role of protecting users against election misinformation, others struggled to contain misleading viral video content. The broader questions that regulators have been grappling with when it comes to improving safety, privacy, and competition online still remain, despite all the measures that have been taken to-date.
In October 2020, the US government appealed a judge’s ruling that prevented the Trump administration from imposing a ban on the video-sharing app TikTok, one of Facebook and YouTube’s competitors in the US. However, this is just one case in a flurry of recent government bans of TikTok across the world, including in India and, most recently, in Pakistan (this ban has now been reversed).
This gives rise to several questions: are the concerns driving governments to ban applications like TikTok legitimate? Are these bans likely to last? How will these decisions impact innovation in the tech and media sector (both within and across borders)? How should decisions such as these be governed given varying considerations around privacy, consumer welfare, functioning of free markets, national security and other factors?
It seems these recent bans are emblematic of the world’s continued foray into a tech cold-war that will have lasting repercussions for years to come.
The rise of TikTok
TikTok, launched in China as Douyin in 2016, was rolled out to international markets in 2017. Its growth has been remarkable. In just two years, TikTok has garnered more than one billion downloads in 150 markets worldwide and 75 languages. It is the most downloaded non-gaming app of 2020.
Why are governments banning TikTok?
Many governments have used national security as a reason for banning TikTok. They have cited risks that their citizens’ data could be handed over to the Chinese government, that the application allows harmful content to proliferate (or censors content) in defiance of local laws, and that the platform could be used as part of a foreign influence campaign in their country.
Some assert that the real reasons may not be as explicit, however. Countries such as Pakistan and Indonesia quickly overturned bans on TikTok after securing assurances that content on the app would be more strictly moderated according to local laws. These bans could therefore have been tactics to more quickly secure the outcome that local governments were seeking from the company. In addition, India’s ban came after rising tensions following a deadly clash between the disputed India-China border, and involved many other Chinese apps.
Bans of consumer technologies and applications are not new. Examples include the 2017 German ban of a US doll which could speak to you, due to the fact that the conversational data was processed in the US. In addition, China has blocked apps such as Twitter, Facebook and Google from operating in its country for many years. The main difference now is the massive impact that such decisions have – in India, the TikTok ban impacted approximately 120 million users. Such decisions will have an ever-increasing impact on the media landscape as these popular apps amass users at record rates.
The broader implications of banning technologies
The main implications of a ban depend on many factors, including how long the ban lasts and how competitors respond. Some possible, longer-term implications may include:
1. Widening information inequalities
There is already a large disparity in what information is available in China and the rest of the world due to bans of major platforms and search engines in the country. However, now more than ever, splinternets are proliferating due to governments restricting access or content. This could to lead to widening information and innovation inequalities if bans such as those on TikTok continue.
2. Less competition
Bans or forced sales of popular foreign applications send a strong signal to the market: while consumers may use your product, it doesn’t mean you are allowed to operate here. This introduces a level of uncertainty and risk associated with foreign expansion that may cause executives to rethink whether it’s worth building a product to compete in a market that may later be disallowed. Not only does this harm consumers, it also entrenches the position of local incumbents who may not innovate as quickly due to diminished competition.
3. Changes in entry and operating strategies
While TikTok took numerous steps to mitigate risks of international expansion, these measures clearly did not do enough to assuage US officials. Many foreign companies looking to expand beyond their home market may now employ different entry and operating strategies; however, the question still remains whether these tactics will be enough to fend off bans as digital protectionism continues to rise.
4. Improved content moderation
Perhaps in part due to increased scrutiny and threats of bans around the world, TikTok took steps to demonstrate industry leadership on increased transparency of its content moderation practices. While the effectiveness and/or purpose of such moves are questioned by some in the industry, it is clear that increased scrutiny from the public is leading many platform executives to take their role in moderating the safety of their platforms more seriously.
5. A focus on building local supply chains
Companies looking to embed stability in their supply chains may focus on sourcing from local markets due to uncertainty about how a particular government’s policies on foreign technologies may impact their business. It also preempts potential new growth opportunities. For example, WorldFirst, a UK-based international money transfer service used by many sellers on Amazon, closed its US business in 2019 as preparation for acquisition by Chinese-based Ant Financial.
6. Reduced benefits / efficiencies from the digital economy
Blacklisting or banning foreign technologies, such as Huawei, could lead to fractured standards and lower network interoperability when it comes to technologies such as 5G. This would lessen collaboration and reduce efficiencies when it comes to the digital economy.
What is the World Economic Forum doing about digital trade?
A way forward
Beyond outright bans, new regulation of the media and tech sector should take a nuanced approach, keeping the following considerations in mind:
Understand all the players in the ecosystem and the unintended consequences of any new regulation: while regulation, including bans, may be targeted at specific companies, implications for smaller or emerging players should also be considered to understand the industry-wide impact. For example, more stringent privacy regulation may actually harm smaller businesses that do not have the same capabilities as large incumbents to meet the new standards – this could do more harm than good for consumers in the long-run.
Build coordinated global strategies: with Europe looking to update its Digital Services Act and the US considering reforms on Section 230 of the Communications Decency Act, this is an opportune time to drive greater global cooperation, given many nations are grappling with similar issues when it comes to tech and media. While this will not be easy, it may prove more effective when it comes to managing platforms that operate globally and have amassed significant power across the world
Take a proactive strategy: establishing, communicating, and enforcing clear strategies when it comes to M&A activity through anti-trust guidelines will not only enhance market predictability but also ensure that problems are addressed early. It is clearer now than ever before that ensuring fair competition is not only vital to free markets but also to the functioning of our democracies.
Change in remedies for violating practices:
Experts argue that fines, which may seem large in absolute terms, but are actually a negligible percentage of a company’s market capitalization have had no real deterrence effect. Instead, they say that remedies going to the heart of the violating business practices are needed.
While easier said than done, cooperation between the private and public sector across national borders will be needed to create a better future for the internet and all of us – its users.
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The views expressed in this article are those of the author alone and not the World Economic Forum.
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