I try to stay away from Google, and they keep pulling me right back in:
In a recent roundtable discussion hosted by Wallace Forbes, [Vahan] Janjigian [Forbes chief investment strategist] said, “I think we’re on the brink of a very serious trade war and that this Google exit from China is only the beginning of what we may see. There’s no question China’s going to retaliate for Google. And the way the Chinese view it is that, you know, Google is not some private company that’s making it’s own decisions. As far as they’re concerned, you know, this is a U.S. decision and they’re going to have to find some way to retaliate. Whether it’s a big way or a little way remains to be seen.” (Forbes)
Trade war? Maybe. More likely because of Google? Very doubtful. When we were in the middle of the Google media frenzy, a lot of crazy talk was thrown around. Some of the speculation was that Google was the proverbial ‘shot heard ’round the world’ that would spark a trade war with China, or alternatively, a global dawn of a new day in Internet liberalization.
I don’t buy in to the hype that the Google pullout was all that significant to China’s trade and investment policies. It seems that in order to bolster the argument that Beijing is lying in wait to retaliate, you have to make several assertions (or at least something similar) that are very difficult to support.1
1. Beijing sees the Google decision as a U.S. decision. I took this statement directly from the above quote. I can see how this might appeal to a nationalist world view, but it does not accurately reflect reality. What evidence is there that China saw the Google move as somehow connected with the U.S. government?
If anything, the Google decision was a distraction for the Obama Administration’s China efforts; it caused an uproar in Congress and forced the administration’s China group to spend time and energy dealing with the Google issue instead of other pressing bilateral matters (see below).
Even Secretary of State Clinton’s speech calling for Internet freedom seemed calculated to avoid any direct confrontation with China. According to at least one account, U.S. government officials in China actively dodged questions arising from Clinton’s speech in an attempt to minimize tensions. Whether Beijing understood this or not is unknown, but neither did the government here give any indication in public statements that they saw the Google decision as a government act.
2. Google embarrassed the Chinese government. It might have been touch and go there for a while in the media wars, but in the end, Google came out looking very good outside of China, and the Chinese government ended up with generally positive marks inside of China. Yes, there were many vociferous complaints from Chinese netizens about the Google decision, but I suspect that this was a very loud minority opinion. As long as Beijing’s treatment of Google met the general approval of its own people, the government is probably not all that upset.
3. Beijing equates Google with ‘foreign companies’ as a group. I have not seen any evidence of this. Although the foreign investment community has been having a tougher time of it than usual in China over the past year or so, not only did these problems pre-date Google’s decision, but most of those difficulties stem from the implementation of a more aggressive Chinese industrial policy as opposed to some sort of retaliatory effort.
4. Google’s pullout will shine a light on China Net censorship, leading to a domestic push to liberalize. This would certainly upset Beijing if it happened, but again, aside from a vocal minority that has always railed against the Great Firewall, I don’t see any huge up swell of anger post-Google.
However, none of this means that further trade conflicts are not in the cards. Tensions between the U.S. and China in particular are still running high, and only some of the disagreements have to do with trade.
As Dr. Eliot Feldman, trade lawyer at U.S. law firm Baker Hostetler said in a recent column:
Difficulties with China are now on Page One of The New York Times and The Washington Post almost every day. There is consensus in Washington that relations between China and the United States will get worse before they get better. There are many issues, most related only marginally, if at all, to trade.
Feldman goes on to discuss several of these issues, including the nuclear threats posed by Iran and North Korea, multilateral climate change negotiations, and ongoing disagreements over Taiwan and the Dalai Lama.
On the economic and trade front, there is of course the currency issue, the related matter of China’s dollar reserves, intellectual property protection, and the ever-present charges on both sides of dumping and illegal subsidies. A discussion of most of the current trade problems can be found in the recent National Trade Estimate, and related reports, prepared by the U.S. Trade Representative and sent to Congress.
With all of these very complex and difficult bilateral issues on the table, Google seems like a very small bump in the road. Morever, if the Google decision was destined to spark U.S.-China tensions into a conflagration, that spark has been smoldering for a while now, and as more time goes on, attempts to blame bilateral friction on Google become less convincing.
- I am not setting these assertions up as straw men. In order to prove that China is likely to retaliate against the Google decision, there have to be motivating factors. [↩]