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The US claims that China’s internet controls may violate the rules of global trade. This line of argument exposes a dilemma for China’s leaders who struggle to uphold an increasingly authoritarian system in an era of deepening international Integration.

Free of charge, but under control. Internet terminals at Pudong International Airport in Shanghai.

The publication of the Panama Papers made headlines around the world, just not in China. The country’s censors worked hard to block the entire nation from accessing information about the secret wealth and financial dealings of family members of its political leaders. These leaders view it as a matter of national security to shield the public from those divisive revelations, and they reject foreign criticism of China’s interdiction of free flows of information as meddling in another country’s internal affairs.

The United States has now opened a new line of attack against China’s censorship regime. Human rights arguments aside, could China’s internet controls constitute a trade barrier? In its annual National Trade Estimate Report, the Office of the United States Trade Representative included the Chinese internet filters and blocks in a list of impediments foreign businesses face in China.

Controlling public discourse and foreign competitors

The report labels China’s internet regulations as “restrictive and non-transparent” and describes them as a burden on China’s trading partners, “hurting both internet sites themselves and users who often depend on them for business”. In other words: controlling public discourse may be one motivation behind China’s censorship regime – the other may be to keep foreign competition at bay.

While foreign companies have long complained about the harmful consequences of online restrictions on their operations in China, this is the first time the US government has waded into this issue. It is highly unlikely that the brief mentioning of the issue will have any immediate consequences. Bethany Allen-Ebrahimian may be right to state in a ChinaFile Conversation on the issue that the USTR report has “no teeth”. At the same time, it may well have prepared the scene for more aggressive steps in the future.

At this moment, the US does not appear ready or willing to challenge China’s internet controls before the World Trade Organisation’s dispute bodies. But precedence suggests that it would not be impossible to do so. In 2009, a WTO panel ruling in the Sino-US Intellectual Property Dispute caused China to remove a censorship provision from its Copyright Act. The case was remarkable for two reasons. It was the first time an international legal body identified a conflict between Chinese censorship regulations and international law. And it was the first time that the People’s Republic of China allowed an international legal decision to guide its domestic law-making.

State sovereignty versus international opening

The 2009 dispute shed a light on the fundamental conflict between Chinese and international law. China’s current leadership is pulled in two directions, especially after Xi Jinping came to power. China’s internet monitoring and controls reflect the leadership’s belief in absolutist principles of state sovereignty. A recently proposed regulation which would force website operators in China to register their domain names with domestic authorities could turn out to be yet another building block for a rapidly expanding censorship regime.

But the actions of Xi’s administration also betray a naïve ignorance of the consequences of China’s growing integration into the world economy and international legal frameworks. The country’s accession to the WTO in 2001 was a matter of national pride all over China, but as the IP case showed, it also forced the leadership to accept the influx of certain international laws and norms. And as it turns out, even trade norms can have an impact on a society’s views of civil liberties such as freedom of information.

In an effort to continue China’s economic opening, Xi has expressed interest in starting talks on China’s entry into the Trans-Pacific Partnership (TPP) trade agreement, which the US and eleven other Pacific-rim countries signed in February 2016 but have yet to ratify through their domestic legislatures. A Chinese TPP membership may be an issue for the remote future. But if China’s censorship system is being threatened by WTO rules, it would not stand in the face of the more stringent TPP provisions to limit restrictions on cross-border data flows.

The trade-off between domestic control and economic globalisation will continue to haunt China’s leaders. At present, the pendulum is swinging in the direction of more control. But the USTR report is a clever warning shot for Beijing. Quelling public debate and thwarting foreign competition may currently serve to maintain social stability and to protect domestic growth. But innovation-stifling repression and isolating protectionism will stand in the way of releasing the dynamics of a networked economy which will be crucial for the next stage of China’s development.