U.S. puts companies on notice in China

U.S. Internet companies in China are now on the defensive after the government declares they hold a shared responsibility for ensuring an open Internet.

Tom Krazit Former Staff writer, CNET News
Tom Krazit writes about the ever-expanding world of Google, as the most prominent company on the Internet defends its search juggernaut while expanding into nearly anything it thinks possible. He has previously written about Apple, the traditional PC industry, and chip companies. E-mail Tom.
Tom Krazit
5 min read

WASHINGTON--U.S. Internet companies might soon need to find a new strategy for dealing with China.

In announcing that it is now U.S. policy to advocate a free and open Internet around the world, Secretary of State Hillary Rodham Clinton on Thursday essentially dared U.S. companies to follow Google's lead and put an end to their complicit censorship of Internet content. Google has saidit will shut down its Chinese search engine if it can't find a way to offer an uncensored version under Chinese law, and while no one else has jumped on that bandwagon, they may soon have little choice.

"We are urging U.S. media companies to take a proactive role in challenging foreign governments' demands for censorship and surveillance. The private sector has a shared responsibility to help safeguard free expression. And when their business dealings threaten to undermine this freedom, they need to consider what's right, not simply what's a quick profit," Clinton said in remarks Thursday at the Newseum, before an audience including members of Congress, representatives from nonprofit groups, and perhaps more than one Internet company executive forced to ponder the meaning of that paragraph.

Clinton stopped short of actually proposing regulations or sanctions on Internet companies that comply with censorship laws. But her tone was clear: it's now the policy of the U.S. government to renounce corporate "engagement," or the belief that by merely being in countries like China, U.S. Internet companies are helping expand access to information.

Will it work? Google, Microsoft, and Yahoo have already formed the Global Network Initiative, a consortium of companies and organizations designed to provide guidelines for operating in countries with authoritarian governments without turning into tools of those governments. Clinton acknowledged the work of the GNI during her speech, but is calling on companies to do more.

"American companies need to make a principled stand...This needs to be part of our national brand. I'm confident that consumers worldwide will reward companies that follow those principles."
--Secretary of State Hillary Rodham Clinton

Microsoft declined to directly address its plans for China in a statement, but thanked Clinton for recognizing the GNI. "We welcome Secretary Clinton's remarks and applaud the heightened attention she has brought to these issues of privacy and freedom of expression. We agree with Secretary Clinton that both governments and the private sector have important roles to play," the company said. Last week, Microsoft CEO Steve Ballmer said that the company remained committed to China despite Google's announcement.

Google, which was recognized during Clinton's speech for "making the issue of Internet and information freedom a greater consideration in (its) business decisions," said it welcomed the challenge. "Free expression and security are important issues for governments everywhere, and at Google we are obviously great believers in the value to society of unfettered access to information. We're excited about continuing our work with governments, human rights organizations, and bloggers, to promote free expression and increased access to information in the years ahead," it said in a statement.

Yahoo did not respond to a request for comment.

Rebecca MacKinnon, a fellow at the Open Society Institute and member of the Global Network Initiative, compared Clinton's push to similar standards companies have been forced to adopt over the ages when operating outside of U.S. laws, such as avoiding the use of child labor in other countries.

Voluntarily adhering to those standards, however, will require corporations to do something corporations tend to dislike: decrease revenue, increase costs, and reduce profits.

"Companies are beginning to look at the long-term interest in an open Internet and understanding there are some short-term costs to functioning that way," said Sally Wentworth, regional director for North American at the Internet Society, a nonprofit that focuses on global Internet standards and education.

China, already with the most Internet users in the world despite having only 25 percent of its population online, is a huge source of future growth for Internet companies. U.S. companies have invested billions in China, not only in well-known areas like manufacturing and software development, but in hopes of courting that enormous future audience that will eventually be searching, watching videos, and consuming news--of some type--on the Internet.

Secretary of State Hillary Clinton Tom Krazit/CNET

But with Clinton's remarks, U.S. companies are in an even more difficult place than they were when Google made its announcement last week. Will they have a harder time getting government contracts if they do business with the Chinese government? Will there be additional taxes, or even eventually fines for following censorship laws in other countries?

After all, U.S. companies can't go breaking laws they don't like around the world, but they can refuse to subject themselves to those laws if they can be convinced that it will eventually be worth their while.

"Their business depends upon trust," MacKinnon said, referencing Google, Yahoo, Microsoft, and other Internet companies. Yahoo is still smarting in China from its decision to hand over information regarding a Chinese dissident to the government in 2005, and U.S. Internet companies could make a brand for themselves in China if they stand up to the government: the Great Firewall can't get everything.

Still, there's a sense that some tech companies would rather the U.S. force some sort of move from China on Internet censorship, instead of having to decided for themselves which countries are open for business and which aren't.

"We look to the U.S. government to address laws and practices in other countries that either facilitate censorship, oppression or a fractured Internet, or are unhelpful to International cooperation in cybersecurity and law enforcement," said TechAmerica, a tech industry trade group, in a statement. "Except in cases involving outright sanctions asserted by the U.S. government, American values also require the freedom of enterprise: Each company must decide where to do business on behalf of its customers, employees, and investors."

This policy will take some time to evolve, as Clinton and other speakers Thursday noted that this effort is merely the beginning of a long road toward promoting an open Internet around the world.

Still, she knows that while the moral pitch is easy, the business end will be harder.

"American companies need to make a principled stand," Clinton said. "This needs to be part of our national brand. I'm confident that consumers worldwide will reward companies that follow those principles."

Editor's note: The first video below is of Clinton's speech. The second is a panel discussion that followed and was moderated by the Anne-Marie Slaughter, the State Department's director of policy planning. Both were posted by the State Department.