Nigel Cory

U.S. Senate Finance Committee Chairman requests an investigation into foreign government censorship and how such censorship may adversely impact U.S. businesses and citizens — a focus on China but broader in reach

In 2020 the United States Senate Committee on Finance’s Subcommittee on Trade held a hearing on “Censorship as a Non-tariff Barrier” and received testimony from four witnesses. The main focus of the prepared testimony was on the actions of China, but the issue is broader than that. Some of the concerns of U.S. businesses are presumably being teed up by the United States and others in the plurilateral talks on e-commerce that are ongoing among more than 80 WTO Members. Since the draft text of the Joint Statement Initiative talks on e-commerce is not public, it is not clear what, if any, current draft provisions deal with the concerns of the U.S. business community. See December 14, 2020 listing of a consolidated negotiating text on e-commerce of 90 pages in INF/ECOM/62/Rev.1 on the WTO webpage (documents online)(document is restricted and hence not publicly available).

On January 4, 2021, the Chairman of the Senate Finance Committee, Senator Chuck Grassley, forwarded a request to the United States International Trade Commission for a fact finding investigation. The letter is embedded below but references the June 30, 2020 hearing and makes specific requests for the type of information to be provided in a report to be provided within 18 months:

“The report should provide detailed information on this important matter, including the following:

“1. Identification and descriptions of various foreign censorship practices, in particular any examples that U.S. businesses consider to impede trade or investment in key foreign markets. The description should include to the extent practicable:

“a. the evolution of censorship policies and practices over the past 5 years in key foreign markets;

“b. any elements that entail extraterritorial censorship; and

“c. the roles of governmental and non-governmental actors in implementation and enforcement of the practices.

“2. To the extent practicable, including through the use of survey data, an analysis of the trade and economic effects of such policies and practices on affected businesses in the United States and their global operations. The analysis should include to the extent practicable, quantitative and qualitative impacts of the identified policies, including by reference, where identifiable, to:

“a. impact on employment;

“b. direct costs (e.g., compliance and entry costs);

“c. foregone revenue and sales;

“d. self-censorship; and

“e. other effects the Commission considers relevant for the Committee to know.”

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While the letter from Senator Grassley does not limit the request to a review of practices of China, the testimony during the June 30, 2020 hearing at the Senate Finance Committee was tightly focused on the serious problems caused by China’s aggressive censorship practices and the resulting harm to U.S. businesses. While all of the prepared testimonies from the hearing are interesting, the most comprehensive in terms of actual negative effects experienced by U.S. businesses was the prepared statement of Nigel Cory, Associate Director, Trade Policy, Information Technology and Innovation Foundation. Mr. Cory had as one of his suggestions having the Senate Finance Committee request a Section 332 fact finding investigation by the U.S. International Trade Commission, which is what has happened. Mr. Cory’s prepared statement is embedded below.

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A former Trump Administration official, Clete Willems, speaking in his personal capacity, reviewed the extensive censorship practiced by China and reviewed various reports by the U.S. Trade Representative’s Office or by the U.S.-China Economic and Security Review Commission on the extent of the problem for U.S. businesses.

“According to USTR’s 2019 Report to Congress on China’s WTO Compliance, ‘China currently blocks most of the largest global sites… and more than 10,000 sites are blocked, affecting billions of dollars in business, including communications, networking, app stores, news and other sites.’1 The report goes on to state that ‘[e]ven when sites are not permanently blocked, the often arbitrary implementation of blocking, and the performance-degrading effect of filtering all traffic into and outside of China, significantly impair the supply of many cross-border services, often to the point of making them unviable.’2

“Additionally, China controls the major press instruments in China – both on- and off-line – and suppresses views inconsistent with the Party’s objectives. The leading news agencies in China are unambiguous instruments of the government. As a result, the U.S. State Department’s recent decision to treat these agencies as foreign government functionaries, subject to similar rules as diplomats stationed in the United States, is entirely appropriate.3 Predictably, China’s response was not to provide the news agencies with more freedom, but to expel journalists from the Washington Post, New York Times, and Wall Street Journal from China, thereby further limiting the number of free voices in the country.

“This is just one recent example of China’s decision to double down on policies of suppression and control. The latest U.S. – China Economic and Security Review Commission Report highlighted China’s growing censorship of economic news, noting that ‘[i]n the past year, Beijing has directed media outlets to avoid stories on declining consumer confidence, local government debt risks, and other unwelcome economic news.’4 In December, China promulgated a new internet censorship law prohibiting online content providers from making, reproducing, or publishing information that could harm the nation’s honor and interests, disseminate rumors, or insult others, among other vaguely defined terms.5 And of course, too many sources to count have highlighted China’s suppression of information related to the coronavirus.6” [footnotes omitted]

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A number of the prepared statements reviewed whether the World Trade Organization provides a remedy for censorship under the GATS and the breadth of possible exceptions. The Cory and Willems prepared statements are embedded above. A third paper by Beth Baltzan is embedded below. See also Wu, Tim (2006) “The World Trade Law of Censorship and Internet Filtering,” Chicago Journal of International Law: Vol. 7: No. 1, Article 12, .https://chicagounbound.uchicago.edu/cgi/viewcontent.cgi?article=1243&context=cjil.

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Conclusion

The U.S. International Trade Commission will likely start the Section 332 investigation in the coming week or two but will not likely conclude the investigation and generate its report until mid-2022. The investigation should generate useful information for Congress to consider in future trade promotion authority legislation (post 2021) and for the Administration in terms of future trade negotiations. However, the report will come too late to be relevant to the ongoing plurilateral talks on an e-commerce agreement where 2021 is the likely year for an agreed text.

With a change of Administrations and change of control of the Senate in the United States in less than two weeks, it is likely but not certain that the Biden Administration will place a priority on ensuring that the ongoing plurilateral negotiations for rules on e-commerce address the major concerns on censorship, although China’s participation in those talks will make achieving meaningful results more challenging.

I assume that Senator Wyden, when he becomes Chairman of the Senate Finance Committee, will want to see the 332 investigation requested by Senator Grassley completed, though it is possible he could add to or modify the requested scope of the investigation.

It is also possible that the Biden Administration will decide to pursue China’s censorship practices in the context of a WTO dispute and/or will attempt to address the censorship concerns in a phase 2 negotiation with China.

What is not in doubt is that the issue of censorship as a non-tariff barrier will continue to be an important one for U.S. businesses and citizens, just as it is for businesses and members of the public around the world.