Are The TikTok And EV Bans Covering Up America’s Lack Of Competitiveness?
The Chinese must think we are playing a very unfair game: as soon as a Chinese business starts to win in America’s vaunted we’re-all-about-competition contest, it is taken off the board by the American government (acting for American business).
This must make the Chinese scoff at America’s calls to “freedom”. It’s all freedom-and-games till some non-American company starts to win. Then the hammer drops. America’s businesses buy government protection, either in an outright ban or by tariffs.
The common US excuse for dropping a ban on a product is ‘national security’. This is the axe that was wielded against Chinese communications maker Huawei, when Western governments decided that critical components could not be provided by a company controlled by another state. The jury is still out on whether this was a boost for American firms or in fact cost them millions.
American firms (and their government) argued that Huawei’s close ties to Beijing's security services mean that if its technology were embedded in mobile networks, Chinese state services could access confidential information. Huawei rejected these claims, saying that the US move was motivated by a protectionist desire to boost its own firms.
This is exactly what is happening to TikTok and Chinese EV makers today.
America has launched an all-out assault on these globally competitive firms, in the name of ‘national security’.
Would that it were that simple, in fact, we would not have to face the issue of American competitiveness: is the US able to keep up with global competition?
This is the most important question America has to answer, because if the trade barriers are just delaying an inevitable come-uppance, America will be in deep trouble in the years to come.
China is pursuing a digital leadership strategy across many sectors that America would be wise to emulate. By mid-2023, the government recorded over one billion foreign businesses operating in the country’s thriving consumer market. E-Commerce covers 40% of the country's GDP. More than 800 million Chinese mobile connections are already 5G.
China has built the world's largest 5G network, largely using Huawei.
Let’s start with the reality of Huawei’s competitive advantage.
I confess I like Huawei…all my experiences in broadband have led to an appreciation of their dedication and professionalism.
At the same time, Huawei has benefited from the government of China’s distortion of their industrial policy to favor the company.
This is what America needs to come to grips with.
Huawei gets three benefits from its government: it gets subsidies that guarantee market chare within China; the state bank gives financing to Huawei’s customers that make the equipment cheap to buy; and its officials interfere in the standardization process at the International Telecommunication Union (ITU) to increase Huawei’s share of the emerging global 5G standards.
Cheap loans, cheap products and a warped path to the future.
That should have been the basis for America’s case against the company. The problem with facing this reality, is that it would force the American government to visibly interfere in “the market” - that sacred tool that US businesses claim they run on.
In fact, American businesses warp the market just as deeply – who got bailed out when the stock market fell…the consumer? - but to admit that rules can change means that we would have to do an analysis of what we should change in order to compete.
It would be an admission that the market is not sacred. Also, these steps require work.
With TikTok the circumstances are different but the outcome is the same: a ban will do nothing to solve the fundamental problem. In this case it is a matter of social networking that warps the judgement of the viewer.
TikTok does not make a profit. Neither does Douyin, TikTok’s domestic Chinese variant. But the Chinese government is fine with that, because it promotes cultural values that fit the CCP. TikTok, however, is more likely than Douvin to be ruining the stability of its audiences. With no standards, TikTok amplifies misleading information and causes injury to the mental state of the participants.
The Chinese must smile when they hear that Americans are worried that the tool could be used by the Chinese state to misinform Americans; Americans themselves are misinforming themselves on the platform, with no help needed from China.
Here again, basic homework needs to be done before an audience can be exposed to any social media. Skeptical thinking needs to be encouraged in society – are there really Jewish space lasers, for example? – and people need to have their psyche boosted so they are confident enough to handle the often dangerous personal attacks on the network.
A ban is not the answer: the viewers will merely flip to another platform and the same problems will occur. A ban is not a social cure.
This has to be affecting America’s standing in the world. I’m not surprised that American media are not covering this aspect, because they are only looking at the world from the American viewpoint. But a neutral outsider would be shaking their head at what they might consider hypocrisy.
It is not hypocrisy: it is deeper – a reluctance to deal with the essentials of the free market and how it can be protected.
It may be that the questions are too complicated for a public forum, but I doubt it. It is more likely that politicians are afraid to let the public deal with deeper issues because they fear the decision-making ability of their voters.
I think this is way overblown; I think people, rather than politicians, often get the complicated picture first, and then wait impatiently for the politicians to catch up.
Recall when the Berlin Wall came down, for instance, and the corruption of communist East Germany was exposed for the first time in a ‘Western reveal’. The politicians went berserk, fearing a push-back from the Soviet Union…but the people went ahead and in great joy they tore down the wall.
And the USSR crumbled.
There is one instance in which a trade barrier makes sense.
In the case of the EV industry, we have a situation where Chinese firms are poised to enter the American market with well-made, well-designed cars. 500 electric car makers are now working in the world's largest vehicle market. If they were allowed to sell into America, Americans could be driving superb $10,000 electric vehicles.
They would definitely be a plus for the American consumer, both from the value that is purchased and the stimulation of domestic competition.
As the column Noahpinion points out, Biden’s proposed new tariff might indeed “prevent a future cheap EV bonanza from reaching America’s shores… if Biden had done nothing, China would have flooded the U.S. with bargain-price high-quality EVs… And Chinese EVs are very good.
“It’s reasonable to worry that without the competitive pressure from Chinese imports, stodgy old companies like GM and Ford — and even Tesla — will have far less reason to copy innovative Chinese features like screen-based controls. American consumers could end up with a dowdier, lower-quality selection of vehicles.”
His solution is elegant in its simplicity: Chinese car companies don’t have to make their cars in China.
Establishing Chinese factories in America would get over the tariff issue right away.
America would gain access to the techniques being used in China. He notes that Chinese automaker BYD has set its sights on Mexico as its quest for global expansion turns toward North America…Building cars in Mexico for the U.S. would allow the automakers to avoid hefty import tariffs that would be applied if they were to send them directly from China.
It also gets around the issue of lower wages, by locating plants inside the Canada-US-Mexico North American free trade zone.
Finally, by establishing a ‘learning zone’ in North America, it means that cars made here will be able to compete around the world against the BVD competition. And upgraded American skill will be on call for future global challenges.
Putting up a trade barrier is not an answer to competition. If you can’t compete, you have a process problem somewhere that is fundamental; you have to fix it.
Banning a product is even worse; it is blanking out an entire category of tools that might be needed by other American firms in order to compete.
Let’s not forget that is was America’s businesses that moved their production to China, in order to get more profit from lower-wage workers.
The Chinese latched onto that and used it as a stepping stone to the creation of their own EVs. From making batteries for Telsa, BVD went on to carve out the world’s number-one niche as a battery maker and EV builder.
In the US last year, TikTok generated $14.7 billion in revenue across twelve critical sectors of the US economy and contributed $24.2 billion to the overall US GDP in 2023. It works to boost small businesses and influencers, and to carry the brand of socially-aware companies.
A report notes that It encompasses encompass 170 million active users and over 7 million businesses. It helped create 224,000 jobs.
The financial toll of a TikTok ban would be deep. Facebook provided insight into their potential losses when it had a glitch in service, impacting billions of users. Last year’s ad revenue (for Facebook’s sites) was $84.2bn. So, for every minute it’s down, it lost around $160,000. Or, $2,670 per second.
Facebook, incidentally, is one of the big potential winners if TikTok goes down. Forecasts indicate they could potentially triple their revenues in the process.
But other than Facebook shareholders, a TikTok ban does not do anyone any good. The Washington lawmakers readily passed the ban because they do not use TikTok themselves on a social basis…at most, it is another channel for their ad agencies to buy. They are disconnected from the reality of public life. And there was no real opportunity for the public to express an opinion on the ban. This is a made-in-corporate-Washington ban.
But it’s for your own good, of course. It’s not worth mentioning that if Washington’s concern was its threat to American public opinion, they would be better off banning Fox News. I see that one of its ex-employees, Tucker Carlson, is now hosting a Russian talk-show – a claim that his team has denied. Carlson’s TikTok feed has an interview with Marjorie Taylor Greene who “explains things”. Just so you know the depth of his coverage.
Obviously companies need to build a robust digital presence on social media, to ensure continuity if there are platform disruptions. TikTok is a key part of that.
These three cases are important because they push America to face fundamental realities on the working of society. These realities did not have to be dealt with in the Constitution, because it was written for a simpler, non-invasive world.
But social media pushes us to understand the new social rules in broadcasting, transportation and media. So far, we have only one answer: ban it.
That’s not good enough.
There are opportunities in every field, if we delve into the essence of the challenges.
Yes, the opportunities come with effort: we need to ride each animal separately. But if we do not take the time to learn, we will be unable to exploit.
And till now, that has been a key American advantage.
Leave TikTok alone, and move Chinese factories into America. If Huawei is getting help from the Chinese government, charge them a tariff to cover the cost of that help…make them an equal player. A ban helps no one.
Remember the financial crash of 2008? When the rich people got bailed out but more than half of America’s workers either lost their jobs or had to take a pay cut? Where was the ban on financial institutions then?
Our experience tells us that when a government reaches for a ban, it is trying to put a patch on a larger problem. And the real problems don’t get banned – they get supported.
There is no system here – no way of applying learning to future experiences. At this rate, we will never learn or improve.
Our world-view is just like the inside of a monkey house, with screaming apes and flying bananas.
We need a Citizen’s Investigative Panel On Legislative Results. Only measures that get positive results over time shall pass. Their lessons shall be passed on.
Until then, all new economic legislation should be banned.
I have just been struck by the terrible thought that Tucker Carlson might agree with me!