News

A Delicate Balance?

• By Michael Desmond
• 04/01/2006

The case highlights the dangers of doing trade in the world's most populous country. Google weathered a storm of criticism after it began filtering search results at google.cn to comply with Chinese government mandates. And in December, MSN Spaces pulled down the blog site of popular Chinese blogger Michael Anti, again at the request of the Chinese government. Free speech advocates have been outraged to learn that American companies are helping China restrict access and expression on the Internet.

"When Google goes to China and produces a crippled service, they now have two customers -- the Chinese government and the Chinese people," says Danny O'Brien, spokesperson for the Electronic Frontier Foundation. He says Chinese citizens end up with a "pathetic imitation of the full Google catalog."

At issue, of course, is the vast opportunity presented by China. With a population of 1.3 billion people and a fast growing economy, Internet-savvy firms are scrambling to get in on the ground floor. But along the way, these companies are forced to make compromises.

"It's one thing for a Chinese company to participate in censorship because they have to," says Rebecca MacKinnon, research fellow at the Berkman Center for Internet & Security at Harvard Law School, and a former Beijing bureau chief for CNN. "But when a company like Microsoft participates in censorship, that really sends a signal."

MacKinnon says the issue of restricting access to information in China has produced intense debate within both Microsoft and Google. "I must say I am not without sympathy for some of these executives, who find themselves in this position. It sounds like there are a lot of heated arguments going on in that [Microsoft] company."

For its part, Microsoft has established a three-tiered framework for complying with local laws, which were articulated during Microsoft's appearance before a Congressional committee in February. They are:

• One, establish explicit standards for protecting content access, requiring a legally binding notice from the government that details that material violates local laws.
• Two, maintain global access by blocking non-complying material only within the country in question.
• Three, provide transparent user notification, which states why content has been blocked.

In his testimony, Microsoft General Counsel Brad Smith emphasized that Microsoft and other multinational companies must comply with local laws to operate in foreign markets. He argued that MSN services -- even filtered and limited -- enable a level of access that wouldn't exist otherwise.

"While this is a complex and difficult issue, we remain convinced it is better for Microsoft and other multinational companies to be in these markets with our services and communications tools, as opposed to not being there."

Perhaps surprisingly, Michael Anti agrees. Despite being silenced temporarily by MSN Spaces, he writes that Google and Microsoft should stay engaged in the Chinese market. "The solution from the American side is that these companies must adhere to their bottom lines and be more responsible. Not only do you need the Chinese market, but China also needs these American companies,"

Not everyone is convinced. Edwin Black, author of the best-selling book IBM and the Holocaust, says the behavior of Microsoft, Google, and Yahoo! in China evokes chilling parallels with IBM's dealings in Nazi Germany during the 1930s and 1940s.

"IBM wanted it both ways. They wanted to be a good Nazi in Germany, and they were. And they wanted to be a good American in America, and they were. And that's what Google and Microsoft and Yahoo! want," Black says. "They want all the protections and promotions of a free and democratic society, so they can go out and help develop a repressive and undemocratic one."

MacKinnon agrees. "Ultimately, if you're not behaving ethically, especially when it comes to information technology, especially when it comes to dictators, you are helping shape a world in which dictatorships are stronger."

Those concerns prompted a Congressional inquiry, which could ultimately produce legislation aimed at regulating the behavior of U.S. firms abroad. But Black says companies will find a way around the strictures. "If worse comes to worse, Yahoo! and Google and Microsoft will do what IBM did and create numerous overseas subsidiaries."

In fact, Yahoo! has already done just that. When Michael Callahan, senior vice president and general counsel for Yahoo! appeared before the Congressional subcommittee, he quickly pointed out that his company had spun off Yahoo! China to Chinese firm Alibaba.com in October 2005.

"It is very important to note that Alibaba.com is the owner of the Yahoo! China businesses, and that as a strategic partner and investor, Yahoo!, which holds one of the four Alibaba.com board seats, does not have day-to-day operational control over the Yahoo! China division of Alibaba.com," Callahan stated.

Yahoo!'s maneuvers may have troubling implications for U.S. firms abroad, but MacKinnon expects Internet firms are learning their lessons.

"I'm hopeful that some of these companies, at least from what I've been hearing privately, that they are concerned enough about doing the right thing that we will see efforts to do the right thing as much as possible."