International Economic Law and Policy Blog

Facebook in China

From Bloomberg:

Since 2009, China has blocked Facebook, the world's largest online social media network. This year, Renren, one of China's largest social networks, plans to raise $500 million on the New York Stock Exchange (NYX). So a Chinese social network can tap U.S. capital markets, but American social networks can't tap Chinese consumer markets. Does that sound fair?

If Facebook grew corn or built cars, the cry would go out that China was putting up barriers to trade. That hasn't happened because U.S. officials and politicians have typically viewed China's Internet censorship as a human rights, not a trade, problem. That's changing—slowly. The Office of the U.S. Trade Representative, which negotiates trade deals, has been reviewing the idea of Internet censorship as a trade barrier at least since 2007. A nonbinding clause protecting "cross-border information flows" is part of the still-unratified Korea-U.S. Free Trade Agreement. And on Mar. 7 the trade office told Bloomberg Businessweek it is "considering proposals" for stricter language in the Trans-Pacific Partnership, an agreement under negotiation with Pacific-Rim countries such as Vietnam, Australia, and Malaysia (not China).

Here's what I wonder:  Does China argue that the relevant measures are non-discriminatory, in the sense that any social network site is allowed if it complies with certain rules, and Facebook is blocked because it won't follow the rules?  If that's not it, how does China justify its blocking of Facebook while it allows Renren?

Google Paper on Free Trade and the Internet

Last week, Google posted a paper entitled "Enabling Trade in the Era of Information Technologies: Breaking Down Barriers to the Free Flow of Information."  There's a Technical Appendix (p. 17 of the document) called "Applicability of the WTO rules to restrictions on free flow of information."  It seemed interesting enough, but I couldn't think of anything to say about it, so I didn't mention it on the blog.  But now Yohai Baisburd (of the new International Trade and Customs blog) points out another part of the paper, which I had not noticed initially because I skipped directly to the WTO legal analysis part:

[governments should] ensure that rules in the next generation of trade agreements reflect new challenges of Internet trade. In this new era, addressing the trade-related problems posed by government censorship and disruption of the Internet will be critical. Fresh, creative thinking will be required in order to properly address the unprecedented problems and opportunities that arise every day.

In particular, Google says that governments should do two things:

First, governments must close gaps in the existing WTO framework in order to ensure that all GATS disciplines apply to all Internet trade. Second, governments must negotiate new rules that reflect today’s information economy and include them in bilateral and multilateral trade agreements.

I'm going to focus on the latter part, i.e., the new rules.  Google elaborates on this a bit by arguing for three "priorities for promoting internet trade"  in the negotiation of new trade agreements: "advancing the unrestricted flow of information; promoting new, stronger transparency rules; and ensuring that Internet services can be provided without a local investment."  My sense is that transparency is not all that controversial.  As for the "local investment" part, this seems to be a simple case for anti-protectionism.  This is controversial in a sense, but in predictable ways.  All governments want to give advantages to domestic companies.  Trade agreements simply set the rules on the extent to which they can do so.

The most interesting part is the call for the "unrestricted flow of information":

Advancing the unrestricted flow of information

Information is the currency of the Internet and the innovation economy. The Internet’s power and ability to deliver benefits, including to the international trading system, depends on the free flow of information across the entire global network. When data is blocked or disrupted, a wide range of businesses and consumers who depend on the Internet as a tool of trade are potentially affected.

Governments should therefore insist on trade agreements that explicitly recognize this and establish a presumption in favor of the free flow of electronic information. In some sense, this is simply applying the same concepts that have long been accepted in the realm of goods
trade, and updating them to adapt to the 21st century economy.

Governments have long agreed that any restriction on the importation of goods should be
prohibited. In addition there is consensus that, to the extent that any technical regulations
are imposed that restrict trade, they should be limited to pursuit of legitimate governmental objectives and tailored to be no more trade restrictive than necessary to achieve that objective. Other than tariffs, which have to be negotiated on a reciprocal basis, the default
position under the WTO is that governments may not restrict imports of goods, and any deviations from that must be justified.

Trade officials should work to ensure that all governments accept the same presumption for the Internet – a presumption that governments may not restrict online information flows.
While this concept can be translated into binding trade agreement language in different ways, the end result must put the burden on governments to justify with particularity any
censorship or other disruption of the Internet. And in such scenarios, governments must tailor restrictions narrowly, spell out legitimate government objectives that are being advanced, and provide basic legal process to affected service providers.

The United States and Korea took an initial, positive step in this direction in 2007 by agreeing to the following provision in the Korea-U.S. Free Trade Agreement (KORUS): “Recognizing the importance of the free flow of information in facilitating trade, and acknowledging the importance of protecting personal information, the Parties shall endeavor to refrain from imposing or maintaining unnecessary barriers to electronic information flows across borders.” This provision applies to any measure that disrupts information flows and applies to all digital content, whether goods or services.

The U.S. and other governments should improve the KORUS language and incorporate it into other trade agreements. Among other things, the provision should be revised to be binding – in KORUS it is an agreement to “endeavor to refrain from” certain restrictions – and it should apply to all electronic information flows, not just those “across borders”.

In essence, Google is asking for trade agreements to include a necessity requirement for information flows.   In this regard, they mention this preambular provision from the KORUS FTA (Article 15.8): “Recognizing the importance of the free flow of information in facilitating trade, and acknowledging the importance of protecting personal information, the Parties shall endeavor to refrain from imposing or maintaining unnecessary barriers to electronic information flows across borders.”  They say they want to put this provision in other trade agreements and make it binding. This would constitute a general necessity requirement applying to all measures affecting "information flows," similar to what already exists in TBT Agreement Article 2.2 for measures that are "technical regulations" (which they also refer to).

The underlying issue here is establishing the proper balance between the free flow of information and other policy goals.  The key other goals are likely to be national security, public order and public morals.  Google wants to put constraints on governments' ability to pursue these goals (or rather, it wants governments to constrain themselves, through trade agreements).  By contrast, some governments are likely to want to maintain a good deal of flexibility in these matters.

So what are the chances of success for Google in achieving this?  My guess is that in the context of the WTO, they may have some trouble.  What they are suggesting would lead to a shift in the current balance between international oversight and flexibility in domestic regulatory autonomy.  It would certainly be an interesting debate if WTO Members were to look closely at these issues, but I'm not at all sure what the ultimate result would be. 

On the other hand, it may be possible to find a few countries who would agree that a tightening of international rules is desirable, and thus they may find takers for their proposed changes in particular bilateral or regional FTAs.

There is more on this issue from Roger Alford at Opinio Juris and Emmanuel at the IPEZone.

The U.S. Position on Free Trade and the Internet

In Foreign Affairs, this is from Betsy Gelb and Emmanuel Yujuico (of IPE Zone):

Another example of a failed effort to apply a largely American vision of technology to a non-U.S. cultural environment involves the Internet search giant Google. In January, after the e-mail accounts of Chinese human rights activists were reportedly hacked, Google's co-founder, Sergey Brin, implied that the Chinese government was culpable for the attacks. To position Google as a pioneer for free communication, he called on Washington to take a robust stand regarding China's Internet censorship practices. The company announced that it would no longer censor its search results in China and would automatically route Chinese users to its uncensored Hong Kong-based service. None of these actions, however, influenced the outcome: Google changed its procedures after the Chinese government considered revoking the company's license. Today, people in mainland China still cannot freely search the Web.  

...

U.S. protests against censorship would seem more convincing if it were not for its own policies restricting Internet freedom. Consider, for example, the United States' questionable prohibition of cross-border trade in Internet gambling. In 2004, the World Trade Organization ruled in favor of Antigua and Barbuda against the United States when the United States banned online gambling services emanating from the twin-island nation. The United States appealed the case and lost, but in the meantime, Antigua's online gambling industry was virtually destroyed. The United States still has not yet satisfactorily resolved this ruling and should do so by conforming to it.

The United States' sincerity has also been called into question due to its strong advocacy for the Anti-Counterfeiting Trade Agreement (ACTA), which is currently being negotiated with several other countries. This proposal is not a conventional free-trade agreement but rather one that would establish stricter legal frameworks for intellectual-property-rights enforcement outside of existing international organizations such as the World Intellectual Property Organization and the WTO.

As many see it, however, the ACTA would strengthen intellectual-property laws at the expense of the Internet community's well-being. According to the Program on Information Justice and Intellectual Property, which represents prominent academics and activists worldwide, the agreement would encourage Internet service providers to police users and disconnect them without due process. In so doing, innovation and competition would be stifled. The agreement is thus fueling widespread concern that Washington cares more about the commercial interests of its major copyright holders than about nurturing the creative potential of Internet users.

I think they are right to point out the hypocrisy here.  A ban on internet gambling is not exactly the same as censorship of political views, but arguably they come from a similar place.  I suppose I'm a little jaded about this sort of thing, after watching years of free trade rhetoric and protectionist reality.  But I agree that a government's position will be stronger if it practices what it preaches.

Dan Drezner on China's Great Firewall as a Trade Barrier

His full post:

Well, there certainly are a surfeit of Sino-American tiffs going on at the moment. 

Over at Reason, Ron Bailey offers an intriguing solution to one of these problems -- use the WTO as a crowbar to bring down the Great Firewall of China:

When China joined the World Trade Organization (WTO) in 2001 it agreed that foreign service companies would have the same access to markets in China as domestic companies do. Now the European Union and the U.S. Trade Representative office are considering an argument that the Great Firewall violates China’s obligations to permit free trade in services under its agreements with the WTO. Last year, in a working paper titled Protectionism Online: Internet Censorship and International Trade Law, the European Centre for International Political Economy (ECIPE) think tank argued that “WTO member states are legally obliged to permit an unrestricted supply of crossborder Internet services.”

Since 2007, the California First Amendment Coalition (CFAC) has been pushing the U.S. Trade Representative to file a case against China on the grounds that it has been violating its WTO obligations. CFAC argues that, among other violations, China discriminates against foreign suppliers of Internet services by blocking them at the border while allowing domestic suppliers to offer like services. In addition, China has violated its commitments not to introduce or apply non-tariff measures when it joined the WTO by blocking a number of imported products without explanation or justification. China has also not set up any administrative procedures through which foreign suppliers of online services could appeal the blocking of imported publications and content.

I'll defer to smarter law blogs for correction, but I really don't think this is going to work.  First, I'm not sure the differences in national treatment are great enough to constitute a WTO violation (remember, the Chinese position on the Google controversy is that Google has to obey Chinese laws, which appply to both domestic and foreign search engines).  Second, China can respond not by lifting the Great Firewall, but by setting up administrative procedures to handle complaints.  Third, as Bailey acknowledges, if China were to lose such a case, one option would be to simply refuse to comply.  The U.S. would be allowed to respond with trade sanctions, but I suspect China's government will take that bargain every day of the week and twice on Sundays. 

Simon Lester suggests that a bilateral investment treaty (BIT) would be a more useful crowbar -- which is great, except the U.S. and China don't have one.  A BIT is being negotiated, and some experts are optimistic that it will be completed by this summer.   Call me crazy, but I can't see the Chinese government negotiating anything that would affect their ability to censor. 

Am I missing something?

I don't think he's missing anything.  I think he's got it pretty much right.  I, too, am skeptical of the NT differences, although there may be new evidence that pops up (and a "market access" claim might work). Also, if we are talking about the GATS, there's a question of whether any relevant commitments have been made, and even if they have been, there is the option to withdraw them.  So, it would be a tough road to get real relief for this at the WTO.

On the BIT issues, I think the substantive obligations would be broader, and thus more useful, but like Dan, I have doubts that China (or the U.S.) would sign onto something like this.  Could either side really tolerate the foreign investor complaints that might result?  Of course, as I've said many times, I don't know much about what goes on behind the scenes in these kinds of negotiations, so I could be completely wrong. 

Investment Treaty Arbitration and Censorship

From Luke Peterson:

There are growing signs that investment treaty protections – while rarely discussed in media or human rights law circles - may be surprisingly useful in some cases of repression or censorship of foreign-owned media. While there is growing debate as to the uses of World Trade Organization agreements to combat certain forms of state repression of media actors, less attention has been paid to the potential of international investment law to combat certain forms of state censorship and repression. With the US Department of State now signaling that internet freedom should be advanced through US foreign policy, it remains to be seen whether the US negotiating position on international investment treaties will shift so as to embrace this foreign policy objective. Ongoing investment treaty talks between the US and China could provide the obvious forum for this issue to be raised and debated.

I agree with Luke (if I am reading him correctly) that investment protections may be more effective than trade rules on the issue of censorship (internet and otherwise).  There are two reasons for this:  (1) there is no government filter to bringing complaints and (2) some of the substantive investment rules seem particularly useful.  Presumably, China is aware of all this, though, which makes me wonder whether China would ever sign on to investor-state protections with countries that have significant foreign investments in China.

ADDED:

Michael Snarr of the China - U.S Trade Law blog thinks China and the U.S. will sign a BIT sooner rather than later:

Negotiation of a China-U.S. BIT will not be quick and easy, but it remains likely. China is an expanding market attracting foreign investment from around the globe. American enterprises want to invest there and would like more security for their investments. Such incentives historically have driven the United States to negotiate BITs.

This time, however, there is an added and critical dimension. China has amassed capital and is beginning to invest abroad. The United States not only is an attractive market; the United States also needs a substantial share of that investment for the growth of its own economy. Chinese businessmen, like Americans, want investment security. This time, therefore, the BIT partners share a common vision of an agreement that will attract investment to their own countries while protecting their citizens investing abroad. Such unusual balance may make the negotiations more difficult, but they also make a positive result more likely. 

Chander on International Trade and Internet Freedom

Anupam Chander has posted International Trade and Internet Freedom on SSRN.  From the abstract:

Can trade liberalization serve the cause of political liberalization in authoritarian states? In this short essay, I suggest that trade law might bolster political freedoms by liberalizing Internet trade. Trade law puts pressure on state repression of information through two principal mechanisms.

First, GATS transparency obligations require what is often absent in authoritarian states – a set of public rules that governs both citizens and governmental authorities. WTO member states must publish regulations governing services and establish inquiry points where foreign service providers can obtain information about such regulations. A publication requirement written for the benefit of foreigners may prove even more useful for local citizens, who will be given the opportunity to understand the rules that bind them – and the opportunity therefore to challenge those rules or their interpretation.

Second, the market access and national treatment commitments provide opportunities for foreign information service providers to disseminate information that local information service providers might eschew. While censorship by itself may not necessarily constitute either a market access or a national treatment violation, it might do so if it is operationalized in ways that effectively discriminate against foreign service providers.

And from the paper:

Censorship by itself may not necessarily constitute either a market access or a national treatment violation. But consider three scenarios: what if a country (1) declared foreign blogging sites off-limits, or (2) required foreign information service providers to route their offerings through special traffic cops, or (3) required local Internet service providers to deny access to certain foreign services in toto? In cases like these, the censorship measures would likely run afoul of a country’s market access and national treatment obligations.

Google and China: Protectionism or Censorship?

In Foreign Policy, journalist Jordan Calinoff asks, "Is web censorship just an excuse to drive out foreign competition and give a boost to Chinese brands?"  He then writes:

... Google, like Yahoo before it, has been systematically forced out of the market by a Chinese government determined to purge all foreign competition from its Internet industry, which is expected to bring in $8 billion in advertising revenue in the next three years, according to Internet research firm eMarketer.com. ...

...

Although this week's news has been perhaps the most visible and largest example of China's "firewall protectionism," Google's exit is just the latest in a long line of foreign Internet firms forced to leave the country on the shaky rationale of national security and censorship.

...

In the face of an obvious and systematic form of protectionism in perhaps the most important industry for the future, the cheering from many leading American figures for Google's "brave" decision seems strange. If China were attempting to block the import of American tires, instead of American Internet media, would Americans applaud Goodyear and Congress for not putting up a fight against blatant WTO violations?

Firewall protectionism is part of a greater and dangerous trend. China has recently shown that it is willing to protect its own industries at any cost, even to the point of all-out trade war. ...

So when media reports that Google's decision is a reaction against China's desperate need to censor the Internet and spy on activists, and not about protectionism, it rings false. In a country where dissidents are routinely jailed for years without fair trials under the dubious charge of "inciting subversion of state power," and poor petitioners from the countryside are routinely thrown into Beijing's horrendous black jails for simply airing grievances, it seems strange that China truly needed to hack into human rights activists' email accounts. A more likely explanation is that it was simply trying to find a way to block the world's biggest Internet giant out of the Chinese market and was searching for the right button to push. As for Google's "threat" to pull out of the country, China will certainly not be begging them to stay.

I still need more facts before I express any views on this one.  It's not very clear to me what specific actions the Chinese government has taken in this area.

Google, China and the WTO

Google's possible exit from China is all over the news.  Are there any trade issues in there?  Possibly:

Lawyers said that Google and the US might have a legal basis for suing China at the World Trade Organisation, a move that would further complicate relations between Washington and Beijing.

...

According to lawyers, the US could argue that Beijing’s censorship in effect discriminated against foreign services such as Google, contrary to its commitments under the General Agreement on Trade in Services (Gats).

“If China imposes harsher web filtering restrictions on Google than on local search engines, such as Baidu, Google may have a WTO discrimination claim,” said David Spooner, a former assistant secretary of commerce, now at the law firm Squire Sanders & Dempsey.

The outcome of a case would depend on how a WTO dispute resolution panel classified search engines. Much of the WTO law addressing internet services and online products is unclear. The last global trade agreement was negotiated in the early 1990s when the technology was in its infancy. But trade experts said a succession of rulings had narrowed governments’ room for manoeuvre, and particularly their ability to use national security or the protection of public morals as defence for censoring words and images on the web.

Gary Horlick, a leading international trade lawyer, said: “We will have to know a lot more about the facts, especially what the [Chinese] government is doing, but the Gats has a lot of unexplored obligations which might protect Google."

Trade Law and ISP Filtering

News from Chile, related to U.S. - Chile FTA rules on copyright protection:

 

The Chilean House of Reps has formally rejected the latest attempt Chilean President Michele Bachelet to “reform” that country’s copyright laws to include ISP-level content filtering.

Pres Bacehlet had argued that it’s necessary in order to comply with a Free Trade Agreement with the United States, but critics pointed out that’s not true being that the US is nowhere near ever having a similar system in place nor is it likely to ever have one.

...

ISPs would’ve been responsible for verifying copyright infringement and most likely would’ve introduced mechanisms to be more proactive with their efforts to ensure compliance and decreased liability, meaning active content filtering in violation of customer privacy.

Another article, Article 12, would’ve required ISPs to keep identifying data of those accused of copyright infringement for at least 6 months. Critics says it’s unfair since it’s only an allegation and no similar treatment is required for people accused, yet not convicted of other crimes.

I think the provisions at issue are in Article 17.11(23), entitled "Limitations on Liability for Internet Service Providers".  It's not clear to me whether these provisions require what the Chilean President thinks they do.  I think the same issue has arisen in the ACTA negotations.

More on Trade and Internet Censorship

Brian Hindley and Hosuk Lee-Makiyama have published a working paper on "Protectionism Online: Internet Censorship and International Trade Law."  From the abstract:

This paper suggests that many WTO member states are legally obliged to permit an unrestricted supply of cross- border Internet services. And as the option to selectively censor rather than entirely block services is available to at least some of the most developed censorship regimes (most notably China), there is a good chance that a panel might rule that permanent blocks on search engines, photo-sharing applications and other services are inconsistent with the GATS provisions, even given morals and security exceptions. Less resourceful countries, without means of filtering more selectively, and with a censorship based on moral and religious grounds, might be able to defend such bans in the WTO. But the exceptions do not offer a blanket cover for the arbitrary and disproportionate censorship that still occurs despite the availability to the censoring government of selective filtering.

And from the paper:

... although the dispute settlement mechanism of neither the WTO nor other trade instruments could be used to eliminate Internet censorship, they might limit the use of its more commercially damaging forms. For businesses, trade with countries ruled by authoritarian regimes, or with countries where the concept of the rule of law is still under development, will always be difficult – if not outright dangerous. Contesting arbitrary and disproportionate blocks on access to such markets will incrementally help to reduce legal uncertainty and therefore contribute in the long run to a regulatory environment where the risks and costs of market participation are foreseeable.

 

China's PC Software Filtering Delayed

Bloomberg reports:

China postponed tomorrow’s deadline for personal-computer makers to include a state-backed anti- pornography software on new PCs after U.S. officials and business groups urged it to scrap the rule

PC Filtering: The Investment Issues

Over at the Kluwer Arbitration Blog, Luke Peterson talks about the investment aspects of the Chinese PC filtering issue.  He notes:

One critical question in any claims arising out of this internet-filtering software dispute would be the expectations that investors had upon entering the Chinese market. For instance, it has been widely reported that Google, the search company, which has had its own ups and downs in China, operates under the terms of a highly-detailed license. I’m guessing that the terms of such licenses make it crystal clear that foreign technology companies are no longer in the highly-permissive State of California.

While I will leave it to others to handicap the chances of any investment treaty claims, it seems to me that the investment treaty route could be the “sleeper” option in this whole controversy.

More on the Software Filtering Issue

The Economist mentions an interesting new detail about China's efforts to have all personal computers sold in China come with filtering software called Green Dam Youth Escort:

An American firm, Solid Oak Software, claims Green Dam includes stolen copyrighted code from one of its products, and has launched legal action.

I hadn't heard much about this Green Dam software before.  This certainly complicates things!

I wish I had more to say about the general issue of the requirement to install filterating software as a potential WTO case.  The trouble is, I'm a little fuzzy on the facts and the legal claims, which makes it difficult to say much.

 

More on Chinese Internet Censorship as a Trade Barrier

At the Huffington Post, Michael Santoro and Wendy Goldberg make the case to the incoming Obama team for Chinese internet censorship to be treated as a trade barrier:

Almost all discussion of the harm done by China's strict censorship of the Internet focuses around its human rights implications. However, by restraining the ability of U.S. companies to fairly compete in the world's largest market, serious damage is also being done to America's free trade interests by its largest trading partner.

I agree there's an argument to be made here.  On the other hand, I do think that perhaps they overstate the case a bit at times.  For example, they say:

The United States, Canada, and the European Union recently won an important WTO-based concession from China which may have a positive effect in moving this issue forward. In November 2008, a formal complaint based on China's WTO obligations was settled by agreeing to allow financial information providers, including Thomson Reuters, Dow Jones and Bloomberg, to distribute financial news independently of the Chinese-controlled Xinhua news agency. These news organizations will now be able to set up shop independently of Xinhua and establish direct commercial relationships with Chinese subscribers -- and make it much harder for the Chinese government to censor news about the country's economy. While the issues are more complex in the case of broad Internet services, the idea that censorship and control of information violates fundamental trade principles has now been firmly established.

Reading this, I wonder which "trade principles" they have in mind.  In the financial services case, there were some non-discrimination issues (with Xinhua favored over foreign competitors), which are clearly a "fundamental trade principle."  By contrast, I'm not sure which trade principles are at issue here.  The authors perhaps imply there is discrimination in the censorship context when they say:

Censorship gives an unfair market advantage to Chinese internet providers like Baidu, which doesn't need to present a superior product to lead the market - it needs simply to offer operational and editorial compliance with what the government wants, or what Baidu thinks it wants.

However, it's not clear to me how Baidu has an advantage.  Aren't they being censored, too, and in the same exact way?  The core of the financial services case, it seems to me, was government action favoring a domestic company.  But from what I can tell, it's harder to make the case that this is what is going on here.

For more on this, see these three old posts.

Regulating Online Gambling, er, Predicting

From the AP:

The rising popularity of markets where guesses are wagered on the outcome of everything from presidential elections to celebrity marriages has led to a situation that, well, many had predicted.

The Commodity Futures Trading Commission on Thursday said it is considering whether these markets should be regulated, and how.

"Event markets are rapidly evolving, and growing, presenting a host of difficult policy and legal questions," Walt Lukken, the commission's acting chairman, said in a release. "What public purpose is served in the oversight of these markets and what differentiates these markets from pure gambling outside the CFTC's jurisdiction?"

...

[Iowa Electronic Markets' director, Joyce Berg] said some guidance is definitely needed to make a distinction between these markets and gambling, but doesn't want to see such markets regulated out of existence.

Two things interest me about this.  First, there is the "international" component:  Are they going to try to regulate "event markets" hosted outside of the U.S. or run by non-U.S. companies?  Will their actions in this regard lead to complaints about "trade barriers"?

Second, somewhat relatedly (and hinted at in the last part of the above quote), how do event markets differ from the online gambling at issue in the WTO Gambling dispute?  If event markets are legal (subject to regulation), can online gambling be prohibited?  And if they are not gambling services (and I think there is a good case that they are not), what exactly are they?

Trade and Censorship: The EU View

I've mentioned before some suggestions in the U.S. that internet censorship be treated as a trade barrier (see here and here).  Now the EU is getting into the act as well:

The European Parliament recently passed a proposal to treat Internet censorship by repressive regimes as a trade barrier. The proposal, submitted by Jules Maaten of the rightist Dutch VVD party, passed on a 571-38 vote. Maaten describes it as an "unusual, but effective way" to promote freedom of expression on the Internet.

The initiative targets countries that have enacted heavy restrictions what their citizens can do and see online. First and foremost on the list is China and its "great firewall." The Chinese government is well known for blocking certain phrases and web sites from view within its borders, and has also turned its attention to RSS feeds. The country also "encourages" bloggers to register with the government.

"The 'Great Chinese Firewall' should be seen as an international trade barrier," Maaten said according to Livre. "In addition to American companies like Google, Yahoo, and Microsoft, European Internet companies like Wanadoo, Telecom Italia, and France Telecom have to unwillingly censor their services in authoritarian states."

...

If adopted, Maaten's proposal would require the EU to classify any Internet censorship as a barrier to trade, and would require that the issue be raised in any trade negotiations. Economic sanctions and trade restrictions have been used in the past as means of getting countries to change their policies, but this is one of the first proposals to tie trade to 'Net censorship.

The measure will now go to the European Council for consideration. The Council can either adopt the proposal as passed by Parliament or send it back with further amendments. 

WTO Rules and Free Speech

This will be a fun case to watch if it goes anywhere:

The California First Amendment Coalition (CFAC), a free speech and government transparency group, has launched an initiative to use international trade laws to force the government of China to end its censorship of the Internet and to remove its barriers to U.S. companies supplying goods and services to the Chinese market via the Internet.

In a presentation to the Office of the U.S. Trade Representative (USTR) in Washington, D.C., CFAC and its lawyers petitioned for the filing of a complaint with the World Trade Organization (WTO), of which China became a member in 2001. The free speech group contends that China's censorship of the Internet--which has been described as the most sophisticated and effective system of censorship in the world-- violates China's obligations under agreements that it signed when it joined the WTO.

"China's censorship of the Internet, while fundamentally an issue of free speech and individual liberty, is also a significant barrier to U.S.-China commerce and, therefore, very much a trade issue," said CFAC executive director Peter Scheer. "In infringing the rights of its 1.2 billion citizens, China is also infringing the rights of American companies to sell goods and services to consumers in China, via the Internet," he said.

Among the agreements that China is alleged to have breached are the General Agreement on Tariffs and Trade (GATT), covering trade in goods, and the General Agreement on Trade in Services (GATS). The WTO has the authority to decide claims brought by member-nations alleging violations of the GATT and GATS agreements and to impose trade sanctions to enforce compliance. CFAC's initiative is, in effect, an effort to persuade USTR to file such a claim with the WTO, targeting China's censorship of the Internet and corresponding market access barriers.

From the CFAC web site:

This is to update CFAC supporters on our latest efforts to stir up trouble on behalf of First Amendment freedoms. I’m pleased to report that CFAC has managed to create a whole lot of trouble, both globally and locally, in the last 2 months.

First globally: CFAC has initiated a proceeding that will attempt to use international trade laws to force the government of China to end its censorship of the internet. In a submission and presentation to the Office of the US Trade Representative, CFAC has petitioned for the filing of a complaint with the World Trade Organization, of which China became a member in 2001.

Our (concededly novel) theory: that China’s censorship of the internet, the most pervasive and systematic system of censorship in the world, violates China’s obligations under treaties it signed (the GATT, covering free trade in goods, and the GATS, covering services) in order to join the WTO. We contend China must end its censorship or risk limitations on its access to US markets.

Think of this as the biggest access-to-information and free speech case in history. If the Trade Representative agrees with CFAC’s petition and files a complaint with the WTO, and if the WTO rules against China--big “ifs,” to be sure--some 1.2 billion Chinese citizens will, for the first time, have unfiltered access to information about the outside world, via the internet.

CFAC is represented by the national law firm of King & Spalding, whose Washington, DC office specializes in trade matters, including several successful cases against China. CFAC is supported in this initiative by a consortium of organizations, including the UC Berkeley Graduate School of Journalism, the Center for Internet and Society at Stanford Law School, the National Freedom of Information Coalition, and the China Internet Project at UC Berkeley, among others.

Stay tuned. You’ll be hearing a lot more about this matter.

ADDED: From a Reuters article.  Who is behind the case:

A California free speech group whose board of directors includes Google and Yahoo said on Monday it had asked U.S. trade officials to challenge China's Internet restrictions as a violation of global trade rules.

What are the chances it will go forward:

Scheer said he was encouraged by the interest the U.S. Trade Representative's office displayed in the coalition's case when he discussed it with them in late November.

"They asked the kind of questions that made it clear they were very engaged," Scheer said.

From Online Gambling to Online Everything

It has been clearly established that online gambling is within the WTO's jurisdiction. Now some want to expand the WTO's role in internet matters even further. The Associated Press reports:

Once relatively indifferent to government affairs, Google Inc. is seeking help inside the Beltway to fight the rise of Web censorship worldwide.

The online search giant is taking a novel approach to the problem by asking U.S. trade officials to treat Internet restrictions as international trade barriers, similar to other hurdles to global commerce, such as tariffs.

Google sees the dramatic increase in government Net censorship, particularly in Asia and the Middle East, as a potential threat to its advertising-driven business model, and wants government officials to consider the issue in economic, rather than just political, terms.

"It's fair to say that censorship is the No. 1 barrier to trade that we face," said Andrew McLaughlin, Google's director of public policy and government affairs. A Google spokesman said Monday that McLaughlin has met with officials from the U.S. Trade Representative's office several times this year to discuss the issue.

"If censorship regimes create barriers to trade in violation of international trade rules, the USTR would get involved," USTR spokeswoman Gretchen Hamel said. She added though that human rights issues, such as censorship, typically falls under the purview of the State Department.

...

One likely source for Google's censorship idea is a paper written two years ago by Timothy Wu, a professor at Columbia Law School, who argues that downloading a Web page hosted in another country effectively imports a service.

Drawing on that concept, Google envisions using trade agreements to fight back. The negotiated pacts would include provisions guaranteeing free trade in "information services." As is true of most trade pacts, the provisions would call for arbitration if there are violations.

...

Columbia's Wu said the trade pact approach is likely to be more effective when governments are guilty of blocking entire Web sites or applications, such as Internet phone-calling, than when they filter specific content.

I think this is the Tim Wu paper the article is referring to: The World Trade Law of Internet Filtering

ADDED:  It just occurred to me that a very early post by Joel also mentioned Tim Wu's article.