U.S. Escalates Tech Cold War with Proposed TikTok Ban

Key Takeaways:

• National Security Concerns: TikTok has sparked significant debate over its ownership by the Chinese company ByteDance, raising concerns about implications for U.S. national security.

  
  

• National Security Creep: Some critics argue that the TikTok ban exemplifies a trend termed “national security creep,” where the U.S. expands scrutiny over corporate transactions under the guise of national security, blurring the lines between national security and economic security.

  
  

• Strategic Considerations and AI Geopolitics: The ban can be seen as a strategic maneuver in the emerging landscape of AI geopolitics, aiming to maintain U.S. technological edge by restricting China’s access to social media data for refining AI algorithms.

  
  

• Implications for Digital Firms and Market Fragmentation: The TikTok ban poses serious hurdles for digital enterprises, whether based in the U.S. or operating globally.
  

The widely-used short-form video app TikTok has sparked significant debate over its ownership by the Chinese company ByteDance, raising concerns about implications for U.S. national security, particularly in the context of ongoing tensions between the U.S. and China.

In response, the House of Representatives has acted decisively by passing a bipartisan bill with resounding support—352 votes in favor and 65 against. The legislation requires ByteDance to divest ownership of the platform within six months and failure to comply will result in a nationwide ban on TikTok across the U.S.

National Security vs. Digital Protectionism

Washington’s foremost concerns regarding TikTok are centred around its data harvesting practices, which include the collection and utilisation of user data, as well as its algorithmic functionalities, referring to the mechanisms that determine content distribution and user engagement. Additionally, there are apprehensions about espionage risks and influence operations associated with the platform.

Despite TikTok’s claims of operational independence from its parent company, doubts persist regarding data privacy and the susceptibility of TikTok’s data to Chinese intelligence access. Moreover, there are apprehensions about the platform’s potential for disseminating propaganda and extracting sensitive information to manipulate public sentiment.

With a staggering user base of 170 million in the U.S. alone, Washington fears that TikTok’s reach poses a significant threat in spreading potential misinformation, particularly in the context of the impending U.S. presidential election.

However, critics have denounced this manoeuvre as yet another demonstration of how certain U.S. politicians exploit the guise of national security for their own political agendas. They argue that the protectionist actions taken by U.S. lawmakers will endanger the rights of hundreds of millions of users and disrupt the operations of 5 million small businesses that depend on the social media platform for growth and job creation, ultimately eroding Chinese investors’ confidence in conducting business in the U.S.

The TikTok ban has garnered support from various U.S. politicians, including Mike Turner, chairman of the House intelligence committee. However, Turner’s simultaneous advocacy for the renewal of Section 702, a mass-surveillance authority, raises questions about potential contradictions in government policy regarding data control and privacy.

In December 2023, Turner presented a closed-door proposal urging the extension of Section 702, arguing that the Federal Bureau of Investigation (FBI) needed warrantless access to National Security Agency (NSA) databases to link pro-Palestinian demonstrators to Hamas. This proposal comes at a time when TikTok has become a significant platform for pro-Palestinian activism, hosting a plethora of content related to the ongoing Gaza conflict.

On the other hand, if the TikTok ban is enforced, American tech giants such as Alphabet, Meta, and Snap stand to benefit substantially. It is estimated that these companies could collectively gain approximately $431 billion in market value, assuming TikTok users migrate to alternative short-form video platforms operated by these corporations. Specifically, Alphabet’s stock could surge by 20%, while Meta and Snap could experience increases of up to 30% and 50%, respectively. Analysis

In the intricate arena of AI geopolitics, the United States and the People's Republic of China find themselves locked in a relentless race for supremacy. This strategic contest is driven by the imperative to secure a decisive advantage in the realm of data acquisition infrastructure, to pioneer the establishment of international norms, and to assert dominance in the development of AI technologies. Consequently, some policymakers perceive the TikTok ban not merely as a defensive measure but rather as an offensive strategic manoeuvre.

Against this backdrop, the recent surge in momentum to ban TikTok reflects several strategic considerations. One significant consideration is reciprocity. Given China’s restriction of U.S. companies like Google, some argue for the justification of the TikTok ban on the grounds that American competitors would stand to gain the most from it since they employ similar data collection and content recommendation strategies.

Another perspective suggests that banning TikTok could impede the Communist Party of China (CPC) from accessing social media data to refine facial recognition algorithms, potentially bolstering the U.S.’s technological edge in AI development.

The U.S. call for the TikTok ban represents the apex of a trend wherein the scope of national security scrutiny over corporate transactions has expanded over the years, encompassing a broader array of deals and even leading to their potential prohibition. This expansion, termed “national security creep,” is propelled by the U.S. government’s growing tendency to blur the lines between national and economic security. As this tendency advances, it unfolds in a context lacking a precise definition of what is essential for national security or uniform standards to gauge the effectiveness of security measures.

As a result, corporations and businesses face the challenge of navigating regulatory frameworks intended to protect national security amidst uncertainty about what exactly the U.S. seeks to safeguard and the approaches utilized. As the understanding of national security expands, so does the scope of regulatory authority wielded by the U.S. government to oversee it.

A prominent illustration of the “national security creep” phenomenon is evident in the U.S. approach to managing the security of the 5G supply chain, which has been a focal point of national security strategy for both the Trump and Biden administrations. Emphasizing the necessity of a dependable and secure backbone for the digital economy, the Biden administration has expedited the implementation of a series of trade measures aimed at diversifying supply chains and enhancing the resilience of 5G networks.

At the infrastructure level, building on Trump’s “Clean Network” initiative, the current Federal Communications Commission (FCC) has invoked similar national security justifications to mandate the removal of Huawei equipment and services from networks operated by U.S. telecommunications companies.

Implications

• Digital Service Providers: As the U.S. reinforces its national security agenda, the growing division in the online domain poses fresh hurdles for both local and international digital enterprises providing digital services in the U.S. Consequently, digital service providers must carefully strategise their market selection, entry methods, and local adaptations.

  
  

  • One distinctive feature of digital companies is their capacity to cater to international markets remotely by offering their digital platforms online.

    
    

  • Nonetheless, the imposition of the TikTok ban has intensified the need for digital firms to establish a tangible presence in markets other than the U.S.

    
    

  • Consequently, the TikTok ban has the potential to worsen the existing fragmentation of the internet, prompting numerous digital companies to explore market selection strategies beyond purely virtual realms.