By Asheesh Agarwal
The Federal Trade Commission’s (FTC) Chair misapprehends the nature of the Chinese challenge to America’s global technological leadership. This misunderstanding could lead the FTC, and other policymakers, to support misguided legislative and regulatory efforts that would hamstring our domestic tech sector to the benefit of our overseas strategic competitors.
During an interview last week with CNBC, Kara Swisher asked FTC Chair Lina Khan whether competition from foreign companies, particularly Chinese companies, obviated any concerns about a lack of competition here at home. Swisher also asked whether U.S. policymakers should worry about Chinese efforts to invest in U.S. companies and gather consumer data and intellectual property from them. Finally, Swisher asked the chair for her views on China’s recent crackdown on its own tech sector.
The chair’s responses reflect at least three significant errors. In discussing China, Khan said that the United States should not adopt “national champions,” a model whereby countries decide to give certain companies a pass from law enforcement on grounds that those companies are too important to a nation’s economy. This is a red herring. No policymaker is arguing that the United States should treat tech companies as “national champions” or give them a pass from antitrust laws. The tech companies are and should be subject to the law, just like any other company. Indeed, Amazon, Apple, Facebook, and Google all are currently facing significant antitrust investigations or lawsuits, or both. Instead, people who support the current antitrust consensus oppose efforts to change the antitrust laws in ways that are designed to punish these and other tech companies. The United States should not change the rules to kneecap its most successful and innovative companies, even as it takes pain to ensure that those companies comply with existing law.
Next, the chair ignored the reality that foreign companies can and do compete with their American counterparts. This is not the 1950s, when most of the world’s leading companies called the United States home. Instead, companies like Alibaba, Tencent, Baidu, and Bytedance, which owns TikTok, offer competing services that can challenge American products. For the moment setting aside any security and privacy concerns, this competition can benefit consumers by providing them with a greater variety of products. They guard against American complacency. Khan, however, may not fully appreciate that the world is bigger than “Big Tech” and that efforts to cripple those companies could result in foreign companies, particularly Chinese companies who are state-owned and dominated, moving to fill the leadership void.
Finally, the chair misunderstands the nature of China’s crackdown on its domestic tech sector. As several observers have explained, China did not rein in its tech sector to protect consumers, or to combat high prices, but rather to protect the Chinese Communist Party’s (CCP) monopoly on power. President Xi and the CCP brought to its heel Jack Ma, founder of Alibaba, and other Chinese tech titans because they dared to show some independence from the ruling party. As a result, with the full backing of state and party resources, these Chinese companies are likely to become even bigger threats to American technological leadership. For instance, China has set a goal of erecting 10,000 “Little Giants” by 2025. These are Chinese “national champions,” promising startups that will receive tax breaks and financial incentives, along with protection from regulatory punishment.
Chair Khan is right that this form of competition is not the American way. It is, however, the way of the CCP. Given this reality, American policymakers should not rewrite the rules to handcuff America’s most innovative companies and leave them at a significant competitive disadvantage.