Posted by on September 20, 2020 8:41 am
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Categories: Tech


By Huan Zhu, courtesy of the Cato Institute

 

WeChat is an internet application owned by Chinese tech company Tencent. It may not sound familiar to most Americans, but it is a tool widely used in China and among Chinese communities world‐​wide. It is a one‐​stop‐​shop that combines payment services, social media, messaging platforms, and news outlets. This app is now facing a ban in the United States.

 

Last month, President Trump issued an executive order related to WeChat, under which any transaction that is related to WeChat by any person, or with respect to any property, subject to the jurisdiction of the United States” would be banned. The rationale was that WeChat continues to threaten the national security, foreign policy, and economy of the United States.” The order itself lacks details on how exactly a ban would work, and the Department of Commerce is expected to issue implementing rules by September 20. The scope of the regulation could range from banning the app from smartphone app stores, to banning all U.S. firms, even ones located outside of the U.S., from dealing with WeChat. The ban would affect both individual users of the app and businesses who rely on it.

 

WeChat does present some risks, but banning it nationwide is overkill. As I explain below, a more targeted approach, such as banning the app on work phones of defense department employees, like the Australian government did, or even for all government workers, is more reasonable.

 

As noted, there is a lot of uncertainty surrounding the executive order. With regard to individuals in particular, it is unclear what transactions” would be covered. If the ban is intended to take the application off the various mobile marketplaces, it will seriously disrupt person‐​to‐​person communications that have been crucial for the 19 million active WeChat users who live in the United States. For some of these users, WeChat is their main channel of keeping in touch and a primary source of information; for others, the app is one of the tools they use to make money and earn a living.

 

The inability to use WeChat in the United States could spook many potential Chinese students and visitors, resulting in a likely drop in school enrollment and tourism revenues. Chinese students contribute approximately $15 billion to the U.S. economy every year, and Chinese tourists contribute $36 billion. The number of Chinese students and tourists was already declining due to deteriorating U.S.-China relations and the COVID-19 pandemic. The WeChat ban, which makes the United States less attractive to Chinese visitors than other countries who allow the app, can only exacerbate this trend.

 

In addition, the ban could go well beyond personal access to the app and extend to associated business activities. The President of the American Chamber of Commerce in Shanghai has noted that all American companies, regardless of their location, could be barred from any transactions related to the WeChat application. Because WeChat is so deeply embedded in the Chinese peoples daily life and has become a platform for a wide range of activities, a ban on transactions related to WeChat would include sales, promotions, payments and other business activities. For instance, Starbucks and McDonald’s use the application as a marketing and sales platform. Filmmakers use WeChat to promote their movies and make ticket sales. Walmart and many other venders use the app to sell products. In fact, the app accounts for as much as 30% of all Walmart sales in China. A WeChat ban could cost corporate users significant revenues.

 

A ban could also result in a 30% decline of iPhone sales. Many Chinese netizens have said that if they have to choose between iPhone and WeChat, they will ditch their iPhones in a heartbeat.

 

According to a survey conducted by the American Chamber of Commerce in Shanghai, nine out of ten companies forecast that the ban would have a negative impact on their business in China, with nearly half of them predicting a loss of revenue because of the ban. Furthermore, a WeChat ban could add more fuel to the already tense relations between the United States and China, making it more difficult for businesses to operate. So far, 86% of companies have reported a negative impact on their business with China as a result of the growing tensions. The situation will only get worse with a WeChat ban.

 

Clearly, the WeChat ban comes with huge costs, but are their offsetting benefits? How big a security risk is WeChat, and would a ban mitigate this risk? With an increasingly hostile geopolitical rivalry brewing, the U.S. government needs to look carefully at the cyber practices coming out of China. The Executive Order indicates that the ban will protect user data from the Chinese government and fight against China’s “disinformation campaigns.” Will they do so?

 

Despite a lack of direct evidence on this point, there have been concerns that WeChat would share data with the Chinese government. If the administration is concerned about this with average citizens (as opposed to military personnel or other government employees, where special considerations apply), instead of banning the app, it could simply warn consumers of such risks and let the them choose whether to use the application. Individuals should have the freedom to decide the level of risk they are willing to take with regard to their personal information. It’s worth noting that the issues related to consumer data are much broader than WeChat. The Chinese government has other ways, such as through web tracking and datasets available on the Dark Web, to obtain users’ information. A better way to protect consumer data, from not only the Chinese government but all governments, is to establish more general domestic and international rules on data protection and hold countries and companies accountable for violating these rules.

 

The Executive Order also highlighted that a ban of the WeChat application will help to mitigate “disinformation campaigns.” As with user data, if the administration is concerned about campaign meddling, it is a much larger problem than WeChat and is happening on other platforms such as Facebook and Twitter and through other means such as hacking. Focusing on only one application is insufficient and could distract from other campaigns coming from other countries.

 

When foreign government try to collect data on American citizens and non‐​citizens living in America, for the purpose of manipulating them for political or other reasons, it is a serious issue. The U.S. government needs to get a handle on this problem immediately. In the case of WeChat, however, any national security benefits of a total ban are outweighed by the disruptions to people’s personal lives and the potential economic losses for individuals and businesses that would likely materialize in the presence of a ban. There are real concerns related to WeChat, but more targeted actions like the Australians have taken make more sense. A total ban on WeChat simply goes too far.

 

 


Huan Zhu is a research associate at the Cato Institute’s Herbert A. Stiefel Center for Trade Policy Studies, where her research primarily focuses on U.S.-China trade relations, WTO negotiations and disputes, as well as China’s trade and investment laws and policies.