Why the TikTok Deal Also Impacts Germany
Published in Die Zeit
(Germany) on 21 September 2020
by Heike Buchter (link to original)
Whether Oracle is able to shield the video platform Tik Tok from Chinese influence is unclear. Only one thing is certain: Trump is fueling a worrying trend toward protectionism.
It was classic Donald Trump. On Friday, the U.S. president threatened to bar the Chinese video platform TikTok from the United States. A ban on downloading the app was set to take effect on Sunday. But just a few hours before the expiration of Trump’s deadline, he changed his mind.
The deal between TikTok’s Chinese owner ByteDance, American software company Oracle and retail giant Walmart has Trump’s blessing, as he announced on Twitter. ByteDance is supposed to create a new independent company named TikTok Global, which would oversee the worldwide business with its app. Walmart and Oracle together would get 20% of the shares. The two companies were to discuss the details of this deal within the upcoming week.
Oracle’s role was to make sure that the Chinese government does not have access to private user data. That was one of the requirements imposed by the U.S. government. Furthermore, Trump demanded that TikTok be owned by an American company and that its algorithm be handed over to the United States.
The deal which Trump has now affirmed does not meet either of those two requirements. ByteDance remains a co-owner. To achieve an American majority interest, one would have to add the shares of Oracle and Walmart and also the already existing investment funds from Sequoia and General Atlantic, which both hold seats on the board of ByteDance.
It also remains to be seen whether the deal will prohibit China from using TikTok as a Trojan horse to acquire the data of the 100 million American users and from censoring content. The sale of the algorithm was supposed to prevent this, but the Chinese government issued a new law that may prohibit the sale of such technologies to foreign countries.
It Is Unclear If the Deal Really Protects User Data
If the deal is approved by China, TikTok must inform Oracle when the algorithm by which users receive recommendations for content undergoes changes in the future. Additionally, Oracle will have access to the source code so it can check whether ByteDance is acting through a backdoor. It is still an open question in this forced marriage as to how the Americans are supposed to identify attempts at manipulation and possible influence while the algorithm continues to be under Chinese control.
Basically, Trump gets only what ByteDance promised him months ago. The company affirmed that China never received any data and that this wouldn’t happen in the future either. ByteDance also promised to move TikTok’s headquarters to the United States in order to create thousands of jobs there.
At the very least, Trump was able to do a friend a favor by making sure that Oracle got the deal. The company’s founder and chairman of the board, Larry Ellison, is among the few tech entrepreneurs of Silicon Valley who are openly supporting Trump. As recently as February, he opened his home for a Trump campaign fundraiser.
Trump Has a Calculated Anti-China Course
The president has already prevented Chinese telecom supplier Huawei from selling its infrastructure for the 5G mobile communication standard in the U.S. The measures taken against TikTok, however, are a hitherto unprecedented interference. The video platform appeals mainly to teenagers and young adults. Compared to the rest of the population, Trump supporters are likely to be underrepresented on the platform. TikTok users have staged several creative protests against the U.S. president.
By taking a hard line against a Chinese company, Trump is trying to continue the success of his 2016 campaign. Back then, this approach helped him with Rust Belt voters in particular. There, a lot of people blame their loss of employment, as well as the ongoing decline in competitiveness in the former industrial regions on the outsourcing of positions to foreign countries. Trump is apparently hoping to mobilize these voters once again.
As one would expect, China expressed its anger. During a press conference last week, Chinese Foreign Ministry spokesman Wang Wenbin said that TikTok had been hunted and cornered by the U.S. government. Trump's course of action, according to Wenbin, showed America’s true intentions and laid bare “the ugly face of economic bullying.”
A New Era of Protectionism Is Looming
The Chinese government itself, though, frequently shuts out foreign companies, which are forced to merge with Chinese partners and share their technology in the process. The fact that Trump, as president of the country that usually poses as the pioneer of a free market economy, is stooping to this level makes matters even worse.
The U.S. president has long since kicked off a new wave of protectionism, which is intensified by the pandemic. Trump is no longer alone among Western governments in this effort. The French government is trying to prevent the acquisition of Tiffany & Co., the jewelry company from New York, by luxury company LVMH, an acquisition that was already settled in 2019.
LVMH, owner of brands like Dom Pérignon and Louis Vuitton, wants to cancel the merger, and is pointing to a letter by the government in Paris, in which French Foreign Minister, Jean-Yves Le Drian recommended a deferral because of Trump’s threats to put tariffs on French exports — a reaction to the French plans for a digital tax, which would heavily impact U.S. technology companies.
The more governments interfere with the economy in this manner, the more endangered international trade becomes. This is risky for Germany as well. Germany’s economy still relies on exports, which in turn need freely accessible markets. At first glance, disputes about luxury purses and the struggle for the American version of a video platform on which teenagers show off dance moves seem to have little to do with our everyday life. In reality, it signifies a trend that threatens the German economy and prosperity as well.
It was classic Donald Trump. On Friday, the U.S. president threatened to bar the Chinese video platform TikTok from the United States. A ban on downloading the app was set to take effect on Sunday. But just a few hours before the expiration of Trump’s deadline, he changed his mind.
The deal between TikTok’s Chinese owner ByteDance, American software company Oracle and retail giant Walmart has Trump’s blessing, as he announced on Twitter. ByteDance is supposed to create a new independent company named TikTok Global, which would oversee the worldwide business with its app. Walmart and Oracle together would get 20% of the shares. The two companies were to discuss the details of this deal within the upcoming week.
Oracle’s role was to make sure that the Chinese government does not have access to private user data. That was one of the requirements imposed by the U.S. government. Furthermore, Trump demanded that TikTok be owned by an American company and that its algorithm be handed over to the United States.
The deal which Trump has now affirmed does not meet either of those two requirements. ByteDance remains a co-owner. To achieve an American majority interest, one would have to add the shares of Oracle and Walmart and also the already existing investment funds from Sequoia and General Atlantic, which both hold seats on the board of ByteDance.
It also remains to be seen whether the deal will prohibit China from using TikTok as a Trojan horse to acquire the data of the 100 million American users and from censoring content. The sale of the algorithm was supposed to prevent this, but the Chinese government issued a new law that may prohibit the sale of such technologies to foreign countries.
It Is Unclear If the Deal Really Protects User Data
If the deal is approved by China, TikTok must inform Oracle when the algorithm by which users receive recommendations for content undergoes changes in the future. Additionally, Oracle will have access to the source code so it can check whether ByteDance is acting through a backdoor. It is still an open question in this forced marriage as to how the Americans are supposed to identify attempts at manipulation and possible influence while the algorithm continues to be under Chinese control.
Basically, Trump gets only what ByteDance promised him months ago. The company affirmed that China never received any data and that this wouldn’t happen in the future either. ByteDance also promised to move TikTok’s headquarters to the United States in order to create thousands of jobs there.
At the very least, Trump was able to do a friend a favor by making sure that Oracle got the deal. The company’s founder and chairman of the board, Larry Ellison, is among the few tech entrepreneurs of Silicon Valley who are openly supporting Trump. As recently as February, he opened his home for a Trump campaign fundraiser.
Trump Has a Calculated Anti-China Course
The president has already prevented Chinese telecom supplier Huawei from selling its infrastructure for the 5G mobile communication standard in the U.S. The measures taken against TikTok, however, are a hitherto unprecedented interference. The video platform appeals mainly to teenagers and young adults. Compared to the rest of the population, Trump supporters are likely to be underrepresented on the platform. TikTok users have staged several creative protests against the U.S. president.
By taking a hard line against a Chinese company, Trump is trying to continue the success of his 2016 campaign. Back then, this approach helped him with Rust Belt voters in particular. There, a lot of people blame their loss of employment, as well as the ongoing decline in competitiveness in the former industrial regions on the outsourcing of positions to foreign countries. Trump is apparently hoping to mobilize these voters once again.
As one would expect, China expressed its anger. During a press conference last week, Chinese Foreign Ministry spokesman Wang Wenbin said that TikTok had been hunted and cornered by the U.S. government. Trump's course of action, according to Wenbin, showed America’s true intentions and laid bare “the ugly face of economic bullying.”
A New Era of Protectionism Is Looming
The Chinese government itself, though, frequently shuts out foreign companies, which are forced to merge with Chinese partners and share their technology in the process. The fact that Trump, as president of the country that usually poses as the pioneer of a free market economy, is stooping to this level makes matters even worse.
The U.S. president has long since kicked off a new wave of protectionism, which is intensified by the pandemic. Trump is no longer alone among Western governments in this effort. The French government is trying to prevent the acquisition of Tiffany & Co., the jewelry company from New York, by luxury company LVMH, an acquisition that was already settled in 2019.
LVMH, owner of brands like Dom Pérignon and Louis Vuitton, wants to cancel the merger, and is pointing to a letter by the government in Paris, in which French Foreign Minister, Jean-Yves Le Drian recommended a deferral because of Trump’s threats to put tariffs on French exports — a reaction to the French plans for a digital tax, which would heavily impact U.S. technology companies.
The more governments interfere with the economy in this manner, the more endangered international trade becomes. This is risky for Germany as well. Germany’s economy still relies on exports, which in turn need freely accessible markets. At first glance, disputes about luxury purses and the struggle for the American version of a video platform on which teenagers show off dance moves seem to have little to do with our everyday life. In reality, it signifies a trend that threatens the German economy and prosperity as well.
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