GP Insights

GP Insights # 416, 19 September 2020

TikTok: After months of uncertainty, there is a deal on the US horizon. Trump has given his "blessin
Parikshith Pradeep

What happened?
On 19 September, Trump gave his blessings to a concept deal on the use of the in the US. He was quoted to have saying: "I have given the deal my blessing, if they get it done that's OK too, if they don't that's fine too." According to a WSJ note, President Trump said agreed "in concept to a deal" under which the "Chinese-owned video-sharing app TikTok will partner with the Oracle in the US." The New York Times quoted the President: "It'll be a brand-new company…It will have nothing to do with any outside land, any outside country."
According to the WSJ report, it would become a US-based company, "capping negotiations that have stirred debate over national security and the future of the internet." The report also quoted the Chief of Oracle: "We are a hundred percent confident in our ability to deliver a highly secure environment to TikTok and ensure data privacy to TikTok's American users, and users throughout the world." 
Earlier, on 18 September, the US Commerce Department released a press note placing 'prohibitions on transactions' on the Chinese video app 'TikTok' in the wake of an executive order released this August. The presidential executive order exclusively mentions the threat to 'national security, foreign policy, and the economy of the United States,' posed by the Chinese owned companies. It alleges 'data collection' by these companies and the perceived threat of the 'Chinese Communist Party's' access to personal information of US users. In response to this, China has accused the US of "bullying' and 'political manipulation." Ironically, the Chinese foreign ministry held that the move went "against the principles of the market economy."

What is the background?
First, the security debate over the TikTok. The app grabbed attention after an American economic think tank released a report in November 2019, highlighting TikTok's popularity amongst US Armed Forces and its adverse effect on national security. The report flagged threats from facial recognition, location sharing and undeniable data access to the Chinese government, citing China's Internet legislations. Following which the US Armed Forces employees and the Pentagon employees were barred from using TikTok. Legislative actions and representative advocacy pushed for investigations. Sen. Hawley called out Tiktok for a congressional testification, for which the Beijing based business failed to show up. 
Second, corporate interests. The company in its efforts to portray distance from the Chinese placed an American CEO, who later resigned after a very short tenure. While the app can still be functional post its ban, it can only do so till 12 November without updates. On the business side, Trump's security concerns are being worked out by US giants such as Oracle and Walmart. The corporate objective has been shaped, keeping in main data security, storing user data in the US and national security interests.

What does it mean?
First, Tiktok's functional openness and operations surpassing borders are valid, but national security necessitates a healthy compromise in the wake of data privacy. Considering Beijing's geopolitical assertiveness, the dominance of Chinese technology on a global level upholds Trump's stance and concerns. The app's large user base in the US, with 50 million users daily hint at better prospects for Trump.
Second, China's technological dominance is vital to its status quo, something it would rather build upon. Beijing could lower its tone on this issue, but its past actions indicate rarity in doing so. Temporary stooping is a tactic one could learn from the Chinese.
Third, data security has become central to electoral politics as an issue that has roped in urban minds. An element of inclusivity is in play, for countries like India that has banned several Chinese apps, and gained major support. Trump's move in the wake of allegations against Chinese companies after India, could be a strong front runner.
Fourth, the strain in techno-corporate and political relations could sow seeds to restructure service sectors that play a major role in the value chain. In corollary, what was once a virtual space for the digital world now has borders and occasional ceasefires. 

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