Cockamamie TikTok deal fails on every measure

Only one thing is worse than a successful political shakedown of business and that is a botched political shakedown of business. But that is where we appear to be heading as Donald Trump threatens to call time on TikTok’s activities in the US.

Not only has the US president trampled over due governmental and legal process in dealing with TikTok, he has also failed to deliver on his earlier promise to ban the wildly popular Chinese, viral-video app in the US. A federal judge on Sunday blocked any ban coming into effect.

Rather, Mr Trump has given his preliminary blessing to a cockamamie deal that would give Oracle and Walmart a combined 20 per cent stake in a new US-based company, TikTok Global, while demanding that it contribute $5bn into a US educational fund (about which TikTok knows nothing) and pursue a public listing.

Mr Trump prides himself on “the art of the deal”. But this arrangement has all the artistic structure of an abstract spray painting by Jackson Pollock. 

For sure, there are good reasons to be concerned about TikTok’s activities in democratic societies, beyond its abilities to entice teenagers to jiggle. While many of its 100m US users would regard the app as harmless entertainment, TikTok has suppressed videos on sensitive subjects, such as Xinjiang and Tibet.

Like all Chinese companies, TikTok’s parent ByteDance operates at the whims of the Communist party. The flip side of any Chinese censorship is propaganda. Should it so wish, TikTok could target users in electoral swing states in the US to push — or undermine — a particular agenda or candidate.

If the overriding concern about TikTok is national security then it would make more sense to ban it outright, just as India has done. If we are living in a world of informational warfare then it matters who controls the platforms.

The deal’s details have yet to be clarified, but, as it stands, it skirts many of those national security concerns. True, TikTok’s data will be held on US servers and Oracle will have an oversight role. But ByteDance will retain control of the all-important algorithms that serve up content to its users and the Chinese government has signalled it does not want to share such important technology. ByteDance says it will also retain an 80 per cent stake in TikTok Global. 

Moreover, as Sinan Aral, co-leader of the Massachusetts Institute of Technology’s Initiative on the Digital Economy, argues, US-owned tech platforms, such as Facebook and Twitter, are themselves still open to manipulation by malign foreign powers. 

As he describes in his book The Hype Machine, Russian disinformation reached at least 126m people on Facebook in the 2016 presidential election and is still rampant today. This is a systemic failing that needs to be tackled, not a national security threat that can be expunged by one executive order.

The broader problem with the TikTok deal is the damaging politicisation of business. “To step in to decide winners and losers on the level of individual companies and individual deals is next to unprecedented in the US and sets a very dangerous precedent,” Prof Aral says.

The suspicion must be that Mr Trump does not want to alienate TikTok’s US users by banning the app outright so close to the American presidential election in November. But, at the same time, publicly beating up a Chinese company serves a political purpose.

Mr Trump has also done favours to his corporate friends at Oracle and Walmart while trumpeting that TikTok would create an additional 25,000 jobs in the US, mostly in Republican Texas.

Such arbitrary interventionism, however, risks retaliation abroad. Good luck in protecting the substantial business interests of Apple and Microsoft in China. Do not be surprised if the EU targets US tech companies even more energetically in its quest to defend technological sovereignty. It should also provide another reason for the British government to think twice about allowing Arm, the chip designer, to be swallowed by Nvidia and becoming another pawn on the US geopolitical chessboard.

Undoubtedly, China has treated many foreign tech companies abysmally while firewall-ing its domestic market. But the US will not outcompete China by becoming more like China.

It will most likely succeed by doubling down on the strengths that have made the US the world’s most innovative economy for so long: the free flow of people, ideas and technologies that have provided the rocket fuel for Silicon Valley, open and contested markets and adherence to the rule of law.

john.thornhill@ft.com

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