Policy Internet - 2022 - Mueller - Regulation of Platform Market Access by The United States and China Neo Mercantilism

Received: 2 November 2021 | Accepted: 9 May 2022
DOI: 10.1002/poi3.305
RESEARCH ARTICLE
Regulation of platform market access by the

United States and China: Neo‐mercantilism
in digital services
Milton L. Mueller | Karim Farhat
School of Public Policy, Georgia Institute of

Technology, Atlanta, Georgia, USA Abstract
China and the United States host the world's largest
Correspondence digital platforms. Platforms are multisided markets that
Milton L. Mueller, School of Public Policy, facilitate value‐creating exchanges among users, such
Georgia Institute of Technology, Atlanta, GA,
USA.
as social media, e‐commerce, software QJ;application
Email: milton@GATECH.EDU downloads, search, email, and cloud services. Internet
access and the purely digital nature of many of the
products and services make digital platforms poten-
tially global in scope. This means that the rules and
restrictions governing the flow of capital and informa-
tion services among national markets strongly influ-
ence the economic and social potential of digital
platforms. The paper conducts a sequential analysis of
the rise of barriers to the United States–China trade in
ICT and digital platform markets from 2000 to 2021.
We find that China's thriving platform economy was
relatively open, competitive and market‐driven in its
early stages, and benefited from U.S. capital and the
entry of U.S. firms. Since 2009, both countries have
progressively restricted access to each other's domes-
tic information services markets. In both cases, the
primary stated rationale involved national security
claims rather than trade policy concerns. Drawing on
International Political Economy theory, we label the
United States–China interaction pattern digital neo‐
mercantilism. Digital neo‐mercantilism fuses the
power and security of the national state with economic
development in the digital economy. Policymakers
represent information flows and digital technologies in
domestic policy discourse as critical to the security
and relative power of the state, and pursue various
forms of industrial policy, data localization, trade
protectionism, or exclusion of foreigners as a result.
348 | © 2022 Policy Studies Organization. wileyonlinelibrary.com/journal/poi3 Policy Internet. 2022;14:348–367.

19442866, 2022, 2, Downloaded from https://onlinelibrary.wiley.com/doi/10.1002/poi3.305 by <Shibboleth>-member@leedsmet.ac.uk, Wiley Online Library on [06/05/2024]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on Wiley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License
POLICY & INTERNET | 349
Both the United States and China are following this

policy.
KEYWORDS
Alibaba, digital platforms, Google, Huawei, International Political
Economy, International Trade, Internet Governance,
Neomercantilism, United States–China relations
INTRODUCTION
In the past 10–12 years, the United States has undergone a major shift in attitude toward
China, seeing it as a systemic threat. In the minds of the U.S. military, politicians, and
policymakers, technology is at the center of that threat. The technological competition in
space and weaponry between the United States and the Soviet Union does not provide
much precedent, because there was little economic integration tying the Soviet bloc and the
West together. China confronts the United States with a highly connected but competing
system of political economy. It accepts domestic and global markets and competitive
enterprises, subordinates them to an authoritarian, one‐party state and protectionist trade
policy. Economic interdependence is vital to both countries’ interests but its asymmetrical
nature is also a source of tension and competition.
Much of the tension stems from both countries’ attempts to lead the digital economy. As
this paper will show, this competitive struggle is more asymmetrical than most people
realize, with the United States in a far stronger position (Jia et al., 2018). Nevertheless, the
United States and China stand apart from the rest of the world as the countries with the
biggest and most globally prominent commercial digital platforms. A survey of platform
companies by Evans and Gawer (2016) found that platforms headquartered in America and
China accounted for nearly 90% of the combined market value of all the platform firms
counted. A ranking based on 2022 market capitalization data (Table 1) shows that all but
one of the world's top 20 platforms are headquartered in the United States or China.1 United
States and Chinese companies dominate the world's platform businesses and technologies
to an astounding degree.
United States–China dominance in the platform space makes trade relations between
the two countries highly significant for global digital governance. If there were mutual, open
market access between the two it would enhance specialization, pool knowledge and R&D
investments, increase competition in both countries and develop a set of common rules.
Such an integrated digital economy would likely set the terms for the entire world. A digital
economy split between the United States and China, on the other hand, becomes a tool of
geopolitical competition between the world's two largest economic and military powers. This
could lead to diverging standards and rules, diminished trust, less business competition, and
barriers to market entry and technology transfer.
This paper shows that policymakers in both countries are going down the path of a
divided platform economy. We label the interaction pattern digital neo‐mercantilism because
it denotes a fusion between economic development in the digital economy and the power
and security of the national state. At a time when digitization is transforming the global
economy, policymakers represent these sectors in domestic policy discourse as critical to
the security and relative power of the state, and pursue various forms of industrial policy,
trade protectionism or exclusion of foreigners as a result.
We believe that naming this pattern is essential to understanding and assessing it.
Our use of the term draws on classical political economy (Magnussen, 2015) but is also
350 | MUELLER AND FARHAT
TABLE 1 World's 20 largest platforms by market cap (2022).
Rank Name Market cap (Bn) HQ country
1 Apple $ 2546 USA
2 Microsoft $ 2055 USA
3 Alphabet (Google) $ 1524 USA
4 Amazon $ 1168 USA
5 Meta (Facebook) $ 583 USA
6 Tencent $ 428 China
7 ByteDance $ 400 (est) China
8 Alibaba $ 247 China
9 Adobe $ 185 USA
10 Salesforce $ 169 USA
11 Meituan $ 124 China
12 Sony $ 105 Japan
13 PayPal $ 95 USA
14 ServiceNow $ 92 USA
15 Jingdong Mall (JD) $ 90 China
16 Booking.com $ 89 USA
17 Airbnb $ 88 USA
18 Netflix $ 80 USA
19 Activision Blizzard $ 61 USA
20 NetEase $ 59 China
informed by recent theoretical work in International Political Economy that focuses on

the way states exploit the interdependencies created by global financial and
communication networks (Farrell & Newman, 2019). We develop a deeper explanation
of why we have adopted this centuries‐old term in the last section.
To track the emergence of digital neo‐mercantilism, the paper conducts a sequential
analysis of United States–China trade in internet and digital platform markets over the
period from 2000 to 2021. We find that since 2009, both countries have progressively
restricted access to each other's domestic information services markets. Notably, in
both cases the primary stated rationale involved national security claims rather than
trade policy concerns.
The paper has the following structure. Part 1 briefly defines platforms as software‐
based information services and shows how they are, due to internet connectivity,
naturally transnational in scope. Part 2 analyzes the way U.S. platforms’ access to the
Chinese market evolved from 2000 to 2021. Part 3 analyzes the way Chinese
platforms’ access to the American market evolved over the same period. Part 4
compares the United States and Chinese market access policies. Part 5 draws on
Sections 2, 3, and 4 to identify and describe the interaction pattern it labels digital neo‐
mercantilism.
PLATFORMS AND TRADE IN SERVICES

An extensive economic literature characterizes platform business models as two‐sided or
multisided markets (Evans & Schmalensee, 2016; Van Alstyne et al., 2016; Kenney &
Zysman, 2016). Platforms “function as an interface between different groups of users and
facilitate value‐creating exchanges” (Cennamo & Santalo, 2013, p. 1331). They match users
and advertisers, buyers and sellers of physical goods (Alibaba, Amazon, eBay), riders and
cars for hire (Uber, Lyft, Didi), job providers and job seekers (Indeed, Upwork, BOSS),
producers and users of informational goods (YouTube, Twitter, Facebook), payers and
payees (Alipay, WeChat), the owners and prospective renters of lodging facilities (AirBnB),
and so forth.
Platform business models existed before the advent of digital technologies. Newspapers
and broadcasters were two‐sided markets bridging advertisers and audiences. Shopping
malls and department stores fulfilled a similar function (Cohen, 2017, p. 137). Digital
technology, however, enables massive increases in the efficiency, scale and scope of
multisided markets. An important observation—so central that it is often overlooked—is that
the platforms’ intermediation functions are driven by software applications and are
instantiated on networked digital devices. Algorithms and software applications rapidly
match the various sides of the market.
In the framework defined by the General Agreement on Trade in Services (GATS),
platforms are “computer and related services” (Gao, 2018). Digital information services are
easily exportable across national markets. As such they are much more disruptive
economically than earlier, predigital platforms such as broadcasting or mail‐order catalogs.
The nonphysical nature of software applications, the purely digital manifestation of many of
the products and services, and the globalized access created by the internet make digital
platforms less geographically constrained than their predecessors. Policies regarding trade
in information services—that is, the regulations governing platforms’ access to national
markets—are thus important factors affecting the economic and social potential of digital
platforms.
U.S. PLATFORMS’ ACCESS TO CHINA

This section examines the rise of China's platform economy and the extent to which it was
open to U.S. firms and investors. One of the great myths surrounding China's platform
economy is that it is the product of a state economic policy geared toward the cultivation of
national champions. Baidu, Alibaba and TenCent (so‐called BAT) are said to have reached
their current size because they were promoted by the state and protected from foreign
competition (Plantin & de Seta, 2019). This view is fundamentally wrong on two counts.
First, China's successful platforms were not encouraged by the government in their early
development. They emerged from domestic entrepreneurs and private companies financed
by mostly foreign capital. Second, China's Internet market was relatively open to U.S. firms
in the early years of platform development. The successful Chinese platforms grew up in an
intensely competitive marketplace and succeeded not because of techno‐nationalist
protection but because they were able to respond more rapidly and flexibly to local
conditions than partnerships governed by remote foreign corporations.2 China's internet and
platform markets were not wide open. Restrictions followed the same pattern developed in
the telecommunications sector (Mueller & Tan, 1996). There were licensing requirements
that discriminated against foreign firms, restrictions on foreign ownership and investment,
and technical blocking of Internet access. Still, the formative period of China's platform
economy—from about 1998 to 2010—was one of market‐driven entrepreneurial capitalism.
As demonstrated below, technical blocking was the most important constraint. Any
platform services involving content (search, video, news, email, etc.) had to conform to CCP
censorship in exchange for market access. Censorship created competitive disadvantages
for American entrants, but those restrictions were lighter and less systematic in the first
decade of the 21st century than they are now. Blocking did not begin to target entire
platforms until mid‐2009. As will be clear from the material below, political, not economic,
protectionism motivated this change. The Party feared that Internet‐fueled discourse and the
free exchange of news and information would undermine its control of the country.
Chinese restrictions on foreign investment

Chinese government foreign investment regulations classify industry sectors into encour-
aged, restricted, or prohibited categories. Many internet and telecommunication business
activities fall into the restricted or prohibited category.3 At the same time, China willingly
grants access to its domestic market when it facilitates transfers of technology and know‐
how to domestic firms. Although this exchange of market access for learning is sometimes
done with the explicit goal of developing domestic replacements for foreign products (USTR,
2018), imitative, catch‐up tactics of that sort could not easily be applied to newly emerging
market forms such as platforms.
Even when the Chinese government restricts foreign investment and ownership,
stakeholders in the Chinese economy devised corporate structures designed to evade the
restrictions, and the government looked the other way until recently. In a typical maneuver,
Chinese private Internet companies split into an offshore holding company in the Cayman
Islands or a similar tax haven, and a domestic corporate entity that held the licenses
required to operate in China. Foreign investors could then buy shares in the offshore holding
company of the onshore entities. The onshore entities further separate into two parts: (1)
wholly foreign‐owned enterprises, which can operate in open businesses and (2) variable
interest entities (VIEs), which try to include the restricted or prohibited part of the business in
the offshore holding company. The VIE structure was an essential requirement for Alibaba's
IPO in the U.S. stock market (Burke & Eaton, 2016). As a result, there has been a
substantial foreign presence in the development of China's platform economy.
E‐commerce
E‐commerce gave rise to some of America's and China's biggest platforms. As far as we
know, China has never blocked Internet access to major consumer‐to‐consumer (C2C) and
business‐to‐business (B2B) e‐commerce platforms. EBay and Amazon, the two major
American e‐commerce platforms, were early entries into the Chinese market. Amazon
entered it in 2000, but had trouble competing with rivals that offered free shipping or did not
require minimum order thresholds. EBay entered China in 2002 with a $30 million
investment in Eachnet, a Chinese C2C marketplace founded in 1999 by two Chinese
entrepreneurs with degrees from Harvard Business School. Eachnet traded apparel,
electronics, and real estate on the platform, accounting for 95% of China's small (at that
time) online C2C market (Sinha, 2018). In 2003, eBay spent $150 million to acquire 100%
ownership of Eachnet. Amazon, in 2004, decided to acquire a local partner and purchased
bookseller Joyo.com for U.S. $75 million. Founded in 2000 by prolific Chinese entrepreneur
Lei Jun, Joyo was renamed Amazon China but withered under Amazon's ownership due to
the low priority afforded it in the company's global strategy (Jiang, 2011).
Domestic e‐commerce firm Alibaba was founded in 1999. Attesting to the mindset and
goals of its founder, Jack Ma, Alibaba's first website was in English and was aimed at a
global wholesale market. Alibaba acquired most of its start‐up capital from investors in the
United States and Japan (Goldman Sachs $5 m, Softbank $20 m). In 2002, it became
profitable and raised $82 million additional capital from foreign sources. In 2003 it started
Taobao Marketplace, a C2C platform that competed with eBay, and rejected eBay's offer to
buy it out. By March 2006, eBay China's market share had dropped to 29%; Taobao had a
67% share. Later in 2006 Alibaba solidified its financial position by forming a strategic
partnership with Yahoo!, an American competitor of eBay. Yahoo! invested $1 billion in
Alibaba Group, in exchange for a 42% equity interest. Alibaba Group went on to stretch
China's restrictions on foreign investment and western accounting standards to the limit by
using the VIE/offshore holding company structure to obtain a listing on the New York Stock
Exchange in 2014, raising a record $25 billion. It is now the dominant force in Chinese e‐
commerce and one of China's two biggest multisided, multiproduct platforms.
Because of the lighter market access barriers, the e‐commerce market provides a taste
of what a more globally integrated platform market would look like. Consultancy reports
(Koetsier, 2020) value the global e‐commerce market at $3.4 trillion. Alibaba Group's
Taobao accounts for 15% of that market, Alibaba's TMall accounts for 14%. Amazon
accounts for 13%, JD.com holds 9%, Pinduoduo 4%, and eBay 3%. The next 5% of the
world market is held by 6 large, mostly Chinese and American companies: Rakuten (Japan),
Walmart (USA), VIP.com (China), Sunning.com (China), Apple (USA), and Shopee
(Singapore). The remaining 37% of the market is divided between hundreds of companies,
large and small (Koetsier, 2020).
Search, portals, and social media

Internet portals, search, and social media platforms are more affected by Chinese market
access restrictions than e‐commerce platforms because they link users to uncensored
content. First Yahoo! and Microsoft, then Google, and later Facebook, Twitter, Pinterest,
and Reddit became available to Chinese users. They were surprisingly prevalent until 2009
and were not systematically shut out until after 2014. Upon first entering the China market,
the big American companies tried to conform to China's censorship regulations by altering
their results or eliminating access to prohibited materials. They also cooperated with law
enforcement requests for access to customer data, leading to criticism from human rights
advocates.4
Reflecting its initial positioning as a portal (the early Internet precursor to platforms),
Yahoo! China offered email and instant messaging, Chinese translations of U.S. news,
finance, weather information, and a directory of 20,000 websites. Despite the growth of
Internet users in China by a factor of 8 in the next three years, Yahoo! China languished
(Decker, 2014). So in November 2003 it acquired a local search company that sold Chinese‐
language keywords to advertisers that would link to ASCII domain names. This partnership
was not successful; as with Amazon, it was undone by the difficulties of meshing foreign
corporate governance with local knowledge and initiative. Not until Yahoo! merged its China
operations with Alibaba and agreed to “give up all operating control” did its investments in
China yield value (Decker, 2014). The sale of some of Yahoo!'s shares in 2012 resulted in a
pretax gain of $4.6 billion on its initial investment (Burke & Eaton, 2016).
In 2000, Google provided a Chinese‐language version of Google.com that ran on U.S.
servers. The United States‐based site's ability to compete with Baidu and other Chinese
search engines was hampered by limited international bandwidth, which slowed search
results, and by sporadic blocking from censors. Nevertheless, it was available for 6 years
and achieved a 10%–11% share of search users. In 2006, Google launched a local version
of its search engine, Google.cn, using servers in China. To gain market access, Google
agreed to conform to official government restrictions on content, including pornography,
gambling, and politically sensitive subjects such as Tiananmen Square, Taiwan, and the
Falun Gong. Microsoft and Yahoo had already agreed to similar restrictions for their
blogging sites, indexes, email, and search engines. In returning search results, however,
Google notified its users that some results were removed. “That public acknowledgment of
internet censorship was a first among Chinese search engines, and it wasn't popular with
regulators,” according to a journalist's report (Sheehan, 2019). During the 2006–2009
period, Google's market share in China search grew from 12% to 35%. Facebook and
Twitter were also accessible in China during this period.
The door started to close in the middle of 2009. Two incidents precipitated a change. The
first was a June 2009 outbreak of ethnic conflict between Uighurs and Han Chinese in
Guangdong Province, which led to riots and demonstrations in Xinjiang Province's capital
city in July. It was then that the Chinese government imposed a complete blackout of
Facebook, Twitter, and Google's YouTube. The second precipitating incident was Google's
discovery in December 2009 that it had been hacked by an adversary using very
sophisticated methods. Google concluded that the adversary was a Chinese state actor, and
that its motive was to break into the Gmail accounts of human rights activists. On January
12, 2010, Google announced, “We have decided we are no longer willing to continue
censoring our results on Google.cn.” (Zetter, 2010) The redirection of search requests from
that site to the uncensored Google.hk eventually led to the complete blocking of Google.cn
in mainland China. The eruption of the Arab Spring in 2011 and 2012 reinforced Chinese
fears of uncontrolled social media. In mid‐2014, a few months before Alibaba's IPO, the
government blocked virtually all Google services in China, including Gmail, Google Maps,
and Google Scholar.
Currently, Microsoft's Xbox, Bing, Outlook, and LinkedIn are permitted to operate in
China. The market access of Microsoft products and services, however, are constantly
under threat from censorship or national security restrictions. Even though Bing manipulates
and censors its search results for Chinese users in line with the Communist Party's policies,
in early 2019, it was briefly blocked with no public explanation. Skype was available for many
years, but in the autumn of 2017 the Ministry of Public Security ordered it removed from the
Apple and Android app stores.5 One indicator of the impact of politically motivated market
access restrictions is shown in the evolution of search engine usage share in Figure 1 below.
American platforms’ usage share declined from 40% in 2009 to about 5% in 2020.
F I G U R E 1 Metrics showing usage share of search engines. Source: Statcounter https://gs.statcounter.com/

search-engine-market-share/all/china
Ride‐hailing platforms
Uber's foray into the Chinese ride‐hailing market in 2014 demonstrated that China's platform
market was still open to foreign entry if the services did not involve content. Two major
Chinese companies had already entered the ride‐hailing market in 2012 and 2013, each
backed by incumbent platform operators: Tencent supported Didi Dache; Alibaba backed
Kuaidi Dache. Uber entered in 2014, funded mostly by foreign venture capital but supported
by Baidu, China's third biggest platform.
Didi and Kuaidi held 55% and 40% market shares, respectively, at the beginning of 2014.
After testing the market in late 2013, Uber formed the Uber China subsidiary and launched
operations in Beijing and Shanghai in July 2014 using Baidu's map for positioning and
navigation functions. Uber hired local managers and empowered them to run operations in
their cities. After a year, it had expanded to 9 cities and had a 15%–20% share of the
growing market.
In February of 2015, the two big Chinese ride‐hailing platforms merged to form Didi
Kuaidi. As this happened, Uber precipitated a market disruption by implementing the radical
business model it was pioneering in the rest of the world, which allowed non‐taxi drivers to
monetize their private cars. In the Spring of 2015, Uber introduced this innovation in China
under the label “Peoples Uber.” This move not only disrupted the economics of the market,
setting in motion intense competition to attract drivers, but disrupted legal and regulatory
arrangements as well.6
In response to Uber's competition, Didi Kuaidi raised U.S. $4.5 billion from a group of
foreign and domestic investors in June 2016, and received a $2.5 billion syndicated loan
arranged by China Merchants Bank Co. A month later, Chinese authorities announced new
regulations to settle the issues raised by the rapidly expanding industry. They loosened
cartel licensing of taxis but required drivers to provide evidence of 3 years of driving
experience and no record of traffic accidents. Services were also required to provide
customers with official receipts. Shortly after publication of the new regulations on August 1,
2016, Didi Kuaidi announced that it would acquire Uber China, consolidating the biggest
players.7 Didi went on to expand into regional and international markets (Jia et al., 2018).
In this case, competing foreign firms and foreign investors profoundly shaped the
development and growth of China's ride‐hailing platform. Without deeper research, it is
difficult to know for sure whether the buyout was driven primarily by private, market‐oriented
deals among the competitors, or a state policy favoring domestic suppliers. Likely, it was a
mix of both but more the former. In their competition for drivers, the contestants had spent
billions on subsidies, and realized that they would all profit if they stopped competing in a
market with winner‐take‐all characteristics. While events forced regulators to update the
rules governing taxis to account for car‐sharing by unlicensed drivers, when it came to the
merger they were little more than approvers of a business deal.
Cloud services
Cloud service providers (CSPs) emerged a decade after the original e‐commerce and social
media platforms. Companies operating platforms learned that the advanced software
capabilities enabled by their own infrastructure could be rented out to third party customers.
Platforms could offer Software as a Service (SaaS), Infrastructure as a Service (IaaS), and
Platform as a Service (PaaS). Unsurprisingly, given the complementarity between platform
supply and cloud services, the main players in cloud services are the major American and
Chinese platforms: Amazon, Microsoft, Google, Alibaba, and Tencent.
To operate in China, CSPs must obtain value‐added telecommunication licenses from

China's Ministry of Information Industry and Technology (MIIT) or its provincial counterpart.
In keeping with its longstanding suspicion of foreign control of ICT infrastructure, China does
not grant such licenses to foreign companies (USTR, 2018, p. 40). To support a global
presence, U.S. CSPs need to have a presence in China and thus contract with local firms
who are eligible to hold the required licenses. Microsoft and AWS entered the China CSP
market in 2013. AWS partnered with Beijing Sinnet Technology Co., and Microsoft partnered
with 21Vianet, a nationwide data center provider.
These early CSP arrangements mirrored the partnerships that characterized the
early development of e‐commerce platforms. But as China's government became more
restrictive, a new set of regulations to localize, control and protect the flow of data took
shape in 2016 and 2017. They prohibited the Chinese license holder from giving the
foreign CSP control over any facilities or resources. They also prohibited the foreign
CSP from directly contracting with Chinese customers, or from offering public provision
of cloud services in China under the trademark of the foreign CSP. Data localization
requirements were imposed on cloud services, and the transfer of data from Chinese
customers to the United States was prohibited. The 2017 law tried to categorize all data
in terms of its sensitivity, giving the Chinese state a broad residual power to restrict
data movements based on those categories. Data control laws were tightened even
further in 2020 and 2021, subjecting companies to “Cybersecurity Reviews.” To comply
with the law, Apple, Amazon, and IBM transferred their Chinese user data to domestic
facilities and/or sold the computing equipment used for their cloud services to the local
partner.8 The resulting market share distribution conforms to the now‐familiar pattern:
the leading Chinese platform accounts for 6% of the global market but 37% of the
domestic market, and Chinese suppliers together account for over 80% of the domestic
market (Table 2). Globally, cloud services market size in 2020 is estimated at $310
billion, growing at 24% per year. China's public cloud services market size was only
about $20 billion in 2020 but is growing at 50% per year.
The data governance restrictions may enhance the market power of China's own
established platforms, but it is abundantly clear that the controls are not economically‐
driven. The explicit intent of the CSP regulations was to strengthen national security,
and national security takes precedence even when it harms China's domestic
platforms. The Chinese party‐state interprets national security in a way that requires
total governmental control of the domestic information environment. Insofar as Chinese
policy and law favored domestic companies, it was to support the state's control
objectives.
TABLE 2 Cloud services market share.
World Cloud Market Q1 2021 China National Market, 2021
Amazon (AWS): 32% Alibaba Cloud: 37%
Microsoft Azure: 21% Huawei Cloud: 18%
Google Cloud: 9% TenCent Cloud: 16%
Alibaba Cloud: 6% Baidu Cloud: 9%
IBM: 4% Other: 20%
Other: 28%
Note: Data sources—World: Synergy Research Group (2022); Canalys, China Internet Watch (2022).
C H I N E S E P L A T F O R M S’ ACCE SS T O T H E U S A
With one notable exception (Huawei, see Section 4.2 below), Chinese information service
providers enjoyed unrestricted access to U.S. markets until 2017. The United States does
not have a government‐mandated Internet blocking regime, so any Chinese website was,
and for the most part still is, available to U.S. users. Until 2017, investment in or acquisition
of tech companies by Chinese platforms was freely permitted. As of 2021, all major Chinese
platform apps, such as Weibo, Alibaba, Baidu, and WeChat, were available to Americans
through the Apple and Android App Stores in the United States. Nevertheless, the United
States started to erect market access barriers targeting China beginning in 2008.
Telecommunication infrastructure equipment supplied the initial focus for the barriers, but
the restrictions were progressively expanded to include payment systems, social media
platforms, and telecommunication services.
In the United States, as in China, trade policy played a surprisingly small role in the
justification for these restrictions. Instead, national security claims justified by an implicit
theory that China's techno‐economic prowess is a major threat to the United States, were
most prominent. The U.S. whole‐of‐government effort involved a domestic political bargain
between China hawks in Congress and an isolationist Trump administration
(see Section 4.6).
Alibaba in the U.S. market

Alibaba was the first Chinese platform to try to expand into the U.S. market. It had always
had global ambitions and strong ties to U.S. capital and partners. In 2010, Alibaba acquired
two United States‐based e‐commerce firms, Auctiva and Vendio, and in 2013 spent $75
million to acquire the U.S. online shopping platform Shoprunner. After its New York Stock
Exchange IPO in 2014, Alibaba started a B2C boutique site for U.S.‐based shop owners
named 11Main. Due to the maturity and saturation of the U.S. online e‐commerce market,
11Main did not succeed and was closed. But Alibaba's leader Jack Ma said the company
would refocus its efforts on helping American small businesses export to China.9 As late as
September 2016, Alibaba's Ant Financial Services Group was able to acquire 100%
ownership of U.S.‐based EyeVerify Inc., a biometric security technology company.
Huawei: Canary in the coal mine
A very different attitude toward Chinese firms had been growing in U.S. military and
intelligence agencies, where the emergence of an internationally competitive Chinese
electronics sector was viewed with hostility and suspicion. Telecommunications equipment
vendor Huawei became the focal point of this threat narrative. Some saw it as an indicator of
how the commercialization of China's electronics sector was increasing its military
capabilities (RAND Corporation, 2005). Others dismissed its status as a competitive,
commercially motivated business and characterized it as a Trojan Horse designed to give
the Chinese state the ability to spy on or sabotage critical infrastructure.10
Huawei entered international telecom equipment markets in the late 1990s. By the early
2000s, it had contracts in Russia, Eastern Europe, Africa, and Asia. By 2008 it was the
world's third‐largest mobile equipment vendor.11 In an attempt to enter the North American
market Huawei moved to acquire U.S. network equipment manufacturer 3Com in 2008. The
deal ignited political criticism, and the Committee on Foreign Investment in the US (CFIUS)
blocked the deal (Mulligan & Linebaugh, 2021). The rationale for denial was Huawei's
alleged past ties to the Chinese military and 3Com's status as a supplier of cybersecurity
software to Defense Industrial Base firms.
In 2010 the 4th largest U.S. mobile network operator, Sprint‐Nextel, was planning to
order Huawei equipment as part of a major upgrade of its network. An organized pressure
campaign from the Defense Department and a bipartisan set of legislators prompted Sprint
to abandon that deal (Barboza, 2010). Early in 2011 CFIUS disapproval forced Huawei to
divest the assets of U.S. server technology company 3Leaf, which it had acquired the year
before.12 U.S. agencies also began to investigate Huawei's executives for evading U.S.
sanctions on Iran (Goldstein et al., 2018).
The narrative that Huawei was a Trojan horse for China's government gained traction in
2011, as the House of Representatives’ Permanent Select Committee on Intelligence
started an investigation of the “counterintelligence and security threat posed by Chinese
telecommunications companies doing business in the United States” (U.S. House
Permanent Select Committee on Intelligence U.S. HPSCI, 2012). The final report failed to
produce any concrete evidence of Huawei‐facilitated espionage or backdoors. Indeed,
during the investigation the U.S. NSA breached Huawei's cybersecurity and monitored
communications at its headquarters. The motive was both to see if the company was
cooperating with the Chinese state and to enable spying on Huawei's customers (Sanger &
Perlroth, 2014). Yet “Operation Shotgiant,” as it was called by the NSA, produced no
evidence for the Trojan Horse argument.
This did not stop the Congressional report from arriving at its predetermined conclusion:
Huawei was a national security threat. The report recommended “view[ing] with suspicion”
Chinese companies’ entry into the U.S. telecommunications market; CFIUS should block
any “acquisitions, takeovers, or mergers involving Huawei and ZTE;” legislation should
expand the authority of CFIUS to include procurement decisions by U.S. private firms. The
report warned the U.S. private sector “to seek other vendors for their projects.” Although no
incidents involved Huawei or ZTE equipment, the U.S. did experience severe cases of
Chinese cyberespionage from 2009 to 2015 (Center for Strategic and International Studies
[CSIS], 2021; Shane & Lehren, 2010).
The election of Donald Trump as President in 2016 put an openly protectionist President
and a Republican Party dominated by nationalistic China hawks in control of the Presidency
and Congress. Restrictions on China's market access intensified in 2017 and 2018 and then
reached a fever pitch in 2019 and 2020.
Blockages on incoming FDI from China
The Trump administration followed the policy line developed by the House Committee report
from 2012. CFIUS began to block almost all Chinese incoming investment in the ICT sector
(Baker, 2017; U.S.‐China Economic and Security Review Commission, 2018). Three of the
denials involved platforms: Navinfo/Tencent's attempt to acquire an automotive map
company in September 2017 (Auchard, 2017); Ant Financial's attempt to enter the U.S.
payment systems market by acquiring Moneygram in January 2018 (Roumeliotis, 2017);
and Kunlun Tech's acquisition of dating platform Grindr (Wang, 2019). All the denials
involved an assertion that a commercial Chinese company's access to data about American
users and economic transactions was a national security threat.
Congress also heeded the House Committee's 2012 call for expanded powers for
CFIUS. The 2018 Foreign Investment Risk Review Modernization Act (FIRRMA) passed
with bipartisan support. CFIUS was now empowered to review noncontrolling investments if
they involved technologies vaguely defined as “emerging and foundational.” The relevant
technologies no longer needed to be directly related to military capabilities to be eligible for
review. Echoing China's Cybersecurity Law of 2017, FIRRMA authorized CFIUS to

determine whether the transaction provides access to “sensitive” data. An earlier version of
the law would have given CFIUS the power to review and disapprove outgoing investment to
China, but that was perceived as overly restrictive to U.S. business interests and discarded.
The explicit, oft‐cited motivation for these expansions of CFIUS's remit was that Chinese
economic and technological development threatened U.S. security.
The section 301 proceeding
On August 18, 2017, the U.S. Trade Representive initiated a major investigation into China's
“Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and
Innovation.” (USTR, 2018) The proceeding was an exhaustive catalogue of U.S. concerns
about the economic threat posed by China's state‐directed economy. The report, published
in March 2018, painted a picture of a Chinese state that was orchestrating a long‐term plan
to “introduce, digest, absorb and re‐innovate” America's high‐tech capabilities to achieve
self‐sufficiency and world leadership. The report asserted that China's global ambitions
relied on local protectionism. The Made in China 2025 Notice released by China's State
Council in 2015 set explicit market share targets to be filled by Chinese producers in dozens
of high‐tech industries (USTR, 2018). In the view of the USTR, China's statist economy was
a dangerous strength, not a weakness. It took the pronouncements of China's central
planners at face value and assumed that China's ability to subsidize industries and centrally
control both incoming and outgoing capital investment in line with its industrial policy
objectives would guarantee dominance in the global economy.13
The Section 301 investigation covered numerous high technology industries in addition
to platforms, but it set the framework for the offensive export control policy (covered in
Section 4.6) and harsher restrictions on platform market access (covered in section 4.7.)
that followed in 2019 and 2020. Although it frequently accused China of mercantilism, the
underlying premises of the USTR were also deeply neo‐mercantilist. According to the report,
trade with China was regarded a zero‐sum game in which access to U.S. capital and
technology would deliver relative gains to the power of the Chinese state at the expense of
the United States.
Blocking access to telecom service markets

Section 214 of the Communications Act requires foreign telecommunication service
providers to obtain a license to operate in the US. China Mobile applied for such a license
in September 2011. The Federal Communications Commission (FCC), which was obligated
by World Trade Organization (WTO) agreements to grant market access on a
nondiscriminatory basis, neither approved nor denied it for almost 8 years. It reopened
the case in 2019 as part of the Trump administration's anti‐China campaign. “Team
Telecom,” the interagency committee set up to review the national security implications of
foreign licenses, duly issued a negative assessment (Department of Justice [DoJ], 2020),
and the FCC issued a terse denial in April 2019, claiming that China Mobile would “be highly
likely to succumb to exploitation, influence, and control by the Chinese government”
(Federal Communications Commission [FCC], 2019a).
Four other Chinese telecommunication service companies provided domestic and
international telecommunications services in the U.S. pursuant to FCC authorizations (China
Telecom, China Unicom, Pacific Networks, and ComNet). China Telecom had held its
license since 2007. In April 2020, Team Telecom recommended that the FCC revoke all
those authorizations. No proof that the licenses or facilities of these companies had been
used to breach U.S. data or networks was provided. The FCC blocked China Mobile from
offering phone service in the United States in April 2019 and then ejected China Telecom
and Unicom later. (Federal Communications Commission [FCC], 2019a, 2019b, 2020). The
three telecom firms were later delisted from the NYSE via a Trump administration executive
order.
Two international cable landings were also denied because of Chinese ownership. One
was a partnership involving Google, Facebook, and a Chinese company with proposed
landing sites in Los Angeles and Hong Kong. Despite the presence of U.S. firms, the project
was killed because of “the PRC government's sustained efforts to acquire the sensitive
personal data of millions of U.S. persons, the PRC government's access to other countries’
data through both digital infrastructure investments and recent PRC intelligence and
cybersecurity laws, and changes in the market that have transformed subsea cable
infrastructure into increasingly data‐rich environments that are vulnerable to exploitation.”14
Export controls
United States restrictions on China trade rely heavily on export controls, which restrict the
sales of its own domestic companies. From a trade policy standpoint, this is
counterproductive. From a national security standpoint, however, export restrictions on
advanced technologies can be seen as a way to limit an adversary's ability to benefit from
the best technology. During the cold war, export controls were intended to prevent advanced
weapons from reaching an enemy power, so that the United States could maintain a
competitive advantage in a direct military conflict. The export controls imposed during the
Trump administration, in contrast, broadened the scope of controls beyond weapons and
came to include almost any products or exchange of knowledge that might contribute to the
development of Chinese high tech.
In the midst of the trade war with China in late 2017, existing export control laws were
regarded as inadequate to address the threat of outbound strategic technology transfers
through U.S.‐Chinese joint ventures. Therefore, in late 2018 Congress reformed both
inbound and outbound investment control measures with the Export Control Reform Act
(ECRA) and the Foreign Investment Risk Review Modernization Act (FIRMMA). Both
reforms were designed to achieve a complementary and coherent U.S. response to counter
the rise of the Chinese high‐technology market (Crapo, 2019; Padilla et al., 2018).
The Export Controls Reform Act of 2018 (ECRA) greatly expanded the U.S.
government's authority to apply dual‐use export controls to information and communications
technology. Like FIRRMA, its primary motivation was to cut off Chinese buyers from
American supplies of “foundational information and know‐how.” The U.S. Commerce
Department developed a vast list of specific Chinese companies connected to the military to
which an array of products and services, including many that could be civilian uses, must not
be sold.
That harder line led to the addition of Huawei to the Entity List of the U.S. Commerce
Department's Bureau of Industry and Security (BIS) in May 2019. Because of its presence
on this list, no U.S. firms (or foreign companies who want to retain access to the U.S.
market) were allowed to transact with Huawei. In August 2020, the restrictions were
tightened further to prevent Huawei and its affiliates from acquiring semiconductors that are
the direct product of certain U.S. software and technology, eliminating a Temporary General
License that authorized certain transactions with Huawei, and adding 38 additional affiliates
of Huawei to the Entity List. (U.S. Department of Defense, 2020) As a result, Huawei's
business stagnated and its market share in mobile phones worldwide declined over three
quarters, from 20% to less than 8% (Chen et al., 2021). One consulting firm estimated a loss
of $36 billion in revenue in the semiconductor industry alone (Woo, 2020).
Tiktok, WeChat and “Clean Networks”

Not content to keep Huawei and other Chinese vendors out of the United States, the United
States used its influence to induce other countries to keep Chinese products out of their
infrastructure. The U.S. “Clean Path” initiative, announced in April of 2020, pressured
European carriers to avoid purchasing 5 G equipment from Huawei and ZTE, so they could
establish communications paths free of any Chinese‐made equipment between the United
States and its embassies in foreign countries.
In August 2020, U.S. market access restrictions crossed a line that few would have
predicted: speeches by Secretary of State Pompeo and Executive Orders from President
Trump embraced a Chinese approach to Internet blocking. On August 5, Pompeo
announced that the Trump administration wanted to remove “untrusted” Chinese apps like
TikTok and WeChat from U.S. app stores (C‐SPAN, 2020). Pompeo also said that the State
Department would work with the Commerce Department and Defense Department to limit
the ability of Chinese cloud service providers to collect, store, and process data in the United
States. Two days after Pompeo's speech advocating “cleansing” the U.S. of Chinese
information technology providers, President Trump issued executive orders that would ban
the Chinese‐owned social media apps TikTok and WeChat from operating in the United
States. if their Chinese‐owned parent companies did not sell them to a domestic company in
45 days.15 Tiktok was then dragged through the preliminaries of a coerced sale process
involving prospective buyers Microsoft, Oracle and WalMart.
Because the United States, unlike China, has an independent judiciary, Tiktok avoided
the ban. A preliminary injunction granted by a U.S. District Court on October 30, 2020, ruled
that the Order exceeded the President's legal authority.16 A June 9, 2021 Biden
administration Executive Order, however, revived the idea by ordering the Commerce
Department to undertake “evidence‐based” evaluation of the risks to national security,
foreign policy, and the economy posed by “the increased use in the United States of certain
connected software applications … supplied by… a foreign adversary.”17
COMPARATIVE ANALYSIS
The policies governing platform market access in the United States and China were initially
very different, but the sequence outlined here shows converging methods and policies in key
areas. In both cases, national security concerns are the key drivers. The differences in
policies seems to stem from differences in their bargaining power, domestic institutional
capacity, and state objectives.
China restricts the platform market because its government considers control of its
population's access to information and communication a critical aspect of national security.
China's one‐party state does not believe it can survive free public political discussion, open
dissent, or autonomous business and civil society associations that might lead to political
competition. This explains why e‐commerce and ride‐sharing were far more open to foreign
investment and competition. It has become increasingly wary of free flows of business data
among corporations employing cloud providers, as well.
China defines sovereignty as the supreme control of a single party, which it maintains by
excluding unapproved information sources and by regulating and controlling the suppliers of
information services to Chinese people. Insofar as China's digital economy policies are
economically protectionist, it is primarily because companies and facilities owned and

operated by Chinese citizens and located on Chinese territory are easier to subordinate and
control than foreign firms and external facilities. The state can regulate, shut down, or gain
access to company and user data more securely and reliably if facilities are inside China and
run by locals. Many of the “predatory” industrial policies attacked by the United States are
attempts to achieve greater self‐sufficiency and reduce the leverage of foreign governments
rather than attempts to take over world markets. China does not specifically target American
companies, although American firms are the most strongly affected by its restrictions
because of the U.S.'s overwhelming leadership in the digital economy and global capital
markets.
American policies, too, have been shaped primarily by national security claims, not trade
policy. A bipartisan consensus has emerged that China's economic growth and growing
technological capability are threats to U.S. hegemony. American nationalists cannot accept
China as a peer, and certainly do not want it to become a superior technology power. In line
with this fear of losing relative position in the international system, the U.S. has restricted
incoming investment from Chinese ICT firms and (ironically, given U.S. complaints about
Chinese protectionism), implemented sweeping restrictions on its own firms’ sales to the
China market. This aspect of the U.S. platform policy diverges greatly from China's policy,
which encourages exports.
In the Trump administration's attack on TikTok and WeChat, and the Biden
administration's new scrutiny of “connected software applications” supplied by “foreign
adversaries,” we see a convergence with the Chinese logic that trade in digital information
services is a national security threat. The arguments for these policies and the restrictions
based on them can only reinforce China's tendency to restrict American access to Chinese
markets. There is recent evidence that China is imitating American self‐limitations, as it is
now restricting its own firms’ ability to obtain stock market listings in the United States due to
fears that data about Chinese economy and its people will “leak” to the United States. Both
countries, in effect, see globalized information services—including the informational
exchanges inherent in auditing listed firms—as threatening.
The U.S. perception of China as a unitary, predatory system of political economy bent on
world domination overlooks some key facts in this paper. China's major platforms were not
products of state industrial policy but of competitive markets and private, entrepreneurial
firms. The firms most harshly targeted by U.S. policy—Alibaba, Huawei—are precisely the
firms most independent of the state and least nationalistic in outlook. Far from being agents
of the state, the most successful Chinese platform firms—especially Alibaba—were seen as
threats to the dominance of the Communist Party and are now being subordinated and
pulled closer to the state. The U.S. position also reveals an odd, misplaced faith in the
efficacy of state planning and control. China's market access restrictions and state‐
domination of its firms impose severe costs on the competitiveness and growth potential of
its own platforms. This is evident from the precipitous decline in the market valuations,
revenues and profits of the Chinese firms following the regulatory onslaught of late 2021.
D I G I T A L N E O‐M E R C A N T I L I S M
Digital neo‐mercantilism is the label we apply to the American and Chinese policies
governing trade in platform‐delivered information services. The current United States–China
conflict is fundamentally about power competition but brings into play trade and industrial
policy, tech policy, cybersecurity, intellectual property, and foreign and military policy. The
concept of digital neo‐mercantilism integrates all these areas of United States–China
interaction by conceiving of them as a conflict between two systems of political economy
striving for relative power. In their pursuit of this goal, both China and the U.S. recognize that
a thriving economy is a crucial component of their national power, necessitating some
economic interdependence and trade; but both also recognize that interdependence can be
a vulnerability. In their analysis of “weaponized interdependence,” Gertz and Evers (2020,
p. 131) come close to identifying one of the central assumptions of digital neo‐mercantilism,
without using the term. They assert, “close, cooperative relations between businesses and
the government act as a force multiplier—state power increases when firms are aligned with
state goals and eager and willing to work hand‐in‐hand with the government to
achieve them.”
This fusion of economic and strategic aims describes what is currently happening but it is
not, as Gertz and Evers imply, an inevitable outcome of the current situation, nor is it
necessarily an effective policy. Its implication that the actions of firms can be easily aligned
with the strategic aims of states without undermining their productivity and efficiency is
almost certainly false. The destruction of Alibaba's financial innovations to preserve the
Communist Party's grip on banking is just one of many possible example. If the Huawei
incident teaches us anything, it is that when private firms are seen as agents of a foreign
state, their ability to expand into new markets will be blocked and their access to the most
advanced technical components will be restricted. As Farrell and Newman (2019, pp.
76–77) argue, the more that states weaponize interdependence, the more other states will
take actions that weaken or undermine the cooperative features of the international system.
Trying to weld techno‐economic progress to state power will sacrifice untold potential gains
from trade, as supply chains, R&D efforts, talent recruitment and market scale and scope
fragment and shrink.
U.S. policy on Huawei fits the pattern of weaponized interdependence perfectly. The
U.S. saw a potential threat in the emergence of a strong Chinese telecom infrastructure
vendor with a global presence, and sought to pre‐empt its rise by exploiting Huawei's
dependence on American semiconductor technology. As a result, U.S. rural telecommu-
nications companies were denied access to inexpensive equipment and the U.S.
government spent billions to “rip and replace” pieces of their infrastructure. China
responded by doubling down on its self‐sufficiency and information protection policies.
Mercantilism is normally associated with narrower ideas about trade policy. Those
unfamiliar with its full historical context tend to see it as the pursuit of trade surpluses. Our
conception draws on a more historically grounded understanding that includes its political as
well as economic dimension. Economic historian Magnussen (2015, p. 48) has redefined the
original mercantilism as
“… a series of discussions that tried to grapple [with] a rapid developing world of

commerce and the effects it had on politics and communities in Europe during
the early modern period. It was a world of strife within empires and old political
formulations as well as between what later became nation‐states to establish
power and recognition.”
The changing “political formulations” he refers to is the rise of larger territorial states,
which was associated with disruption of prior empires and with more organized, large‐scale
trading relations among the states governing them. This is why the German historicist
scholar Gustav Schmoller claimed that mercantilism was “state‐making and national
economy making at the same time” (Magnussen, 2015, p. 21). Contrary to Adam Smith's
rent‐seeking explanation for mercantilism, Magnussen (2015, pp. 174–176) states that
“National economic expansion and increased state control was most probably a more
persistent motive behind the aggressive and war‐like 'politics of mercantilism' than the
private interest of moneyed merchants.” It is this fusion of the economy with the political and
military interests of the state that is characteristic of neo‐mercantilism and explains why we
think the label fits the United States–China situation. (The label is also a fun counterfoil to
the repetitive, increasingly dated assaults on neo‐liberalism in many academic circles.)
We call this way of thinking digital neo‐mercantilism because both sides believe that a
rapidly digitizing ICT sector is changing the parameters of what is required to play a
dominant role in the global order.18 The capabilities of big data, artificial intelligence,
software, networks, and information processing create new forms of wealth, new forms of
interdependence, new vulnerabilities to foreign systems of political economy, as well as new
opportunities to gain relative power advantages.
To conclude, the substantial platform economies of the United States and China are
being decoupled from each other and subjected to greater controls, all in the name of a
contest for relative geopolitical power. This zero‐sum competition over relative power is
based on assumptions that ICT capabilities, industrial policy, and trade have the potential to
affect prosperity and shift relative power relations among states. Many of these assumptions
are questionable; both parties are probably overstating the importance of digital technology
“leadership” by national economies and drastically underestimating the importance of
globalized competitive markets, information sharing, and an international division of labor in
advancing and deploying digital technology. But the digital world awaits a 21st century Adam
Smith to provide a full normative and positive assessment of digital neo‐mercantilism.
ORCID
Milton L. Mueller http://orcid.org/0000-0002-9114-8259
ENDNOTES
1
Market capitalization is a company's stock price multiplied by the number of shares. Market cap data is sourced
from the NYSE, NASDAQ, and Hong Kong stock exchanges. An ongoing listing of the market capitalization of
“tech companies” can be found here, https://companiesmarketcap.com/tech/largest‐tech-companies-by-market-
cap/. However, not all tech companies are platforms as defined here; e.g., Tesla, equipment and semicondutor
manufacturers and other hardware firms have been removed from the ranking).
2
Speaking of Yahoo!'s first attempt at a partnership with a local firm Decker (2014) wrote: “Headquarters took
toolong to approve locally generated ideas, and as a consequence, Chinese competitors were beating us with
rapidly‐turned‐out products that were tuned for the local market.”
3
Value‐added telecom services have a 50% foreign ownership limit, excluding e‐commerce. In basic
telecommunication services the Chinese partner must be controlling. Banks limit foreign shares to 25%.
4
The arrest of activist Jiang Lijun in 2002 and the imprisonment of journalist Shi Tao in 2005 are widely attributed
to Yahoo!'s cooperation with the authorities. Yahoo! later settled a lawsuit related to this.
5
“Skype removed from China Apple and Android app stores,” BBC News (online) Published 22 November 2017.
https://www.bbc.com/news/business-42076033
6
As in other parts of the world, taxi drivers complained that they had lost a substantial portion of their business,
and taxi strikes proliferated in several cities. Local authorities in Chengdu and Guangzhou raided Uber offices in
response to the questionable legality of People's Uber. Drivers who benefited from Uber's gig economy mounted
protests: “In Chengdu last month, hundreds of Uber drivers lashed out at the local traffic police after one driver's
car was impounded.” (Mozur & Isaac 2015).
7
The acquisition gave Uber a 5.89% stake in the combined Chinese company and provided the Chinese firm with
a minority equity interest in Uber.
8
See, for example, Yang Jie and Lisa Lin, “Amazon Sells Hardware to Cloud Partner in China—Amazon Web
Services says rule change by Chinese government prompted the sale of its computing equipment.” Wall Street
Journal, 11/14/2017 From https://www.wsj.com/articles/amazon-to-sell-its-china-cloud-computing-business-
1510628802
9
The launch of the Trump administration's tariff war in 2017 ended Alibaba's interest in facilitating United
States–China trade.
10
See Healey (2019) for a lurid and imaginative expression of this attitude.
11
Huawei, “Annual Report 2008” (Shenzhen, China: 2009), p. 2, https://www.huawei.com/ucmf/groups/public/
documents/annual_report/092581.pdf
12
Reuters. (2011). Huawei backs away from 3Leaf acquisition. [online]. https://www.reuters.com/article/us-
huawei-3leaf/huawei-backs-away-from-3leaf-acquisition-idUSTRE71I38920110219
13
Ironically, China's Military‐Civil Fusion plans, which Washington regarded as part of its grand strategy to
dominate in high‐tech industries, were deemed by China itself as unsuccessful. China's 13th five‐year plan
states: “we must soberly realize that China still faces some problems in the development of S&T military‐civil
fusion” (National Development and Reform Commission [NDRC], 2020).
14
U.S. Justice Department news release, June 17, 2020. https://www.justice.gov/opa/pr/team-telecom-
recommends-fcc-deny-pacific-light-cable-network-system-s-hong-kong-undersea
15
Executive Order No. 13943. 85 FR 48641, (2020). [online]. https://www.federalregister.gov/documents/2020/08/
11/2020-17700/addressing-the-threat-posed-by-wechat-and-taking-additional-steps-to-address-the-national-
emergency
16
Court decision available at: https://rbgg.com/wp-content/uploads/20-16908_Documents.pdf
17
Executive Order No. 14034. 86 FR 31423, June 2021. Protecting Americans' sensitive data from foreign adversaries
[online]. https://www.federalregister.gov/documents/2021/06/11/2021-12506/protecting-americans-sensitive-data-
from-foreign-adversaries
18
Some accounts refer to the trade and development policies of Germany in the 19th century as “neo‐
mercantilism” (Cohn, 2016). Revivals of mercantilist ideas and approaches have gone through cycles. Our
association of neo‐mercantilism with the digital economy is sufficient to differentiate it from earlier versions. See
Wallerstein, 2011 for another use of the label.
REFERENCES
Auchard, E. (2017). Chinese drop investment in maps firm HERE after U.S. resistance. [online] Reuters. https://
www.reuters.com/article/us-china-autos-security/chinese-drop-investment-in-maps-firm-here-after-u-s-
resistance-idUSKCN1C11H4
Baker, L. (2017). Trump bars Chinese‐backed firm from buying US chipmaker Lattice. [online] Reuters.com. https://
www.reuters.com/article/us-lattice-m-a-canyonbridge-trump/trump-bars-chinese-backed-firm-from-buying-u-
s-chipmaker-lattice-idUSKCN1BO2ME
Barboza, D. (2010). Scrutiny for Chinese Telecom Bid. New York Times. https://www.nytimes.com/2010/08/23/
business/global/23telecom.html
Burke, Q. L., & Eaton, T. V. (2016). Alibaba group initial public offering: A case study of financial reporting issues.
Issues in Accounting Education American Accounting Association, 31(4), 449–460.
Canalys, China Internet Watch. (2022). China cloud computing market in 2021; top 4 have 80% market share.
https://www.chinainternetwatch.com/30820/cloud-infrastructure-services/
Cennamo, C., & Santalo, J. (2013). Platform competition: Strategic trade‐offs in platform markets. Strategic
Management Journal, 34, 1331–1350. https://doi.org/10.1002/smj.2066
Center for Strategic and International Studies (CSIS). (2021). Survey of Chinese Espionage in the United States
Since 2000. https://www.csis.org/programs/technology-policy-program/survey-chinese-linked-espionage-
united-states-2000
Chen, Y., Shuqi, L., & Yan, J. (2021). Huawei continues to lie dormant, and the Chinese market becomes a ballast
stone. Finance Magazine (Chinese language) 4/1. https://mp.weixin.qq.com/s/R88T4uowjE6AYHMyWZLpYA
Cohen, J. (2017). Law for the platform Economy. UC Davis Law Review, 51(1), 133–201.
Cohen, T. (2016). Global political economy: Theory and practice. Routledge.
Crapo, M. (2019). Crapo statement at hearing on export controls. [online] Banking.senate.gov. https://www.
banking.senate.gov/imo/media/doc/Crapo%20Statement%207-18-19.pdf
C‐SPAN. (2020). Secretary of state Mike Pompeo delivered remarks and responded to reporters' questions on a
range of issues. https://www.c-span.org/video/?474540-1/secretary-state-pompeo-holds-news-conference
Decker, S. (2014). An insider's account of the Yahoo‐Alibaba Deal. Harvard Business Review. https://hbr.org/2014/
08/an-insiders-account-of-the-yahoo-alibaba-deal
Department of Justice (DoJ). (2020). Office of Public Affairs. Executive Branch Agencies Recommend the FCC
Revoke and Terminate China Telecom's Authorizations to Provide International Telecommunications Services
in the United States [Online]. https://www.justice.gov/opa/pr/executive-branch-agencies-recommend-fcc-
revoke-and-terminate-china-telecom-s-authorizations#_ftn1
Evans, D. S., & Schmalensee, R. (2016). Matchmakers: The new economics of multisided platforms. Harvard
Business Review Press.
Evans, P. C., & Gawer, A. (2016). The rise of the platform enterprise: A global survey. The emerging platform
economy series. The Center for Global Enterprise. https://www.thecge.net/app/uploads/2016/01/PDF-WEB-
Platform-Survey_01_12.pdf
Farrell, H., & Newman, A. L. (2019). Weaponized interdependence: How global economic networks shape state
coercion. International Security, 44(1), 42–79.
Federal Communications Commission (FCC). (2019a). Memorandum Opinion and Order. In the Matter of China
Mobile International (USA) Inc. Application for Global Facilities‐Based and Global Resale International
Telecommunications Authority Pursuant to Section 214 of the Communications Act of 1934. [online] fcc.gov
https://docs.fcc.gov/public/attachments/DOC‐357087A1.pdf
Federal Communications Commission. (2019b). Denial of International Section 214 Authority for China Mobile
International (USA) Inc. Memorandum Opinion and Order—IBFS File No. ITC‐214‐20110901‐00289. https://
docs.fcc.gov/public/attachments/DOC-357087A1.pdf
Federal Communications Commission (FCC). (2020). Press Release. FCC scrutinizes Four Chinese government‐
controlled entities providing telecommunications services in the US [Online]. https://docs.fcc.gov/public/
attachments/DOC-363976A1.pdf
Gao, H. S. (2018). Digital or trade? The contrasting approaches of China and US to digital trade. Journal of
International Economic Law, 21(2), 297–321. https://doi.org/10.1093/jiel/jgy015
Gertz, G., & Evers, M. M. (2020). Geoeconomic competition: Will state capitalism win? The Washington Quarterly,
43(2), 117–136. https://doi.org/10.1080/0163660X.2020.1770962
Goldstein, M., Flitter, E., Benner, K., & Goldman, A. (2018). How a national security investigation of Huawei set off
an international incident. New York Times, December 14. https://www.nytimes.com/2018/12/14/business/
huawei-meng-hsbc-canada.html?
Healey, J. (2019). Five jeez: Five security arguments against Huawei 5G. There are more than enough reasons to
keep Huawei equipment out of the core US internet infrastructure. Blog post, Council on Foreign Relations,
September 4. https://www.cfr.org/blog/five-security-arguments-against-huawei-5g
Jia, K., Kenney, M., & Zysman, J. (2018). Global competitors? Mapping the internationalization strategies of
Chinese digital platform firms. In R. van Tulder, A. Verbeke, & L. Piscitello (Eds.), International business in the
information and digital age (progress in international business research) (Vol. 13, pp. 187–215).
Jiang, F. (2011). Who is the Amazon Of China: Alibaba, Dangdang or Jingdong? Business Insider Australia,
September 23, 2011. https://www.businessinsider.com.au/who-is-the-amazon-of-china-aliababa-dangdang-
or-jingdong-2011-9
Kenney, M., & Zysman, J. (2016). The Rise of the Platform Economy. Issues in Science and Technology, 32(no. 3),
61–69.
Koetsier, J. (2020). 44% Of Global eCommerce Is Owned By 4 Chinese Companies. Forbes, October 21. https://
www.forbes.com/sites/johnkoetsier/2020/10/21/44-of-global-ecommerce-is-owned-by-4-chinese-companies/?
sh=4d840ffc1645
Magnussen, L. (2015). The political economy of mercantilism. Routledge.
Mozur, P., & Isaac, M. (2015). Uber spends heavily to establish itself in China. New York Times, June 8. https://
www.nytimes.com/2015/06/09/technology/uber-spends-heavily-to-establish-itself-in-china.html
Mueller, M., & Tan, Z. (1996). China in the Information Age. The Washington Papers/169. Center for Strategic and
International Studies.
Mulligan, S., & Linebaugh, C. (2021). Huawei and US Law. [online] Congressional Research Service. https://
crsreports.congress.gov/product/pdf/R/R46693
National Development and Reform Commission (NDRC). (2020). The 13th five‐year plan For economic and social
development of the People's Republic of China (2016‐2020). Central Compilation & Translation Press. https://
en.ndrc.gov.cn/policies/202105/P020210527785800103339.pdf
Padilla, C., et al. (2018). National security & international trade. [online] Wita.org. https://www.wita.org/event-
videos/national-security-international-trade/
Plantin, J.‐C., & de Seta, G. (2019). WeChat as infrastructure: The techno‐nationalist shaping of Chinese digital
platforms. Chinese Journal of Communication, 12(3), 257–273. https://doi.org/10.1080/17544750.2019.
1572633
RAND Corporation. (2005). “The Digital Triangle”: A new defense‐industrial paradigm? In E. S. Medeiros, R. Cliff, K.
Crane, & J. C. Mulvenon (Eds.), A new direction for China's defense industry. RAND Corporation. https://
www.jstor.org/stable/10.7249/mg334af.12
Reuters. (2011). Huawei backs away from 3Leaf acquisition. https://www.reuters.com/article/us‐huawei-3leaf/
huawei-backs-away-from-3leaf-acquisition-idUSTRE71I38920110219
Roumeliotis, G. (2017). U.S. blocks MoneyGram sale to China's Ant Financial on national security concerns. [online]
Reuters. https://www.reuters.com/article/us-moneygram-intl-m-a-ant-financial/u-s-blocks-moneygram-sale-to-chinas-
ant-financial-on-national-security-concerns-idUSKBN1ER1R7
Sanger, D., & Perlroth, N. (2014). N.S.A. breached Chinese servers seen as security threat. New York Times,
March 22. https://www.nytimes.com/2014/03/23/world/asia/nsa-breached-chinese-servers-seen-as-spy-
peril.html
Shane, S., & Lehren, A. (2010). Leaked cables offer raw look at US Diplomacy. [online] Nytimes.com. https://www.
nytimes.com/2010/11/29/world/29cables.html
Sheehan, M. (2019). How Google took on China—and lost. MIT Technology Review. https://www.
technologyreview.com/2018/12/19/138307/how-google-took-on-china-and-lost/
Sinha, A. (2018). How Alibaba took on eBay in China (and a few lessons for Indian entrepreneurs) Medium, July 8.
https://medium.com/@aishsinhaindia/how-alibaba-took-on-ebay-in-china-and-a-few-lessons-for-indian-
entrepreneurs-4f5ae9709089
Synergy Research Group. (2022). As quarterly cloud spending jumps to Over $50B, Microsoft Looms Larger in
Amazon's Rear Mirror. https://www.srgresearch.com/articles/as-quarterly-cloud-spending-jumps-to-over-50b-
microsoft-looms-larger-in-amazons-rear-mirror
U.S.‐China Economic and Security Review Commission. (2018). Report to congress of the U.S.‐China economic
and security review commission, p. 37. Uscc.gov one hundred fifteenth congress, second session. November.
https://www.uscc.gov/annual-report/2018-annual-report-congress
U.S. Department of Defense. (2020). DOD Releases List of Additional Companies, in Accordance with
Section 1237 of FY99 NDAA. [online] https://www.defense.gov/Newsroom/Releases/Release/Article/
2328894/dod-releases-list-of-additional-companies-in-accordance-with-section-1237-of-fy/
U.S. House Permanent Select Committee on Intelligence (U.S. HPSCI). (2012). Investigative Report on the U.S.
National Security Issues Posed by Chinese Telecommunications Companies Huawei and ZTE.
Washington, D.C. https://republicans-intelligence.house.gov/sites/intelligence.house.gov/files/documents/
huawei-zte%20investigative%20report%20(final).pdf
USTR. (2018). Findings of the investigation into China's Act, policies, and practices related to technology transfer,
intellectual property, and innovation under Section 301 of the Trade Act of 1974. https://ustr.gov/sites/default/
files/Section%20301%20FINAL.PDF
Van Alstyne, M. W., Parker, G. G., & Choudary, S. P. (2016). Pipelines, platforms, and the new rules of strategy.
Harvard Business Review, 94(4), 54–62.
Wallerstein, I. (2011). The modern world‐system II: Mercantilism and the consolidation of the European world‐
economy, 1600–1750 (Vol. 2). Univ of California Press.
Wang, E. (2019). China's Kunlun Tech agrees to U.S. demand to sell Grindr gay dating app. [online] Reuters.
https://www.reuters.com/article/us-grindr-m-a-beijingkunlun/chinas-kunlun-tech-agrees-to-u-s-demand-to-
sell-grindr-gay-dating-app-idUSKCN1SJ28N
Woo, S. (2020). The U.S. vs. China: The high cost of the technology cold war. Wall Street Journal. https://www.wsj.
com/articles/the-u-s-vs-china-the-high-cost-of-the-technology-cold-war-11603397438
Zetter, K. (2010). Google to stop censoring search results in China after hack attack. WIRED, January 12. https://
www.wired.com/2010/01/google-censorship-china/?utm_source=WIR_REG_GATE
How to cite this article: Mueller, M. L., & Farhat, K. (2022). Regulation of platform
market access by the United States and China: Neo‐mercantilism in digital services.
Policy & Internet, 14, 348–367. https://doi.org/10.1002/poi3.305

Policy Internet - 2022 - Mueller - Regulation of Platform Market Access by The United States and China Neo Mercantilism

Uploaded by

Copyright:

Available Formats

You might also like

Policy Internet - 2022 - Mueller - Regulation of Platform Market Access by The United States and China Neo Mercantilism

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Policy Internet - 2022 - Mueller - Regulation of Platform Market Access by The United States and China Neo Mercantilism

Uploaded by

Copyright:

Available Formats

Received: 2 November 2021 | Accepted: 9 May 2022

Regulation of platform market access by the

Milton L. Mueller | Karim Farhat

School of Public Policy, Georgia Institute of

348 | © 2022 Policy Studies Organization. wileyonlinelibrary.com/journal/poi3 Policy Internet. 2022;14:348–367.

Both the United States and China are following this

TABLE 1 World's 20 largest platforms by market cap (2022).

Rank Name Market cap (Bn) HQ country

1 Apple $ 2546 USA

2 Microsoft $ 2055 USA

3 Alphabet (Google) $ 1524 USA

4 Amazon $ 1168 USA

5 Meta (Facebook) $ 583 USA

6 Tencent $ 428 China

7 ByteDance $ 400 (est) China

8 Alibaba $ 247 China

9 Adobe $ 185 USA

10 Salesforce $ 169 USA

11 Meituan $ 124 China

12 Sony $ 105 Japan

15 Jingdong Mall (JD) $ 90 China

19 Activision Blizzard $ 61 USA

informed by recent theoretical work in International Political Economy that focuses on

PLATFORMS AND TRADE IN SERVICES

U.S. PLATFORMS’ ACCESS TO CHINA

Chinese restrictions on foreign investment

Search, portals, and social media

F I G U R E 1 Metrics showing usage share of search engines. Source: Statcounter https://gs.statcounter.com/

To operate in China, CSPs must obtain value‐added telecommunication licenses from

TABLE 2 Cloud services market share.

World Cloud Market Q1 2021 China National Market, 2021

Amazon (AWS): 32% Alibaba Cloud: 37%

Microsoft Azure: 21% Huawei Cloud: 18%

Google Cloud: 9% TenCent Cloud: 16%

Alibaba Cloud: 6% Baidu Cloud: 9%

IBM: 4% Other: 20%

Alibaba in the U.S. market

Huawei: Canary in the coal mine

Blockages on incoming FDI from China

review. Echoing China's Cybersecurity Law of 2017, FIRRMA authorized CFIUS to

The section 301 proceeding

Blocking access to telecom service markets

Tiktok, WeChat and “Clean Networks”

economically protectionist, it is primarily because companies and facilities owned and

“… a series of discussions that tried to grapple [with] a rapid developing world of

You might also like