Chander’s Balanced Examination of Free Trade, State Sovereignty, and the Internet

I very much enjoyed Anupam Chander’s excellent new book, The Electronic Silk Road: How the Web Binds the World Together in Commerce, and can highly recommend it, especially to anyone who is interested in the intersection of cyberlaw and global free trade issues. What follows are some thoughts on the book that I have condensed from a slightly longer review of the book that originally appeared on The Technology Liberation Front blog in late August.

At the heart of Chander’s book lies an old tension that has long haunted trade policy: How do you achieve the benefits of free trade through greater liberalization without completely undermining the sovereign authority of nation-states to continue enforcing their preferred socio-political legal and cultural norms? Chander correctly notes, “States will be loathe to abandon their law in the face of the offerings mediated by the Internet.” “If crossborder flows of information grossly undermine our privacy, security, or the standards of locally delivered services, they will not long be tolerated,” he notes. These are just a few of the reasons that barriers to trade remain and why, as Chander explains, “the flat world of global business and the self-regulating world of cyberspace remain distant ideals.”

Nonetheless, he hopes that we can find a way to achieve a sensible balance between the greater liberalization of markets as well as the preservation of a residual role for states in shaping online commerce and activities. And he hopes to do so through the application of three key principles.

The first is harmonization of laws and policies, preferably through multinational accords. “Efforts to harmonize laws across nations and standards among professional associations will prove essential to preserve a global cyberspace in the face of national regulation,” Chander insists. The second principle is “glocalization,” or “the creation or distribution of products or services intended for a global market but customized to conform to local laws — within the bounds of international law.” The final key principle is more self-regulatory in character. It is the operational norm of “do no evil” as it pertains to requests from repressive states to have Internet intermediaries to crack down on free speech or privacy.  “[W]e must seek to nurture a corporate consciousness among information providers of their role in liberation or oppression,” Chander argues.

In a sense, what Chander is recommending here is largely the way global information markets already work. Thus, instead of being aspirational, Chander’s book is actually just more descriptive of the reality we see on the ground today. For example, the harmonization efforts he recommends to facilitate Trade 2.0 have been underway in various fora and trade accords for several years now. Chander does a nice job describing many of those efforts in the book. Likewise, his “glocalization” recommendation is to some extent already today’s norm. After a series of high-profile legal skirmishes over the past dozen years, Internet giants such as Yahoo, Google, Facebook, Cisco, Microsoft and others have all eventually folded under legal and regulatory pressure from various governments across the globe and sought to accommodate parochial regulatory requests, even as they expand their efforts internationally. Again, Chander discusses several of the more well-known case studies in the text.

Finally, however, there have been moments when — especially as it pertains to certain free speech matters — some of these corporate players have stood up for a “do no evil” approach when repressive governments come calling.  In this regard, Chander only briefly mentions the work of the Global Network Initiative, which is somewhat surprising since it has been focused on this mission since its inception in 2008. Nonetheless, such “do no evil” moments have happened (for example, Google bowing out of China), although the track record of success here has been spotty to say the least.

Technological Neutrality

Chander also wants to make sure that online markets are not somehow advantaged relative to traditional markets and technologies. “Trade law should not allow countries to insist on a regulatory nirvana in cyberspace unmatched in real space,” he insists. Fair enough, but how we achieve neutrality and level the proverbial playing field is, of course, important. The problem is that most nation-states seek to harmonize in the direction of greater control. The rise of electronic networks and online commerce presents us with the opportunity to reconsider the wisdom of long-standing statutes and regulations that are either no longer needed or perhaps never should have been on the books in the first place.

In my own work I have proposed that, when it comes to domestic information policy spats that involve old and new players and technologies, we should consider borrowing a page from trade law by adopting the equivalent of a “Most Favored Nation” (MFN) clause for communications and media policy. In a nutshell, this policy would state that: “Any operator seeking to offer a new service or entering a new line of business, should be regulated no more stringently than its least regulated competitor.” Such a MFN for communications and media policy would ensure that regulatory parity exists within this arena as the lines between existing technologies and industry sectors continue to blur.

Although it will often be difficult to achieve in practice, the aspirational goal of placing all players and technologies on the same liberalized level playing field should be at the heart of information technology policy to ensure non-discriminatory regulatory treatment of competing providers and technologies.

But let’s be clear about what this means: To level the proverbial playing field properly, I believe we should be “deregulating down” instead of regulating up to place everyone on equal footing. This would achieve technological neutrality through greater technological freedom and marketplace liberalization.

Of course, others (possibly including Chander) would likely claim that could lead to a “race to the bottom” in certain instances by disallowing state action and the application of local laws and norms. But one person’s “race to the bottom” is another person’s race to the top!  It all depends on the perspective you adopt toward liberalization efforts. For me, the more liberalization the better. The history of deregulation has been shown in one market after another to improve consumer welfare by expanding choice, increasing innovation, and generally pushing prices lower. But the debate over the merits of comprehensive liberalization efforts will, no doubt, continue.

Policies of Freedom

What other specific policies can help us strike the right balance going forward?

I was extremely pleased to see Chander discuss the Clinton Administration’s July 1997 Framework for Global Electronic Commerce. It was instrumental in setting the right tone for e-commerce policy before the turn of the century. The Framework stressed the importance of taking a general “hands off” approach to these markets and treating the Internet as a global free-trade zone. It set forth five key principles for Net governance, including: “the private sector should lead;” “governments should avoid undue restrictions on electronic commerce;” “where governmental involvement is needed, its aim should be to support and enforce a predictable, minimalist, consistent and simple legal environment for commerce,” and other light-touch policy recommendations.

As I summarized in the title of my 2012 Forbes essay on the Framework, “15 Years On, President Clinton’s 5 Principles for Internet Policy Remain the Perfect Paradigm.” Chander generally embraces these principles, too, even though some of his “glocalization” recommendations cut against the grain of this vision.

Importantly, Chander also highlights four specific U.S. policies that have fostered the growth of electronic trade.

(1)   “The First Amendment guarantee of freedom of speech;

(2)   The Communications Decency Act’s Section 230, granting immunity to web hosts for user-generated information; [see my old Forbes essay, “The Greatest of All Internet Laws Turns 15” for an explanation of why Sec. 230 has been so important.]

(3)   Title II of the Digital Millennium Copyright Act (DMCA), granting immunity to web hosts for copyright infringement; and

(4)   Weak consumer privacy regulations [which have] created breathing room for the rise of Web 2.0.”

“This permissive legal framework offers the United States as a sort of export-processing zone in which Internet entrepreneurs can experiment and establish services.” Chander gets it exactly right here. Legally speaking, this is the secret sauce that continues to power the Net.

But Chander doesn’t really fully confront the inherent contradiction in earlier calling for “technological neutrality” between cyberspace and the traditional economy while also praising all these legal policies, which generally treated the Internet in an “exceptionalist” fashion. I would argue that some of that asymmetry was essential, however, not only to allow the Net to get out of its cradle and grow, but also because it taught us how light-touch regulation was generally superior to traditional heavy-handed regulatory paradigms and mechanisms. Now we just need to keep harmonizing in the direction of the greater freedom that the Internet and online markets enjoy.

Multi-stakeholderism?

One surprising thing about Chander’s book is the absence of the term “multi-stakeholderism.”  It is getting hard to pick up any Internet policy tract these days and not find reference to multi-stakeholder processes of one sort or another. In particular, I expected to see more linkages to broader Net freedom fights involving the U.N. and the WCIT process.

In this sense, it would have been interesting to see Chander bridge the gap between his work here on free trade in information services and the proposals of various Internet governance scholars and advocacy groups. In particular, I would have liked to have heard what Chander thinks about the conflicting Internet policy paradigms set forth in important recent books from Rebecca MacKinnon (“Consent of the Networked”) and Ian Brown and Christopher Marsden (“Regulating Code”) on one hand, versus those of Milton Mueller (“Networks and States”) and David Post (“Jefferson’s Moose”) on the other. I think Chander would generally be more comfortable with the policy paradigms and proposals sketched out by MacKinnon and Brown & Marsden (whereas I am definitely more in league with Mueller and Post), but I’m not entirely sure where he stands.

Regardless, I would have liked to have seen some discussion of these issues in Chander’s otherwise excellent book.

Semantic Choices

I suppose my only other complaint with the book comes down to some semantic issues, beginning with its title.  In some ways, calling it The Electronic Silk Road makes perfect sense since Chander wants us to think of the parallels to the Silk Road of ancient times, of course. Alas, these days it is hard to utter the term “Silk Road” and not think of people buying and selling illegal drugs or other shady stuff on the (recently shut down) online black market of the same name. So that might be confusing to some.

I’m also not a big fan of some of the other catch-phrases Chander uses throughout the book. Repeatedly using the hyphenated term “net-work,” for example, is a bit too cute for my taste and there are times it gets confusing. And the term “glocalization” is the sort of thing that you’d expect to see on the Fake Jeff Jarvis parody account (actually, I think he has used it before) and once critic Evgeny Morozov catches wind of it he will, no doubt, eventually use to linguistically lynch Chander.

Finally, should trade in information and e-commerce be “Trade 2.0” or is it really “Trade 3.0”? To me, Trade 1.0 =agricultural & industrial trade; Trade 2.0 = trade in services; and Trade 3.0 = trade in information and electronic commerce. Doesn’t that make more sense? In any event, the whole 1.0, 2.0, 3.0 thing has gotten a bit clichéd in its own right.

Conclusion

Despite these minor nitpicks, I very much enjoyed Anupam Chander’s Electronic Silk Road and would highly recommend it to anyone who is looking to connect the dots between international trade theory and Internet policy / e-commerce developments. The reader will find a little bit of everything in the book, such as classical trade theory from Smith and Ricardo alongside a discussion of Coasean theories of the firm and Benkler-esque theories of commons-based peer production.

Best of all, it is an extremely accessible text such that either a trade policy guru or a Net policy wonk could pick it up and learn a lot about the opposing issues they may not of heard of before. I could also imagine several of the chapters becoming assigned reading in both trade policy courses and cyberlaw programs alike. It’s a supremely balanced treatment of all these issues.

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