Lessons from the TikTok ban threat in the US

The recent example of the threat to ban TikTok in the United States has sparked a significant debate about the shifting balance of power between nation-states and multinational corporations (MNCs). This scenario underscores a broader trend where states are increasingly asserting their authority over global enterprises, raising questions about the implications for globalisation and international business dynamics.

Historically, multinational corporations have wielded considerable power, often operating across borders with relative autonomy. They have benefited immensely from globalisation, leveraging international markets to grow and influence global economic policies. These corporations often navigate complex regulatory environments to maximise their profits and expand their influence, which has led to a dynamic where they can sometimes operate with more flexibility than nation-states.

However, the rise of digital platforms and concerns about data security, national security, and cultural influence have prompted states to reassert control. The case of TikTok is emblematic of this shift. In 2020, the Trump administration cited national security concerns as the primary reason for seeking to ban the app, arguing that the company could be compelled to share user data with the Chinese government. This move highlighted the US government's growing apprehension about foreign tech companies' influence on its citizens and infrastructure.

The debate over whether this shift in power towards nation-States is beneficial is complex. On one hand, increased State control can ensure better protection of national interests, security, and sovereignty. In the case of TikTok, the potential for foreign influence and data misuse is a legitimate concern that warrants regulatory oversight. Nations have a responsibility to protect their citizens' data privacy and maintain control over critical digital infrastructure. Such measures can also level the playing field for domestic companies competing against foreign MNCs that may have different regulatory standards.

For instance, the European Union's General Data Protection Regulation (GDPR) sets stringent guidelines for data protection, reflecting a broader trend of increasing regulatory frameworks that aim to protect consumers and ensure corporate accountability. These regulations underscore the importance of State intervention in protecting individual rights and national security in the digital age.

On the other hand, excessive State intervention can stifle innovation, restrict the free flow of information, and create an environment of uncertainty for global businesses. MNCs thrive on open markets and predictable regulatory environments, which allow them to plan and invest in long-term growth strategies. The threat of sudden and arbitrary state actions, like banning a popular app, can disrupt business operations and erode investor confidence. Additionally, such actions can lead to retaliatory measures, creating a fragmented global market where companies must navigate a patchwork of regulations and restrictions.

Another pertinent example is the case of Huawei, the Chinese telecommunications giant. The US government, citing national security concerns, imposed a series of restrictions on Huawei, including banning the company from supplying equipment for 5G networks in the United States and encouraging allied nations to do the same. This move significantly impacted Huawei's business operations and highlighted the growing trend of State intervention in regulating the activities of MNCs perceived as threats to national security.

The ideal approach moving forward involves striking a balance between state control and corporate autonomy. Governments need to establish clear, transparent, and consistent regulations that protect national interests without unduly hindering business innovation and growth. International cooperation is crucial in this regard. For instance, countries can collaborate on establishing global standards for data privacy and security, ensuring that MNCs adhere to stringent regulations regardless of their country of origin. This would mitigate concerns about data misuse while providing a stable regulatory environment for businesses.

Moreover, fostering dialogue between states and MNCs can lead to mutually beneficial solutions. For example, instead of outright bans, governments can require foreign tech companies to store data locally or undergo regular security audits. Such measures would address security concerns without disrupting the benefits of globalisation.

This dynamic also reflects a broader geopolitical context. As global power structures evolve, nation-states are increasingly wary of ceding too much influence to foreign corporations that may operate under the jurisdiction of rival powers. The tension between the US and China, exemplified by the TikTok situation, is indicative of a larger struggle for technological and economic supremacy. This struggle is not just about market control but also about the strategic advantage conferred by technological leadership.

The implications for globalisation are profound. The traditional model of globalisation, characterised by the relatively free movement of goods, services, and capital, is being challenged by these emerging trends. The assertion of State power over MNCs suggests a move towards a more fragmented and regulated global market. This could slow the pace of globalisation as companies adapt to a more complex regulatory environment, potentially leading to higher costs and reduced efficiency.

However, this shift could also drive innovation in compliance and governance. Companies that can effectively navigate these new regulatory landscapes may gain a competitive edge. The development of robust data protection and security measures, for instance, can enhance consumer trust and open new markets. Additionally, States that develop clear and fair regulatory frameworks may attract more sustainable and responsible business practices.

In conclusion, the shifting balance of power towards nation-States in the face of multinational corporations, as illustrated by the TikTok ban threat, presents both challenges and opportunities. It is neither entirely good nor bad but requires a nuanced approach that safeguards national interests while promoting an open, innovative, and interconnected global market. Transparent regulations, international cooperation, and constructive dialogue are essential to navigate this evolving landscape effectively.

Ultimately, what is needed now is a collaborative effort to establish global norms and standards that protect both national security and the benefits of globalisation. Governments and corporations must work together to develop frameworks that balance State sovereignty with the need for open markets and innovation. By doing so, they can create an environment where both national interests and global business can thrive, ensuring a more stable and prosperous future for all.

This article is authored by Ananya Raj Kakoti and Gunwant Singh, scholars of international relations, Jawaharlal Nehru University.