The RESTRICT Act could unite TikTok, Tucker Carlson, and Shein
New proposed legislation in the U.S. Congress could stop foreign tech companies from operating in the U.S. Everyone’s talking about TikTok — but the implications for Chinese companies are much broader. Not even Tucker Carlson likes it.
As TikTok CEO Shou Zi Chew (周受资 Zhōu Shòuzī) endured grilling in the U.S. Congress last Thursday, Chinese Internet users took to social media to defend his performance and call out the anti-China tactics they saw in the hearing.
But despite the attention the hearing garnered on both sides of the Pacific, Chinese internet and communications tech companies were likely focused on other developments in Congress that could threaten their own business in the U.S.
The Restricting the Emergence of Security Threats that Risk Information and Communications Technology, or RESTRICT Act, was introduced by Senators John Thune (R-SD) and Mark R. Warner (D-VA) this month, and 19 other senators now cosponsor the bill. The bill would require the Commerce Department to identify and restrict information and communications technology (ICT) transactions in the U.S. in which foreign countries deemed adversaries have an interest, for the purposes of protecting national security.
Some observers have pointed out the bill’s broad coverage of many industries and the wide-ranging authority it would give the Commerce Secretary. Former Obama Administration official Kevin Xu argued that “the RESTRICT Act could be the largest expansion of executive power in the name of national security since the USA PATRIOT Act”, referring to controversial Bush-era legislation that allowed for increased U.S. government surveillance in the wake of 9/11.
With a growing list of bipartisan cosponsors, support from House Speaker Kevin McCarthy (R-CA), and an endorsement from President Joe Biden, the bill has a real chance of becoming law.
Will Shein get RESTRICTed?
The legislation calls out by name a variety of implicated industries, including the hot-button AI, biotech and telecommunications sectors, but also industries less often associated with national security, like cloud services and social media.
The section of the legislation relevant to TikTok in fact encompasses a much broader swathe of software applications “designed or used primarily for connecting with and communicating via the internet”, as long as the application has more than one million users.
Many Chinese software companies have cultivated a large user base in the U.S., with popular ecommerce apps Temu and Shein, and video-editing app CapCut (from TikTok parent ByteDance) all founded and based in China.
A host of other, less well-known apps developed by Chinese firms have also found a foothold in the U.S.
File-sharing apps like SHAREit and Xender, payment platforms like Alibaba Group’s Alipay and QQ Wallet, gaming apps like PUBG Mobile and Clash of Kings, and Chinese social media apps Weibo and Tencent’s WeChat could also be swept up in the ban.
Potential bans would affect companies differently; Alipay does not have a strong U.S. user base outside of Chinese diaspora communities, for example, with only 4 million downloads in the U.S. as of 2019 (meanwhile, Alipay is used by over a billion people in China). Shein could stand to lose much more business, given its popularity among U.S. consumers.
Chinese firms could take some measures to try and circumvent restrictions or bans, something Shein has already started to do by positioning itself as headquartered in Singapore, rather than China. Likely in preparation for an initial public offering in New York this year, Shein’s CEO Chris Xu (许仰天 Xǔ Yǎngtiān) became a permanent resident of Singapore, and the firm made a Singapore-domiciled company its parent. Hundreds of Chinese firms have made similar moves.
Such measures may not succeed in avoiding restrictions under the legislation. Specifically, the RESTRICT Act mandates the Commerce Department to regulate related transactions “in which any foreign adversary has any interest,” setting the bar high for Chinese companies hoping to avoid regulation.
Real American opposition to RESTRICT?
Legions of American TikTok users traveled to Washington to protest in the days around Shou Chew’s Hill hearing, and multiple influencers called on their followers to contact their representatives and voice their opposition.
Alex Pearlman, who has more than 800,000 followers, posted an explanation on how to find and contact one’s representative to object to RESTRICT. The video received over 2.6 million views and echoed the concerns felt by TikTok users across the platform; that the RESTRICT act was less about Chinese businesses and more about restricting internet freedoms. Another prominent TikTok user, kyleenotalawyer, posted a breakdown of the RESTRICT act which received well over 1.5 million views. She made an appeal to people who previously were unconcerned about TikTok being banned, emphasizing that the restrictions “do not just apply to TikTok. They just want us to focus on that because it makes us look more dumb.”
There is also some opposition emerging among decision makers in the capital.
Among liberals, House members Jamaal Bowman (D-NY), Ilhan Omar (D-MN) and Alexandria Ocasio-Cortez (D-NY) have all come out against an outright ban of TikTok, citing anti-Asian xenophobia and urging instead for more comprehensive data privacy for Americans in general.
On the other side of the political spectrum, libertarian voices have come out in opposition of the sweeping powers the legislation would give the executive. Senator Rand Paul (R-KY) voiced his concerns over the bill. (He also assured voters that his opposition had nothing to do with his ties to Jeff Yass, a prominent donor, who owns 7% of TikTok parent company ByteDance.) The Republican-led House Committee on Financial Services also tweeted its opposition to the bill.
Various voices in the media have begun to sound the alarm on the bill, notably including the prominent conservative Tucker Carlson. These are only the beginnings of an opposition, but if enough Americans begin to buy the idea that this is an undue expansion of federal government power, the RESTRICT Act may in fact see substantial difficulty becoming law.
Companies:
TikTok
Temu
Source and additional data:
Why Chinese Apps Are the Favorites of Young Americans / Wall Street Journal
Kevin McCarthy says House ‘will be moving forward’ with TikTok legislation / NBC News
Alipay in America / Axios
Jack Ma’s fintech giant tops 1.3 billion users globally / TechCrunch
Two New Bills on TikTok and Beyond: The DATA Act and RESTRICT Act / Lawfare
Rand Paul: Opposition to TikTok ban based on free speech, not his ties to top investor / Courier Journal
TUCKER CARLSON: This is about introducing flat out totalitarianism into our system / Fox News
