Baidu, China's Search Engine, Attacked By US

The Office of the United States Trade Representative occasionally puts out a list of “Internet and physical markets that exemplify key challenges in the global struggle against piracy and counterfeiting.” China’s dominant search engine Baidu is on the most recent list. The company has about 70% of the search market in the People’s Republic. It has crushed the prospects of Google. This may have been aided by unidentified hacks into the Google e-mail system in China and a subsequent battle between the American company and censors in the world’s most populous nation.

The USTR says that:

The markets listed include, for example, the website Baidu, which recently ranked as the number one most visited site in China, and among the top ten in the world. Baidu exemplifies the problem of online services engaged in “deep linking,” which provide links to online locations containing the allegedly infringing materials. The list also includes numerous examples of websites involved in BitTorrent tracking and indexing, which facilitate the high speed transfer of infringing materials between users, as well as Internet markets involved in specific activities such as piracy of sports telecasts, Smartphone software and physical products. Key physical markets listed include, for example, Beijing’s notorious Silk Market, as well as numerous other markets from a wide range of countries and regions.

The attack on Baidu represents a change in the direction that US trade complaints against China have taken. Most of the criticisms until now were based sales of pirated merchandise or premium media content. The battle has started to shift to the structure of the Internet’s search capacity, which is almost certainly a much more complex market to analyze and counter.

The USTR is up against a system that China will almost certainly not change even if the American agency has a case. Hackers and pirates still operate with impunity in the People’s Republic. Morgan Stanley (NYSE: MS) said its servers and sensitive data were attacked from China. American efforts to build a secure wall around government sites and those of large US businesses have only been partly successful. Hackers seem to take two steps forward for each step that sophisticated security software does. Protecting key US properties will almost certainly become more difficult.

It is puzzling why the Administration does not take a harder line against activity like that discovered in the operation of Baidu. The company’s stock is listed on the NASDAQ. The site is easily accessible in the US. That access will almost certainly continue to be the case no matter how powerful the USTR case against China’s largest search company is.

One of the reasons that business and many members of Congress are skeptical about reports from the USTR is that the Administration receives them and then files them away. The reports show the US’s unwillingness to act against China’s violations of international law.

Douglas A. McIntyre