China Challenge

The Trump administration’s ban targeting ByteDance Ltd.’s TikTok isn’t about one company but about the Chinese communist party’s threat to democracy, Keith Krach, the U.S. Department of State’s Under Secretary for Economic Growth, Energy, and the Environment told Bloomberg’s Maria Tadeo, exclusively in Brussels. They spoke on "Bloomberg Surveillance."

Maria Tadeo: Keith Krach, the Under Secretary of State for the US. He focuses on economic growth, energy and the environment. I do have to ask you about the situation going on with TikTok, because there’s a lot of confusion in the market as to what’s going to happen now that the court has jumped in.

Keith Krach: You know, on TikTok it’s more than about one company. It’s more than about a TikTok and a WeChat. What it’s really about is the CCP threat. The Chinese Communist Party’s threat to democracy and their surveillance state. So if you look at what they are doing, they’re extending that great one way China firewall, where all the data comes in but none comes out and reciprocally all the propaganda goes out. But the truth does not come in. And so TikTok just happens to be an app like WeChat that collects massive amounts of data that goes into their AI machine so they can come up with that one number. And that one number is a social credit score in China. It’s for every person, every company. And that one number defines how loyal you are to the Chinese Communist Party.

Now, they can do that in Brussels. They could do that in the U.S. They could do it anywhere in the world.

Tadeo: But when you look at what is happening with the court and they say you may have overstepped some of the authority there, your views are very clear. I mean, you’re saying right now, China is a national threat. You don’t trust any of these apps. Do you think the court is then making a mistake, and are you going to win this case?

Krach: Well, you know, I don’t know. But all I know is that it’s great that we have three branches of government, we have checks and powers so we don’t end up with a lifelong dictator like President Xi.

Tadeo: What do you respond to the Chinese when they say what the U.S. is doing is just extortion?

Krach: Well, I would say, look at look at your market. And by the way, you can’t even use your Twitter that you use all around the world. Your ambassadors use it all around the world. You don’t let Google in. You don’t let Facebook in. I mean, I just say you’re the biggest hypocrites in the world.

Tadeo: Well. And I do have to ask you, because you know the tech world very well. Do you worry, however, that, you know, if you’re a very American company, you’re a supplier, perhaps, to Huawei, you’re not allowed to work with Huawei anymore? Do you worry that ultimately these restrictions are detrimental to U.S. companies or could be in the future? They’re losing a big client.

Krach: I took Secretary Pompeo out, I hosted him in Silicon Valley at the beginning of the year. We had 36 of the top CEOs. We had them all go round the room. "Tell your favorite China story." And I can tell you it’s the same as when I have my bilaterals with with different governments. They literally look around and say, "We don’t trust them." And nobody trusts them. And one of the things that I’ve said — I actually said that night — is I said, "the Chinese Communist Party is a real and urgent threat to democracy around the world. It’s also a real and urgent threat to your businesses because they don’t just want to compete. They want to put you out of business."

Tadeo: I’m wondering, I know you went to Germany I know you went to three different cities in Germany. What are the Germans telling you about Huawei and 5G? Because they still have to roll out big contracts there. Did they tell you we’re not going to work with Huawei?

Krach: We respect Germany’s right to make a decision. And, you know, it comes down to German law. German basic law, which is the Constitution, Article one, and that says two words, human dignity. And they totally get it.

Tadeo: We know, "we’re not going to work with Huawei," they said that?

Krach: Well, they totally agree with us on the North Star. And I had great meetings with many of the CEOs, with their governments, they’re writing that IT security act. We talked with them about paragraph 109 and 9-B, because what they’re really doing is they’re creating a digital trust standatd that leverages off the things we’re doing in the Clean Network and also EU’s 5G clean tool box.

Tadeo: And just a very brief answer here, because, you know, we’re running out of time. But I do want to put the question, what about the Nord Stream pipe? Did you talk with the Germans about this? Because the US has said if you go ahead with this there could be sanctions.

Krach: I think they understand our position is very clear and it’s aligned with this same position as the EU. We see this as a tool for Russia. So we see it as a threat to European security.