The Agenda

The Facebook-Google Trade War

Ryan Singel reports that Google will no longer allow Facebook to access Gmail contacts:

 

Facebook users previously could give the social network permission to look through their Google contacts for e-mail addresses via Google’s Contact API. Facebook would match them up with user profiles to suggest people to befriend. And if those people weren’t on Facebook, you could send them an e-mail invitation to join — which is exactly how a social network goes viral.

But Facebook generally doesn’t reciprocate with other services — unless they are partners. If you are also a Twitter or Buzz user and want to find out which of your Facebook friends were using those services, Facebook will not let you.

Google — which has plenty of reasons to covet the rich mine of user data hidden behind Facebook’s walls — simply had enough.

This reminds me about arguments for and against unilateral free trade. Google has decided to close its borders, having decided that Facebook is behaving like an obnoxious mercantilist. But is Google cutting off its nose to spite its face? Do Facebook users love the convenience of accessing the Gmail contacts, and might they think twice about using Google services in the future? Or is Facebook playing Google for a patsy?

Here is Brink Lindsey making the case for unilateral free trade in 1998:

 

It’s not just that free traders have sold their cause on foreign policy grounds. Through linking trade liberalization exclusively with international negotiations, they have actually conveyed the impression that free trade requires the subordination of the U.S. national economic interest to broader concerns. After all, in trade talks countries agree to reduce their trade barriers only on the condition that other countries do likewise. Thus, trade barriers are treated like nuclear missiles in arms control talks — prized strategic assets that are given up only in exchange for foreign assets of equivalent value. (Indeed, in the parlance of the General Agreement on Tariffs and Trade, a commitment to reduce tariffs is a “concession.”)

With the issue so framed, the military metaphors proliferate. Trade “hawks” argue that relatively open markets amount to “unilateral disarmament,” and urge that we close off access to U.S. markets unless foreign countries let in more American goods. Free traders, by resisting such calls, get cast as “doves.”

Of course, the equation of trade with war is economic nonsense. Trade, unlike war, is not a zero sum game: one country doesn’t “win” at another’s expense. In particular, openness to foreign competition is not a vulnerability. On the contrary, it allows a country’s citizens to enjoy the best goods and services the world has to offer, and to specialize in those pursuits at which they are relatively more productive. And the benefits of open markets accrue regardless of whether other countries maintain similarly liberal policies.

So is the relationship between Google and Facebook best seen as akin to trading relationships among states or is it more like war? My sense is that the war analogy makes much more sense in this context, as Singel’s post suggests:

 

Facebook and Google are locked in a fight over who controls identity on the net, which Facebook is handily winning with its Connect service that automatically logs you into some sites (and transfers your profile) and gives sites and now phone apps an easy way to let people log in with their Facebook credentials. It’s a convenience that puts Facebook firmly at the center of the web.

Google is likely picking pick this fight now because of an anticipated launch of a competing social networking service, rumored to be called Google Me. The fastest way to hit the ground running would be for Google’s 176 million monthly users to cross-index their friends among Facebook’s 500 million members. Facebook, the 800-pound gorilla, isn’t especially interested in giving a new competitor a leg up — especially one of Google’s size — and is making it clear it doesn’t want to let users have their data or play fairly when it comes to portability.

Facebook has a history of blocking its rivals and, until now, it hasn’t been seriously challenged. Twitter’s Facebook app in June gave users the ability to find which of their Facebook friends were also on Twitter, so that you could follow them or make a list of them to follow. Facebook quickly shut that down. [Emphasis added.]

To be sure, states engage in Facebook-like behavior often. And it’s clear that we’d all be better off if all states refused to engage in beggar-thy-neighbor shenanigans. (It is also true, as Dani Rodrik has argued, that when an economy has relatively few trade barriers, as is true in most of the rich market democracies, you can bet that the trade barriers that are left will be very costly to remove.)

The Google-Facebook battle is a microcosm of why the world is often a sad and miserable place. Consumers would win from more openness, but Facebook thinks it can successfully impose its will on its “partners.” In some cases, this leads to just desserts scenarios, as when Facebook refused to play ball with Apple’s new Ping social network for iTunes users. At first, Facebook was open to allowing Ping to use Facebook Connect, but then Facebook backtracked. But of course Apple has taken a notoriously control-freakish approach to the development of apps, etc.

And so it goes.   

Reihan Salam is executive editor of National Review and a National Review Institute policy fellow.

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