Alleged $275 billion secret deal between Apple and China raises awkward questions

A paywalled IT industry publication called The Information has published a blockbuster report titled, “Inside Tim Cook’s Secret $275 Billion Deal with Chinese Authorities.” Only 2 paragraphs are visible to non-subscribers, Hartley Charlton of MacRumors has published a summary of it that is available to all. You can read the whole thing quickly, but here are some highlights:

Tim Cook‌ personally forged a five-year agreement with the Chinese government during a series of in-person visits to the country in 2016. The need to push for a closer alliance with the Chinese government reportedly came from a number of Apple executives who were concerned about bad publicity in China and the company's poor relationship with Chinese officials, who believed that Apple was not contributing enough to the local economy.

Alleged internal documents show that Cook "personally lobbied officials" in China over threats made against Apple PayiCloud, and the App Store. Cook set out to use a "memorandum of understanding" between Apple and a powerful Chinese government agency called the National Development and Reform Commission to formally agree to a number of concessions in return for regulatory exemptions. The 1,250-word agreement was written by Apple's government affairs team in China and stewarded by Cook as he met with Chinese officials.

Apple has apparently agreed to benefit China more. It has invested a billion dollars in a Chinese ride-share app and made

…a pledge from Apple to help Chinese manufacturers develop "the most advanced manufacturing technologies," "support the training of high-quality Chinese talents," use more components from Chinese suppliers, sign deals with Chinese software firms, collaborate with research in Chinese universities, and directly invest in Chinese tech companies, as well as assistance with around a dozen Chinese government causes. If there were no objections from either side, the deal would be automatically be extended for an additional year until May 2022, according to the agreement.

Apple vowed to invest "many billions of dollars more" than its current expenditure in China, including on new retail stores, research and development facilities, and renewable energy projects.

 Given the rapidly escalating tensions between China and the free world, Apple may find itself accused of divided loyalties or worse, along with much of the high-tech community.  China’s evident commitment to using high-tech information tools to control its population more effectively than previous totalitarians could have dreamed of makes the relationship particularly awkward.

The question of the loyalty of global corporations to their home countries is nothing new. My late friend Raymond Vernon wrote a national bestseller in 1971 titled Sovereignty at Bay, about the rise of multinational corporations.  In the half-century since, the phenomenon of global corporations has only grown, with more nations home to such firms. Conspicuously, although Chinese products are sold all over the world in vast quantities, no Chinese company has become remotely like the global corporations that locate manufacturing, R&D, and other functions across the world, wherever economic and political logic suggest they might best serve the overall corporate interest.

I suspect that Tim Cook is not going to enjoy the spotlight that will now be focused on him.

Photo credit: Pierre Lecourt CC BY-NC-SA 2.0 license

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