September 13, 2011

For real estate agents, it determines how much a property can fetch. For strategists, it may trump size in their ability to project power. For moralists, knowing where one stands ought to guide one's actions. Though capital, location fortunately offers relatively few difficulties that cannot be solved in ordinary times with the help of a good map, a compass and a clear conscience.

For political historians, location may indeed be the only fixed fact on which to rely. All other facts come and go, even the weather, as soon as one looks back a few centuries. It is only natural then if their tales read like roll calls of successive owners pegged to each geographical area. Let them delve at length into unit size and type of ownership. For our purpose today, it is enough to broadly speak in terms of states.

For one who sees political history as a perpetual fight among states as they try to gain new territories, what Thanassis Cambanis calls "a new species of powers that operate outside the umbrella of traditional governments", i.e. the "non-state actors", is thus quite unsettling (*).

"Any accurate power map of the world, he writes, has to include, along with the traditional states, entities like Google and Microsoft, Saudi Aramco and Chevron, Al Qaeda and Hezbollah. States still matter too, of course - and nations like China, Iran and Russia matter immensely but [...] these other players are often just as important."

His very sentence illustrates the issue. Whereas a state at any given time can be painted on a map, with tactful stripes to acknowledge any disputed area, how can one pin down an organization with no territorial rights, even if it owns real estate? Location becomes more hindrance than help.

But really is Google so different today from the East India Company (1) and Jardine, Matheson & Co. (2) as they dealt with XVIIIth century India and XIXth century China? Didn't in 1989 the fall of communism in Poland show Stalin's heirs the weight of the Catholic Church? Yet has it not behaved since 1870 like a typical non-state actor despite any state trappings bequeathed by the Middle Ages?

What has changed is not so much the emergence of non-state actors as it is the fact that the United States have lately found themselves on the receiving end. This critique though does not diminish in any way the truth of Thanassis Cambanis' analysis. As a result political history urgently needs to agree on two convenient terms, one to cover both state and non-state actors and another to refer to their mutual relationships.

As the expression "power centers" wrongly emphasizes location, one should instead talk of "world powers". Similarly speaking of "foreign relations" is too much redolent of borders and old fashioned diplomacy. Though not perfect, "external relations" would be more neutral.

Demoted, location is still important. It remains the defining factor which differentiates state from non-state actors. And state actors are not shy to yield the power they alone enjoy to own a territory within which their police can as they see fit raid offices and arrest individuals.

As the current head of BP should know by now, the Russian State keeps a vigilant watch over oil companies operating within its borders (3) and online gambling executives found out to their dismay how unwise it is to travel to their foreign destinations via US airports (4).

On the other hand non-state actors draw their strength from their very lack of a fixed location. They fight state foes with mobility.

Subcontracting for instance delivers strategic depth. Per Kathrin Hille and Leslie Hook, "environmentalists say that electronic manufacturers are increasingly heavy polluters" (**). To avoid what would be a serious problem in the US, Apple relies on Foxconn, "one of [its] most important suppliers", to bear the blame. As the latter deals with more lenient local Chinese authorities, only a non-state actor could shift shame back to Apple.

Non-state actors can also void local data protection laws by switching suppliers of processing services, using worldwide competition abetted by Information Age technology. Add outsourcing to what Amazon.com did internally eleven years ago (5). Eprivacy is thus another bystander victim.

"The Stanford breach spotlighted the persistent vulnerability posed by legions of outside contractors that gain access to private data". Indeed more than seven years before Kevin Sack's report on the latest "medical privacy breach" (***), hadn't David Lazarus already documented the dodge (6)?

Location arbitrage is the way non-state actors favor to engage a reluctant state into "external relations" and negotiate mutually acceptable terms.

"The embarrassment of foreign riches among US tech companies is starting to become conspicuous", Richard Waters remarks in a recent column (****). His choice of words implies companies belong to the state in which they are headquartered. The remedy he suggests tells otherwise. "Companies have lobbied long and hard for a relaxation of immigration policy to feed their domestic development efforts. Why not link concessions to the return of cash from overseas - with the accompanying tax payments?" Isn't this but a sensible compromise in high stake external relations?

Amazon.com has received "a one-year reprieve from having to collect a sales tax from its customers in [California]". Compromise is how David Streitfeld calls this truce in Amazon's wars (*****), shrewdly adding "left unmentioned by either side was the possibility that [...] if [Amazon] moves several small subsidiaries out of the state, it could argue that it no longer has the physical presence in California that requires it to collect the tax."

To use location arbitrage, non-state actors must freely move staff and information. While states use immigration control to constrain staff location, notice how little they dare to do when it comes to data location, even when it concerns their own citizens, Europe found most bark and little bite.

Beyond these differences however, one must draw two lessons from Thanassis Cambanis. First it is time to study competition and alliances among world powers without prejudice. From this perspective China is as much, if not more, a threat to Google as Apple and Facebook.

Even more crucial, American privacy advocates should shed their blinders and focus no more on hypothetical evil from states than actual evil daily done by non-state actors. "The [US] justices will address a question {...]: Do the police need a warrant to attach a GPS device to a suspect's car and track its movements for weeks at a time?", writes Adam Liptak (******). The Fourth Amendment does need strengthening but also widening.

Beware all world powers bringing presents to track your personal location by the minute, even non-state actors like Apple or Google.

Philippe Coueignoux

• (*) ........... Meet the new power players, by Thanassis Cambanis (Boston Globe) - Sept 4, 2011
• (**) ......... Foxconn tackles pollution claim, by Kathrin Hille and Leslie Hook (Financial Times) - Sept 1, 2011
• (***) ....... Medical Data Of Thousands Posted Online, by Kevin Sack (New York Times) - Sept 9, 2011
• (****) ..... A quick solution is needed to US groups' foreign cash, by Richard Waters (Financial Times) - Sept 1, 2011
• (*****) ... California Lawmakers Give Amazon Tax Reprieve, by David Streitfeld (New York Times) - Sept 11, 2011
• (******) . Court Case Asks If 'Big Brother' Is Spelled GPS, by Adam Liptak (New York Times) - Sept 11, 2011
• (1) see the East India Company in the wikipedia
• (2) see Jardine, Matheson & Co. in the wikipedia
• (3) Memo to Exxon: Business With Russia Might Involve Guns and Balaclavas, by Andrew E. Kramer (New York Times), September 1, 2011
• (4) Founders of online poker sites charged, by Joseph Menn (Financial Times), April 16, 2011
• (5) for more details on how to evade European regulations, see the Privacy International versus Amazon UK case in my lecture on Safe Harbors
• (6) for David Lazarus' San Francisco Chronicle report in March 2004 and my case analysis, see my lecture on the Handling of Medical Records