#280 Do, Then Think

Of India's Chip Import Restrictions and Australia's Social Media Controls

Not(PolicyWTF): Another Rollback of a PolicyWTF

This section looks at egregious public policies. Policies that make you go, WTF, Did that really happen?

- Pranay Kotasthane

The government taketh away, and then the government giveth—sometimes. This is the type of action we end up discussing in the Not(PolicyWTF) section. We wanted this section to discuss path-breaking reforms, but all we get are crumbs, wherein the government first commits a PolicyWTF, has a rethink about it, and then reverses it.

One such occurrence happened last week when the government withdrew the Chip Import Monitoring System (CHIMS). CHIMS was operationalised in October 2021, making imports of all kinds of integrated circuits (chips) subject to prior registration on an Import Management System portal. This registration came at a small fee and was in addition to the existing requirement of an Importer-Exporter Code (IEC) registration. CHIMS demanded details of the chip import consignments, including, in some cases, the upload of datasheets of the chips! Once this license came through, the consignment would be cleared at customs. This system was particularly terrible for small electronics firms and enthusiasts who were importing chips to build things in India. Isn’t it amazing how easily the government can restrict our economic freedoms without specifying the intended outcomes of such restrictions?

Moreover, the Department to Ground Foreign Trade Directorate General of Foreign Trade (DGFT) notification that brought in these restrictions said absolutely nothing about the reason for this measure. My searches on government websites and press releases also failed. The sufferers guessed that the government wanted this data to estimate India’s chip import needs accurately. I suspect this line of reasoning as importers are already required to furnish the Harmonised System Codes for taxation and tariff reasons. How the additional CHIMS registration would help was never stated officially. I guess that it had something to do with the post-Galwan equation with China, given that nearly 60 per cent of India’s chip imports come from mainland China and Hong Kong.

Be that as it may, the good news is that the government withdrew CHIMS last week. Yet again, no reason was given for this policy change. Obviously, no details about the outputs and outcomes achieved through CHIMS over the last three years were shared. All we can guess is that it finally dawned upon the DGFT that this friction was counter-productive for Indian electronics firms. Small mercies.

This is just another illustration of how the administrative State is adept at killing Indian entrepreneurship. Then, we wonder why there are so few Indian product companies.

PS: Shree Kumar, an electronics hardware specialist and a Takshashila GCPP alum, has a post on this policy here.

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Global Policy Watch #1: Social Media Controls Are Here

Insights on global issues relevant to India

— Pranay Kotasthane

On November 29, the Australian Parliament passed the Online Safety Amendment (Social Media Minimum Age) Bill 2024. Various news reports have claimed it is a blanket ban and questioned its enforceability. However, there is more to this move than meets the eye.

The Facts

The bill has a detailed explanatory memorandum that explains its motives and considerations. Here’s what we know.

The bill sets a minimum age for users to hold a social media account. The current minimum limit is set at 13 years, and it predates the social media age. Australia’s law will increase this minimum limit to 16 years. The obligation to prevent age-restricted users from having an account rests solely with social media platforms. There are no penalties for children who circumvent this law, but platforms that do not take reasonable steps to implement this law face a hefty civil penalty. Social media firms have been given a year to implement age verification mechanisms.

The bill does not propose a blanket ban. One, it exempts messaging apps, online gaming services, and ‘services with the primary purpose of supporting the health and education of end-users’. Two, it does not prevent children from accessing ‘logged-out’ versions of a social media platform, i.e., they will have access to YouTube, X, and Facebook without signing in. And three, the bill explicitly acknowledges that its aim isn’t 100% compliance. It says:

It is impossible for governments to completely prohibit young people from accessing harmful products or content. Australia should be prepared for the reality that some people will break the rules, or slip through the cracks. However, the Bill will set clear parameters for our society and assist in ensuring the right outcomes.

The bill’s stated aim is as follows:

This will help to mitigate the risks arising from harmful features that are largely associated with user accounts, or the ‘logged-in’ state, such as persistent notifications and alerts which have been found to have a negative impact on sleep, stress levels, and attention. The obligation would not affect user access to ‘logged-out’ versions of a social media platform…

In honing in on account holding, the obligation seeks to mitigate the harms that arise from addictive features largely associated with the ‘logged in’ state of social media platforms, such as algorithms tailoring content, infinite scroll, persistent notifications and alerts, and ‘likes’ to activate positive feedback neural activity.

Finally, the narrative instrument is also crucial. This bill is being positioned as just another ‘'age‑based law to limit or minimise access to known harms, as in the case of alcohol and cigarette use’.

Anticipating the Unintended

Many articles have tried to anticipate the unintended consequences. Some of them have focused on enforcement and implementation issues. Age verification using biometrics will harm children’s privacy, kids might be pushed into accessing more harmful and less-regulated platforms, and kids will be denied the benefits that social media provides; these are some concerns that have been discussed widely.

Given that VPNs exist, it will be impossible for the government to prevent motivated children from using social media. Given Australia’s small population, it is also likely that some companies might just refuse to comply and choose to exit the market. Finally, the bill doesn’t comment on other alternatives, like the film content rating system or forced logouts after a specific time period.

It appears that by zeroing in on persistent notifications and algorithmic tailoring, the government focused on the cognitive autonomy dimension for kids. To make it seem less unpopular, it has also allowed a number of exceptions. Given the implementation problems that are easy to anticipate, it’s unlikely that Australian kids will suddenly gain more cognitive freedom from social media trickery.

Nevertheless, for a high-state-capacity-liberal-democratic country to restrict social media usage marks an important milestone for the Information Age. How far have we come from the early days of social media euphoria! Framing social media use akin to harmful intoxicants is a smart ploy. More countries are likely to use this precedent to justify other types of social media restrictions, which might signal these platforms to self-regulate before the heavy hand of the State falls on them. Ultimately, its biggest value might be just this: a signal to parents, platforms, and other governments that social media use requires moderation.

As for me, I was convinced that this ’ban’ was a policyWTF. But after reading the explanatory memorandum, I am not so sure . From an Indian perspective, copying the law might not be the best option, but it has surely brought the importance of protecting one’s cognitive autonomy to the centre stage. What do you make of it?

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HomeWork

Reading and listening recommendations on public policy matters

1. [Paper] Since Trump has reignited the de-dollarisation topic, here’s a deep-dive by my colleague, Anupam Manur. TL;DR: “With gradual increase in export competitiveness and greater participation in regional trade blocs, India can try in the medium to long-term to persuade countries to accept payment in rupees, as long as those countries find Indian goods attractive and competitive. In the meanwhile, India’s approach should be to diversify its forex portfolio and at the same time get into regional trading arrangements that are promoting the use of other currencies and payment mechanisms for trade. However, it should refrain from promoting greater global use of Chinese Renminbi.”

2. [Papers 1 and 2] The Australian social media controls have brought the benefits and costs of these platforms back into focus. Luckily, my former colleague Prateek Waghre has co-authored two papers that systemically classify their harms and benefits.

3. [Thread] Another “One Nation One X” is in town, this time for academic journal subscriptions. Here’s an initial view by Shambhavi Naik.

4. [Podcast] Another year, another US semiconductor export control update to restrict China’s access to advanced semiconductors. ChinaTalk has a great episode dissecting the rules.

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