My favorite weekly China-related podcast, Sinica, answered one of my questions on their latest episode, "Revenge of the Call-in Show". Hosts Kaiser Kuo and Jeremy Goldkorn, who are far more knowledgeable about China than I’ll ever be, conclude that the Great Firewall is first and foremost about censorship (or more precisely, social stability), and the fact that it helps Chinese internet companies is a happy bonus, but not the goal itself. Kaiser adds that non-Chinese competitors fail, even without the GFW, because they are usually late and poor competitors. YouTube, he notes, was a distant runner up for video service, and Twitter/Facebook were plagued by poor performance relative to domestic competitors long before they were blocked.
But wait a minute...would Facebook, which is no government-resisting anarchist, really hesitate to give the Chinese authorities access to their servers if that’s what it took for admission to the world’s biggest market? That’s why I’m not convinced this is just about censorship.
Facebook and YouTube and many others were once themselves behind the market leaders in other countries, including the US (MySpace, Friendster) when they started. They suffered the same poor performance and incumbency problems in Japan (hardly a place devoid of domestic competitors) and many other places but won anyway.
Countries rarely enact trade barriers explicitly “to prevent trade”. The Japanese bureaucrats who restricted US imports for so long had no shortage of good non-trade-related reasons: Japanese stomachs are smaller, and they wouldn't digest well the larger Florida oranges; Japanese snow, which falls on an island, is different and might present a safety hazard for skis designed for continental precipitation like Europe or America. Even in the US, small family farms are prevented from selling their goods to willing and educated buyers for "food safety reasons", not because the large politically-powerful agribusinesses don't want the competition (that's just a bonus).
Kaiser and Jeremy are right about the explicit goals for the Great Firewall (“promote domestic harmony”), but policymakers might be better off thinking about it instead as a trade issue and not a human rights one. China can argue that, as a sovereign nation, it should be allowed to control information within its borders, but blocking foreign competitors for purely anti-competitive reasons runs afoul of the spirit of the international trade organizations of which China is a part -- and big beneficiary. That argument, it seems to me, is more likely to win in the end.