NEW YORK (CNNMoney.com) -- Two days after Google stopped censoring search results in China, a congressional panel praised the company's actions while excoriating the Beijing government for its record on Internet censorship and human rights.
At a hearing held by the Congressional-Executive Commission on China on Wednesday, lawmakers called on China to allow a free flow of ideas on the Internet and sharply criticized Microsoft for continuing to be complicit with China's censorship laws.
"China wants to participate in the marketplace of goods but keep the marketplace of ideas outside their country," said Sen. Byron Dorgan, D-N.D., "Only when China respects human rights and allows the free flow of ideas ... only then will they be treated as a full member of the international community."
While lawmakers scolded China, they roundly applauded Google for shutting down its search operations in China.
Dorgan said he believed Google's decision to stop censoring was "a difficult decision to make, but it was the right decision."
Rep. Chris Smith, R-N.J., called Google's decision "a remarkable, historic and welcomed action." He also praised Internet domain host site GoDaddy.com which said it will no longer offer new Chinese Web domains. GoDaddy.com announced on Wednesday that it would no longer register ".cn" addresses, citing tough new government rules requiring extensive personal information from applicants.
At the same time, he lit a fire under Google's search rival Microsoft (MSFT, Fortune 500) for continuing to censor results in China and not following Google's (GOOG, Fortune 500) lead.
"They [Microsoft] need to get on the right side of human rights rather than enabling tyranny, which they're doing right now," Smith said.
In response to lawmakers' criticism, Microsoft issued a statement, saying it would continue to do business in China but would work with the government to foster a more open Internet.
"We appreciate that different companies may make different decisions based on their own experiences and views," the company said. "At Microsoft we remain committed to advancing free expression through active engagement in over 100 countries, even as we comply with the laws in every country in which we operate."
Lawmakers and Google disagreed with Microsoft's position, and they urged the government to take a more active stance on Internet freedom.
Smith said he supported the Global Online Freedom Act, which would require tech companies doing business in China to disclose what they're censoring. He called on China to do "more than passing lip service" to Google and pass the act.
Google agreed that the United States needed to take action as well. At the hearing, Google's director of public policy, Alan Davidson said governments should do more to protect Internet freedom around the world.
"We believe the Internet should be about the free exchange of ideas, but it's going to take a lot of work, and we need your help," Davidson said. "It not only raises important human rights concerns, but also creates significant barriers for U.S. companies doing business abroad."
Representatives from the Chinese government were invited to the hearing, but declined to attend, as they always have for hearings held by the committee. But for the first time since the committee was founded in 2000, the Chinese government provided the committee with a written statement.
"Foreign companies need to abide by China's laws when they operate in China," China's State Council Information Office said in the statement. "Google violated it's promise."
In its statement, China also said it is "firmly opposed to the politicization of commercial issues," and said that it is "committed to the opening up of the Internet." The country said it will welcome back Google if it decides to abide by its nation's laws.
Due to the wide interest about the implications of Google's decision on the United States' diplomatic relations with China, the hearing was packed. Journalists and other spectators stood two rows deep in the back of the hearing room.
On Monday, Google began redirecting its Chinese users to its Hong Kong site, google.com.hk, which offers uncensored search results.
Google's search site for Chinese users is now hosted on servers that are in Hong Kong. Since Google is no longer hosting its search operations within mainland China, Google no longer needs to adhere to China's censorship laws.
It is now up to the Chinese government to block access to the results it finds objectionable.
One of the witnesses at the hearing, Sharon Hom, executive director of Human Rights in China, said Google's model of continuing to do business in China by operating outside of mainland China's borders serves as a model for other foreign businesses.
"Google's decision this week really demonstrates the possibility beyond the either-or mentality," Hom said. "Google really hasn't left the country."
Google itself did not completely avoid criticism from lawmakers. When asked specifically what Google was censoring in China, Davidson said he could not reveal that information, because it is a Chinese state secret.
"I admire the decision ... but aren't you able to talk about it outside of China?" asked Dorgan.
Davidson declined, to Dorgan's displeasure. Davidson said the legality of the issue represented one of the reasons why the company shut down its search service in the country because it puts Google "in a terribly difficult position."
Dorgan said the debate over an open Internet was more than just "intellectual," but had very important, tangible implications.
"China is a country that throws people in dark prisons for expressing their ideas," he said. "This is a matter of life or death."
-- CNNMoney.com Deputy Managing Editor Rich Barbieri contributed to this story
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