Donald Trump vehemently complained of the way China takes advantage of the United States. He did not specify his objections on TV. At first, his China-bashing sounded like the typical complaint caused by China eating our lunch with low-wage manufacturing. China pays their workers something like a tenth of what American manufacturing employees make. This is the main driver of Chinese ascendancy, a fact of global economics and this disparity will not diminish just because Americans disapprove. Then I started remembering some things. Upon reflection, I realized that Donald Trump is right, in at least in two ways that came to mind:
First, Chinese manufacturers send enormous quantities of manufactured goods to the United States of America. When those manufactured goods cause injury or prove defective, it is extremely difficult if not impossible to bring the Chinese manufacturer into an American court. Under the Hague Convention, foreign manufacturers must be served the lawsuit in their own languages, but after that, the foreign manufacturer is subject to jurisdiction in American courts. While Chinese manufacturers are theoretically subject to the jurisdiction of American courts, it is very difficult to obtain service of process within China. If service of process is effected, the normal discovery procedures such as depositions and document requests are not usually recognized. If an American obtained a judgment against the Chinese corporation, it would be very difficult to collect. At every juncture in the legal process, language and cultural barriers impede the actions of American lawyers. The only way I have seen a Chinese corporation brought into American courts is when the company was owned by the state, an alter ego of China itself, and U.S. federal jurisdiction obtained by serving the Chinese consul. As a practical matter, very few American attorneys will attempt to sue a Chinese manufacturer. Because the cost of American product liability litigation is high, Chinese manufacturers have a significant trade advantage over the United States, Europe and Japan.
Second, Chinese prison-made goods enter the United States easily. This is not supposed to happen, and it is against the law, but monitoring the component manufacturers in China is very difficult. Again, linguistic, cultural and geographic barriers make it very difficult to detect Chinese prison-made goods. Federal and state statutes stop
American prison-made goods from crossing state lines. It is easy to tell if something is made in an American prison industry. The Hawes-Cooper and Ashurst-Sumners Acts deny American prison-made goods the status of being made in interstate commerce, and they prohibit prison-made goods from crossing American state lines. Most prison industries in America only make goods for the federal and state governments. Obtaining exceptions to these self-imposed trade limitations is difficult and imposes other debilitating restrictions.
U.S. law provides consumers and injured parties remedies if they are injured or damaged by a defective or dangerous product. American law also takes a stand against prison industries competing against industries employing law-abiding workers. Various aspects of these broad American policies are debatable and subject to change, but both are ingrained in American law. The Chinese pursue policies directly contrary to American law. The Chinese do not facilitate American product liability litigation, and they actively exploit prison labor.
Between the United States and China, the playing field is not level. The two described advantages decidedly favor China. What’s not clear is how to remedy the imbalance. The United States could discourage product liability litigation and encourage prison industries. Or China could accept the long arm of American litigation and limit their prison industries. Most likely, both will have to modify their legal and trade structures.
These are just two imbalances in Chinese-American trade and foreign relations. For those concerned with America’s place in the world, we had best look for others – and then take action.