Russell Fry Asks Law Professor How Congress, Executive Can Stop China From 'Evading Trade Controls'

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During a House Judiciary Committee hearing prior to the congressional recess, Rep. Russell Fry (R-SC) questioned Hofstra Law Professor Julian Ku about China's avoidance of trade controls.

Transcript

00:00We now go to the gentleman from South Carolina. Hopefully you'll deal with your North Carolina

00:04friend as well as everyone else has. It's been pretty good so far. Mr. Chairman, I couldn't

00:08agree more. He's outside the district, but we're in the footprint of Charlotte. I think most of

00:13the United States is actually in the footprint of Charlotte. The gentleman's recognized then.

00:17Thank you, Mr. Chairman. Professor, you were talking earlier with Mr. Kiley about

00:22enforcement of judgments. I'm just curious, what would be the prudent way in which Congress

00:31or the courts could review these judgments in foreign countries to ensure that substantive

00:39and procedural due process were honored? I think, as Professor Dillow mentioned,

00:46there are already standards. The courts are already empowered to review. The problem is that

00:52the standard, I think, is too deferential. I think the courts should be given a different

00:58standard where the presumption is reversed. It could be with respect to certain countries

01:03that Congress identifies, like foreign adversaries. Congress has identified foreign adversaries

01:08that these standards should not be given for courts in these countries. That might be one

01:13way to do it, which I think would be kind of a scalpel. It would focus without creating

01:20problems with other countries. So if you took countries of concern, right?

01:23Countries of concern. These countries, and you, would it be like a de novo, almost de novo

01:28review of their procedural and substantive processes to make sure that the hearing was fair in the foreign

01:34country? Right. I mean, we do have a standard where they do have to meet a standard of fundamental

01:37fairness. I think what I'm worried about is a lot of courts just don't do that. And so maybe

01:42the way to give litigants even more is a presumption that the party seeking to enforce the foreign

01:47judgment must have the burden to prove that the prior judgment was adopted fairly. One of the

01:54problems I'll just mention is that it's hard to get access to information on the original court

01:57judgment in China, for instance. It'd be hard to travel there, as Mr. Ma discovered he can't travel

02:03there because he's worried about being arrested. So creating a presumption of putting the burden on

02:09the party seeking to enforce the foreign court judgment or the Chinese court judgment would,

02:13I think, solve a lot of these problems.

02:15In your experience, Professor, do you believe that when domestic courts are enforcing foreign

02:20judgments, that it's almost a rubber stamp exercise?

02:24I wouldn't go so far as to call it rubber stamp, but it isn't as, I'll just put it this way,

02:28it's not as rigorous as other countries. Other countries are much more skeptical of foreign

02:32court judgments than on average U.S. courts are, especially that would include state courts.

02:37And part of it is there's no federal standard.

02:39Thank you for that. And to briefly shift a little bit, what do you suggest just overall that Congress,

02:44the executive branch, or even domestic companies can do to stop China from evading trade controls,

02:51as an example?

02:53Yeah, I mean, this is a real problem. I think the first problem is identifying, admitting that the

02:57problem exists. And I think, like, in educating folks to realize that the party state, as I call it,

03:06is intertwined with Chinese businesses. And so even if Chinese businesses don't really want to,

03:11they are essentially manipulated often or forced to be participating in a Chinese strategic plan,

03:17which can be nefarious. And I think that is the first step in sort of getting everyone to be aware

03:22of what you can do. And then we have tools which we can do to harden our system. What I like to use the

03:28term, hardwood, we just have to, we shouldn't change our system. We need to make it tougher for,

03:33for, for, make it harder to manipulate by bad foreign actors. I think disclosure, education,

03:40awareness, it could be, go a long way to solving some of our problems. But the transition shipment

03:44problem, I think, might be the solution, might be empowering the people who know best,

03:49the parties that are being injured by the bad actors to go to court, bring their evidence to court,

03:54because I think we just don't have necessarily enough enforcement resources in the United States.

03:58Right. So in the, in the instance of the, of the piping company, that they're much more equipped to,

04:02to recognize the problems in the industry as, as it pertains to these shipments into the United States.

04:08Right. We've adopted this in other mechanisms as a way, False Claims Act and other ways to enforce.

04:13So giving private actors who already have the incentives might be a good way to do that,

04:17to make it tougher for transshipment and other types of evasion.

04:24So, Ms. De La Bruyere, what, what should U.S. companies and law firms with the presence

04:30or operational nexus with China be doing to insulate themselves from risks associated with engaging in this,

04:40in this space?

04:44First of all, I think that they should limit their engagement with China to the greatest extent possible,

04:49and there should, and there should, and that's a role Washington can play, too.

04:54If the U.S. government imposes costs, and in the same way that China does to its entities,

05:00calls for a choice to be made between the U.S. and the Chinese markets,

05:03that will create an incentive both for U.S. companies to invest at home and to protect themselves

05:12from the risks of exposure to the Chinese market,

05:14because China is adept at leveraging short-term incentives to which our market entities are very vulnerable

05:20in exchange for long-term strategic advantage that will destroy our market entities and our system.

05:25So, I think there is a role for Washington simply to restrict that exposure or to put costs in it,

05:31and at the same time to create greater incentives for investment at home,

05:36so that it's not just surrendering things for U.S. entities, it's also gaining a new opportunity.

05:41Thank you for that.

05:42Mr. Chairman, I see my time has expired, and I yield back.

05:45I think the gentleman would now recognize the ranking member for unanimous consent.

05:48Yes, two articles, Mr. Chairman, I'd like to offer for the record.

05:52With one.

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