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Monday, March 06, 2006

U.S. Lawyers and China

A couple of days ago, I reviewed some interesting empirical evidence suggesting that lawyers' tend to adopt political views that reflect their clients’ economic interests.  When I wrote that post, there was a specific issue I had in mind: Lawyers’ attitudes toward foreign trade, especially with China.  Let be briefly sketch out the argument and then the evidence.

In 1993, Anthony Kronman (who was then Dean of Yale Law School) wrote in The Lost Lawyer that the legal profession had entered a period of irretrievable decline because of the “ideal of the lawyer-statesman” was “now dying in the American legal profession.”

According to Kronman, the lawyer-statesman ideal (which Kronman borrowed from a speech given by Chief Justice William Rehnquist in the mid-1980s) reflects an professional ethos in which the “[t]he outstanding lawyer ... is, to begin with, a devoted citizen.  He cares about the public good and is prepared to sacrifice his own well-being for it ... .”  Kronman observes that  “the explosive growth of the country’s leading law firms ... has .... created a new, more openly commercial culture in which the lawyer-stateman ideal has only a marginal place.”

So let me pose a question that will surely sound naive: Is expanded trade of goods and services with China, including greater investment in China by nominally American companies, a policy that  serves the public good and advances the nation’s long-term interests?

In 1994, when the Clinton administration threatened to withdraw China’s most favored nation (MFN) status unless China improved its human rights record, conservative commentators such as Charles Krauthammer wrote that such a policy would be huge mistake: “It would cause a huge disruption of American trade, seriously injuring such industries as aerospace and telecommunications.  It would shut the United States out of the fastest growing market in the world.”  In the same op-ed, Krauthammer attempted to assuage his readers by quoting an official from the American Enterprise Institute: “Is not systemic change in China far more likely to occur as a result of inexorably increasing internal pressures – rising out of an exploding market economy and the growing exposure to Western values?” 

Bill Clinton, and the whole centrist DNC movement, eventually bought that logic and gave China permanent MFN status.  Of course, the Democrats also raised millions from Wall Street and Silicon Valley to fund their campaigns.

But what are Western values?  This is certainly a fair question to ask after executives from Google, Yahoo, Cisco and Microsoft acknowledged before Congress that they had succumbed to pressures from the China government and had provided technical assistance to suppress political speech and identify political dissidents. This caused Rep. Tom Lantos, whose district includes Silicon Valley, to comment, “These companies tell us they will change China, but China has already changed them.”

In the United States, trade with China creates winners and losers.  But on balance, so the rhetoric goes, the country as a whole is better off.  Yet even the business community is divided.  As noted in a October 12, 2005 story in the N.Y. Times, the unwillingness of the China government to let the yuan float against the dollar means that U.S. manufacturers who want to sell in China are at a huge price disadvantage of 40 percent or more.  Yet the cheap yuan is terrific for large U.S. corporations who export from factories in China.  Not surprisingly, the largest U.S. companies continue to urge restraint.  In the meantime, the U.S. trade deficit continues to climb. 

So there you have it: The stability of our domestic economy is increasingly contingent on the willingness of the China government to hold our treasury bills.   Ironically, Communist China has as much, or more, influence over U.S. interest rates and inflation than our own Federal Reserve. In the meantime, large, nominally American companies makes a hefty profit.

Of course, so do their lawyers.   Virtually all the “leading law firms” referred to by Kronman have clients who are expanding into China.  Not surprisingly, they are falling over themselves to open new offices in Shanghai, Beijing, and  Qingdao.  Yet, the opportunities are not limited to engagements with nominally American companies.  The Wall Street Journal recently reported that Wilmer Cutler Pickering Hale & Dorr successfully defended the Markor International Furniture Mfg. Co., a Chinese Company, against an anti-dumping suit brought by U.S. furniture producers. 

Apparently, we are at the beginning of a bonanza.  According to one U.S.-trained lawyer working in China, "When antidumping cases are announced, you can see companies receiving hundreds of pages of faxes pitching different [U.S.] law firms."  A partner with Mayer Brown Rowe further opines that “[Chinese] companies have begun to realize that they can get better results if they hire the right lawyers.”

As a group, U.S. business lawyers, especially those at large firms, stand to prosper from expanded globalization (I think the term “international trade” is now outdated and inaccurate).  But what policies advance the public good for average working Americans or the long-term interests of the nation as a whole?   That is the perspective of the lawyer-statesman.  Unfortunately, I agree with Kronman: collectively, the legal profession no longer aspires to this ideal. And that is a shame.

... On that somber note, I am signing off.  Many thanks to the kind folks at PrawfsBlawg.  I enjoyed my time here as a guest blogger.    Bill Henderson.

Posted by Bill Henderson on March 6, 2006 at 02:59 PM in Law and Politics | Permalink


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I am not alarmed by the ascendency of China per se. Rather, I worry that because transactional lawyers and corporate litigators stand to profit from economic globalization, the legal profession as a whole will be reticient on issues such as the growing trade deficit, the harmful effects of currency manipulation on small businesses (as opposed to large multinationals), the perils of having the China government accumulating treasury bills, and whether economic integration will actually produce greater political freedom. This problem is most acute at the leading firms because (a) they profit the most from globalization, and (b) they the salary expectations of law students.

Note that his post was building upon an earlier post on whether lawyers adopt political views that reflect their clients' economic interests. In other words, lawyers might reason backwards from a pro-trade stance because it affects their livelihood. Conflicts of interest are basic to what lawyers do. Perhaps there is a conflict of interest between a lawyer's role as a devoted citizen and a lawyer's role as an advocate for his clients economic interests? This is not an esoteric concept.

I don't care if Wilmer Cutler Hale & Dorr represents Chinese companies in anti-dumping suits. But I do worry when they convince themselves that the pro-trade stances favored by their clients (U.S. and Chinese) are synonymous with the long-term interests of the United States. You could spin that story in 1994 (see above). But it is much harder to spin today.

Posted by: William Henderson | Mar 8, 2006 12:25:50 PM

Shanghai, Beijing, and...Qingdao?? Do they like the beer? The seaside? Funky former German embassys? Really, I think post-communist China is cause for neither hysteria nor elation. To the degree that both the alarmism found in your post and the China boosterism found in other quarters promote an understanding that China's rise marks a fundamental shift in the world power balance, the emergence of a multi-polar world, and the end of the United States' hyper-power status, I think discussion is productive. But why should lawyers be any more concerned about helping Chinese companies than helping say, Haliburton? What's the interest that is being protected? Modern China is no monolith. Why is defending a Chinese furniture company against dumping charges any worse than defending an American furniture company against charges of employment discrimination? Frankly, I think your post is an unproductive use of China as trope which tells us very little.

Posted by: Bart Motes | Mar 8, 2006 1:57:06 AM


You are a resident fellow at the American Enterprise Institute. As noted in the above post, it was another AEI official who told Krauthammer in 1994: "Is not systemic change in China far more likely to occur as a result of inexorably increasing internal pressures – rising out of an exploding market economy and the growing exposure to Western values?”

Well, the market economy has been exploding in China for a dozen years now and America's most revered high-tech companies have assisted the Chinese government in the suppression of political speech. So what are Western values? Profit maximization, or human liberty and dignity? Which values come first?

AEI may argue that political freedom and basic human rights will occur spontaneously as the Chinese economy continues to grow, but the Chinese government is working hard to ensure the exact opposite outcome. Yet, if AEI is wrong, lots of nominally American companies (whose executives no doubt fund AEI) will continue to make a boatload of money.

Finally, you imply that large law firms such as those mentioned above are really pro-consumer when they pitch themselves to Chinese companies accused of dumping goods in the U.S. The Chinese government is pegging the yuan to the dollar in order to build its industrial capacity. In the meantime, this currency manipulation is causing lost sales and lost jobs for thousands of small, highly competitive U.S. businesses. The consolation prize for the U.S. is inexpensive Chinese consumer goods, an unsustainable foreign trade debt, and high profits for nominally American companies that export from factories in China. The large accumulation of U.S. Treasury bills by the Chinese government also gives them powerful and unprecedented leverage over the U.S. economy.

My point is that a lawyer-stateman, as a "devoted citizen," might question the long-term wisdom of these policies rather than sending faxes to Chinese companies that pitch the firm's services--something that hundreds of U.S. law firms are apparently doing.

Posted by: William Henderson | Mar 7, 2006 10:38:34 AM

Considering how dumping laws hurt the poorest American consumers, a lot of public interest groups would be doing infinitely more public good if they were taking dumping cases pro bono instead of challenging the ability of the United States to fight wars.

I fail to see what's wrong with or even notable about Wilmer Hale representing a client targeted by the dumping laws; American law firms have represented such clients since the dumping laws were passed. Why not single out the law firms that lobby for the restriction of trade to the benefit of a small protectionist coalition at the cost of the public good both here and abroad?

Posted by: Ted | Mar 7, 2006 8:32:26 AM

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