DEVELOPMENTS
Chinese Prime Minister Wen Jiabao announced a draft law designed to increase food safety on Wednesday. The new legislation comes in the wake of a nationwide crackdown on the sale of tainted food and other consumer products. On Monday, Chinese officials announced the arrest of over 700 people charged with violating food safety laws. These are welcome developments for the millions of Americans who consume Chinese products every day. Since Mattel/Fisher-Price announced a recall of 18.6 million toys made with lead paint and other hazardous materials this summer, consumer protection advocates have been clamoring for better inspection of Chinese goods.
BACKGROUND
China’s status as the world’s largest manufacturer is without question. Since the once-isolated communist country joined the World Trade Organization (WTO) in 2001 it has instituted countless market reforms. China has doubled its global manufacturing output in six years and tripled its share of world exports between 1993 and 2005. Its massive cheap labor force, estimated at 798 million in 2006, swamps other developed nations.
Although China’s capitalist-communist hybrid economy has been labeled ‘unstoppable’, the world has started to see some of the drawbacks of Chinese ascendancy.
Chinese toy-maker Zhang Shuong committed suicide days after his company was blamed for thenearly 20 million toys recalled this summer. By October of this year, recall stories included exploding mobile phone batteries, tainted pet food, mislabeled cough medicine and disease ravaged pigs which drove up the price of pork.
The disasters came to pass in part because the Chinese government had both too much and too little influence on the economy. The market reforms of the 1990s reduced the government’s role in regulating the economy, but China’s simultaneous decision to become the world’s factory floor prompted heavily subsidized production. Despite receiving government subsidies, many Chinese manufacturers are only able to make a profit by using low-cost sub-contractors. These often nameless sub-contractors compete entirely on cost with no reliance on brand recognition or quality.
End result: cheap goods and expensive recalls.
ANALYSIS
In response to the backlash, the Chinese government has begun to establish real safety standards. It has dispatched 30,000 inspectors nationwide and the recent arrests indicate that some progress is being made. One reason why China is ramping up inspections is fear that this issue will mar the 2008 Olympic Games in Beijing. The Chinese view the Olympics as an opportunity to win respect as a world leader. Any negative publicity leading up the Games makes that goal less likely.
Another reason why China is taking the safety regulations seriously is that the viability of their economy depends on it. The liability of recalls and the increased cost of product-testing, may motivate companies to find new suppliers in southeast Asia or Latin America.
But regardless of China’s efforts, US consumers cannot rely on China to protect them from hazardous imports. Multinational companies (like Mattel/Fisher-Price and Motorola) will have to make the effort to increase audits and internal investigations, probably with some prodding by the U.S. government.
But the wheels are turning.
A number of elected officials have taken a stand on the issue of hazardous Chinese imports. Senator Chuck Schumer (R- NY) has called for an import czar. And Senator Dick Durbin (D-IL) has proposed a bill increasing the maximum penalty for retailers selling recalled products. With 20 days left until the holiday shopping season begins, let’s hope those wheels are turning fast enough.
Olivier Kamanda is the Founder and Editor-in-Chief of Foreign Policy Digest.
