Toxic Toys: Is this just China bashing?

Ever since China joined the World Trade Organization in 2001 and began its spectacular transformation into a trade superpower, the chorus of complaints about its low-priced goods has been swelling. China has been blamed for the massive loss of manufacturing jobs in countries such as Canada and the U.S., and it has also been accused of using unfair trade practices to capture an ever-increasing share of the world market.

Governments with hard-hit industries have attempted to shut out, or at the very least limit, low-priced imports from China. The tiff between China and the European Union over lingerie imports, dubbed "The Bra War", was just one of numerous instances where China was accused of flooding markets with everything from auto parts to shoes.

It is tempting to assume that the current uproar about toxic toys, sparked by the massive recall of Chinese-made Barbie dolls, Polly Pockets, and other playthings, is part of this broader agenda.

Certainly the time is ripe for China bashing south of the border. China’s trade surplus with the U.S. has soared to record levels in recent months, just as the political campaign to be the presidential candidate is heating up in both the Republican and Democratic parties. In the 2008 US election, the presidency, vice-presidency, a third of the seats in the Senate, and all of the seats in the House of Representatives are up for grabs. Standing up for America against a foreign foe is a time-tested way to win political support.

China not alone in producing unsafe goods

Lending credence to the argument that China is being unfairly targeted is the fact that China is hardly alone in producing unsafe products. Remember the spinach infected with E. coli last year? The toxic bottled carrot juice? How about the arthritis drug that appeared to cause heart attacks? Or the contact lens cleaner that appeared to cause temporary blindness? As far as I know, there was no link to China in any of these cases. They were all products, or produce in the case of the spinach, made in North America and Europe by western manufacturers.

The toxic toy affair is undoubtedly being exploited for trade reasons. However, there is more to it than that. Coming as it did on the heels on tainted seafood, poisonous toothpaste, unsafe car tires, and wheat gluten laced with plastic, the latest health scare has helped expose a raft of more fundamental problems that need to be addressed, not just in China, but also in the countries that buy Chinese-produced goods. Some of them are so entrenched, however, that it would take an optimist to assume they will be resolved any time soon.

Regulation is a good place to start. Every country has its share of cowboy producers who cut corners and use inferior goods in order to make a buck. The difference between Canada and China, however, is that we have a well-established system of product safety regulations, which, while not perfect, manages to catch problem products and force manufacturers to recall items. We also have environmental and labour regulations, again, hardly perfect, but capable of limiting the worst excesses.

Local governments ignore central directives

Now, China apparently has a good set of regulations covering both quality control and the environment. The only problem is that these are set by the central government and largely ignored by lower levels of governments because they stand in the way of economic growth. The central government is moving to take away some authority from local governments, but this won’t happen overnight. And as long as China continues to make economic growth its key priority, local governments, not to mention some companies, still have a powerful incentive to ignore regulations.

Here in Canada, the business community often talks about regulation as if it is a uniformly bad thing. Getting rid of red tape is practically a mantra for some business leaders. While overregulation is admittedly a bad thing, no regulation at all would lead to the situation you now see in some parts of China, where rules exist but are not enforced. Some red tape is necessary to keep society safe.

Which brings us to the situation on this side of the Pacific Ocean. The toxic toys were made in China for a respected U.S. company, Mattel Inc., one of thousands of western companies who have outsourced production to China to take advantage of cheaper prices (possibly in part because of the lack of concern for environmental damage or labour standards). The company has moved swiftly to recall the suspect toys and has been lauded for its actions. But questions are also being asked about its responsibility to ensure that quality standards are met at every step of its supply chain. Clearly, if lead-painted goods for children made it into shops in Canada and the U.S., there is something wrong with the company’s internal system of quality control. Fixing internal controls is the responsibility of western companies, not the Chinese government.

Should the Canadian government do more?

The finger pointing related to the latest health scare has also extended to government checks on imported goods. If Chinese regulations were followed to the letter and companies had effective internal quality control systems, import inspections would be superfluous. Unfortunately, we live in a world where you cannot count on the first two, so the government must play a role in ensuring the health and welfare of its citizens, not just with foreign goods but also with those made in Canada.

As with regulations, there is a fine balance between too much inspection and not enough. However, effective and efficient inspections cost money and governments are under pressure to reduce spending and cut taxes. It takes a very brave politician to stand up to business and announce new rules that might slow the flow of trade and cost more money, even if it is done in the interest of consumer safety. It is easier to claim the problem lies elsewhere.

Those who support totally free markets contend that "buyer beware" should be the operating principle. But how can consumers judge the safety of a product if they are given incomplete information? Inadequate labelling in this era of globalized production makes it impossible to determine, not just where your car comes from, but also the ingredients of much of the food you put on your table. Business could fix this problem, with labels that spell out the source of various parts and ingredients. This would be costly.

These, then, are the complicated problems that the toxic toy scare has helped expose. Some of them could be resolved right here in North America. But it is easier to distract consumers and politicians here by pointing the finger at China. Does China deserve to be bashed? Undoubtedly. But so do a host of others much closer to home.