Total Recall

February 29, 2008 Topic: Economics Tags: Communist Party Of China

Total Recall

Mini Teaser: What do the Olympics, airplanes and toys have in common? How China can reverse course, and save lives. . . .

by Author(s): Dali L. Yang

But most importantly, the Chinese are upgrading quality standards in all areas, from food to pharmaceuticals. They're taking proactive measures to strengthen the monitoring and supervision of production and supply chains for food and manufactures, including implementing monitoring and inspection programs for wholesale farm-produce markets in all major cities, introducing recall mechanisms for food and more rigorously testing the quality of export products at the border.

In spite of the domestic campaign and crackdown, it is simply impossible for Chinese regulators to achieve full compliance in the domestic market in a short time period. There are hundreds of thousands of firms and families involved in producing food and manufactures. So, the focus of governmental action is, in the words of Wu Yi, "to strengthen the system of supervision and control over product quality, especially relating to exports." This means that, while there will be general improvement, the improvement in the domestic market will likely lag behind that of exports.

As with aviation-safety regulation and antidoping, the international pressure on China to improve product quality has been accompanied by international assistance. We can hope this collaboration will be as effective. On products ranging from preserved and pet foods and farm-raised fish to certain drugs, medical devices and toys, the United States and China have reached agreements to strengthen the quality of Chinese exports. Whereas previously, authorities would ignore the errant or unlicensed factories until after a product-quality problem had been uncovered, the agreements signed during the Third U.S.-China Strategic Economic Dialogue in December 2007 require Chinese exporters to register with the government and accept inspections to ensure compliance with American standards. This is clearly designed to mitigate counterfeiting and safety problems before the products even leave China.

Also as part of the agreements, and as an indication of the growing interdependence between the Chinese and American economies, Beijing has allowed U.S. inspectors to become "embedded" in China to monitor the quality standards of certain Chinese export products, ensuring they meet U.S. quality standards. Stationing U.S. FDA personnel abroad helps bridge different regulatory systems. This kind of cooperation is a nascent but significant step toward deep regulatory integration and may also be replicated in other countries. All this highlights the disparity between American and developing-world standards.

Meanwhile, even without the major Chinese government initiatives, the massive recalls would have caused businesses on both sides of the Pacific to modify their behavior. Western buyers, mindful of the high costs of safety-related recalls, have become more demanding when it comes to quality and safety. On the other side, many Chinese manufacturers quickly adopted more rigorous testing and tightened quality standards to keep the orders coming in. Those unable to bear the rising costs and risks have simply exited the market.

It's unlikely that government regulation will be fully effective in the Chinese domestic market, if for no other reason than the sheer number of businesses that need to be regulated. But when it comes to Chinese exports to developed markets, the message is clear: Beijing will ensure products destined for American markets meet U.S. standards. As Wu Yi said, "China will live up to its responsibilities and obligations when it comes to product quality and food safety." Both government initiatives and market forces will point the way. After all, China's reputation is at stake.

 

Dali L. Yang is currently the director of the East Asian Institute in Singapore and was previously the chairman of the Department of Political Science at the University of Chicago. He is the author of Remaking the Chinese Leviathan: Market Transition and the Politics of Governance in China (Stanford University Press, 2004) and Beyond Beijing: Liberalization and the Regions in China (Routledge, 1997).

 

1Reuters, "Mattel Apologizes to China for Recall," International Herald Tribune, September 21, 2007, http://www.iht.com/articles/2007/09/21/business/mattel.php/.

2Andy Pasztor, "How China Turned Around a Dismal Air-Safety Record," Wall Street Journal, October 10, 2007. Yang Yuanyuan was replaced as the head of caac and posted to the State Administration of Work Safety in January 2008.

Essay Types: Essay