"Made in China" Proving Bad for Health

By Roger Bate

Posted: Friday, November 7, 2008

Bangkok Post via AEI - American Enterprise Institute

Brand China has taken a severe beating this year. Some of its fakes were amusing, notably Olympic Ceremony sleights of hand, with fake fireworks and a miming singer, but product contamination has killed hundreds and harmed unknown tens of thousands.

It started with 95 dying in America from a contaminated blood-thinning drug, then in September came the deaths of four babies in China from contaminated milk powder that made thousands of others ill. The latest news is that the melamine found in that milk powder may be present throughout the food chain via animal feed, having reached eggs in Hong Kong.

China could learn some brand management from other manufacturing economies--more than 100 years ago.

Take Britain, where food contamination was a major problem in the 19th century: 15 people died in London when a sweet-making mould contained arsenic; three people died in Nottingham from eating a bright green blancmange laced with copper arsenite; hundreds around the country fell ill from copper sulphate in beer.

These problems only ended when manufacturers put safety above short-term profit. Among the first was Crosse & Blackwell, which gave up coppering pickles in 1855. This initially cut sales because the public were used to bright green pickles but, since the less lurid pickles were safer and tasted as good, Crosse & Blackwell quickly became the trusted brand, driving less safety-conscious competitors out of the market or into compliance.

Over the next few decades, wider brand competition continued to drive out dangerous additives. Later, litigation and regulation made it the rare occurrence it is today.

Although concern about additives has probably increased over the past 40 years in the West, food has become safer all the time.

But is China likely to allow brand competition, with advertising veracity scrutinised by the media, and will litigation by victims be allowed?

The evidence is mixed, especially over the latest melamine milk contamination. Over 30 officials and dairy industry workers have been arrested and the head of the national quality watchdog agency, Li Changjiang, has been fired.

Thousands of inspectors are scurrying around measuring food for contamination and officials from the president downwards have vowed to remedy the situation.

But action came after months of delay. The company at the heart of the milk scandal, Shijiazhuang Sanlu Group, tried to cover up the case when it first came to light, over six months ago. It sought government support and got a media blackout.

A Chinese reporter wanted to blow the whistle on the melamine milk disaster before the Olympics but was unable to do so, the Wall Street Journal Asia reported.

He fell victim to a directive from the Propaganda Department forbidding negative reporting on food safety ahead of the Olympics.

This episode shows how China's media controls make it impossible for the press to serve as an effective watchdog. Since the milk scandal erupted, Beijing has grown more restrictive, not less.

On the other hand, reporting freedoms are being extended--but only to foreign journalists. Beijing has said the relaxed rules brought in for the Olympics would continue indefinitely.

Foreign journalists will be able to travel and report without seeking permission from provincial officials. Chinese reporters, however, will not be afforded such freedom, even if they work for foreign news services.

Nor can the Chinese people expect more than minimal protection in law. Lawyers for families of many of the poisoned children, including one of the dead, have filed three cases against Shijiazhuang Sanlu Group. So far, the cases have not been accepted by the courts and, even if they are, the most the families can expect is compensation for medical expenses.

When companies like Sanlu continue to enjoy such protection, there is no incentive to improve safety in the future.

The solutions are anathema to the political class and the business community--openness to media scrutiny and accountability through independent courts.

If Beijing wants to prevent future scandals it has to encourage corporate integrity driven by competition. The present system leaves Chinese children with less protection and value than American pets: thousands of US pet owners are close to a US$32 million settlement over last year's Chinese pet-food contamination case.

To motivate businesses to ensure product safety and thus encourage durable growth, China must allow free news media and courts that uphold the law instead of the status quo: regulation alone has not worked, while more regulation will just stifle legitimate business and provide cheats with opportunities for corruption.

Roger Bate is a resident fellow at AEI.

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