Melamine, China, and the peril for emerging markets

France's Banana RepublicIn 1993 France instituted the European Banana Regime placing quotas on banana imports from outside of their trade preference agreements with Europe’s old colonial trading partners, the African, Caribbean and Pacific nations. The big losers were Latin American farmers.

Germany, joining the European Union in 1987, and with no historical colonies to protect, was suddenly restricted from importing (to them) cheaper, tastier and larger bananas from Latin America in favour of the ACP imports. The case went to GATT (now the World Trade Organisation).

France declared that they were simply preventing toxic products from entering their market; citing evidence that Costa Rica used harmful pesticides and degraded the environment through their agricultural practices. That Costa Rica was improving its farming techniques, and that the ACP countries were even worse than Latin America was moot.

It was flagrant protectionism and resulted in years of jokes about France banning bananas based on their curvature.

Protection of free speech is seen as sanctified (it can be available but you don’t have to listen to it) but commercial protectionism is still popular (we don’t even want to know it exists). And protectionism turns up in unusual places.

When US lobster fishermen – after years of overfishing – complained that Chinese farmed lobster were putting them out of business, US congressmen acted quickly to declare China guilty of dumping and to levy huge duties on imported lobster.

Imported foods are particularly aggressively targeted for protectionism. Firstly, because they’re an easy target to stimulate local fears, and, secondly, because emerging markets frequently only have competitive advantages in primary industries like agriculture or basic manufacturing.

Instead of seeing developing nations as being further back along the development pathway, rich nations like to hold them to the same standards to which they (on paper) hold themselves.

This has seen a plethora of moves that support Japanese rice farmers, all French agriculture, and corn and cotton farmers in the US. The very products that would most assist the development of poor nations. Tax-payers in the rich world prefer to keep poor nations in permanent need of charity and aid (so that they can drive around in fancy off-road vehicles while lording it over the neglected victims around them) than to trade with them.

Not that poor nations have anything to be proud of either. Self-imposed red-tape and excise taxes (on goods not even manufactured locally) dramatically increase costs in poor countries as well. Kenya, which doesn’t make mosquito nets, used to levy a 600% tax on imported nets ensuring that the cheapest prevention for malaria is out of reach of the poor.

Now we have Melamine.

Some of the loudest voices responding to this crisis have called for a ban on imports from China. That is counter-productive.

China is not singling the US out in some processed-foods act of terrorism; they feed this stuff to their own people as well. Their attitude to life is just different.

I would suggest that a more measured, long-term, and sustainable response would be an opt-in health system. Simply demand of your own companies that they must comply with local health rules, be they CE or ANSI or even HACCP. And that this must apply to their entire value chain. The real culprits here are corporations who – knowing that the deal was too good to be true – never looked at their inputs to assess whether or not they were safe for consumption.

Consumers can declare their allegiance at the till: are you willing to pay more for appropriately certified products; or do you wish to sacrifice safety for price?

Don’t blame China – they just sold you what you wanted. Caveat emptor.


7 replies »

  1. But – wait a sec. I get your general point, but am not sure I see China and melamine spiking as comparable to the other cases you reference. If your general point is correct, the China example detracts from the argument.

    For starters, I’m a little hard-put to see China as an under-developed nation suffering at the hands of colonialist paternalism. Costa Rica and China are very different cases.

    Second, the melamine spiking we’re seeing isn’t about giving us what we want here in the US. If the practice were aimed at driving prices down, then I’d say we’re guilty. In fact, the practice is the opposite – it’s about making a product look like it has more protein than it actually does, thereby allowing them to charge more. Or, more accurately, allowing them to charge what they’d charge for the same compound if it contained as much protein as it seemingly did.

    So it’s not about driving down price – it’s about a way of cutting costs while holding the line on price, and that’s most assuredly NOT what we want.

  2. And I agree with you entirely. I am arguing that your manufacturers – who bought the additives from China – were getting a good deal, didn’t question it, didn’t check the bona fides of the companies concerned, and simply passed it on to you.

    Take a careful look at your local distributors and see whether they took any precautions, or whether they simply slapped a label on the bag, made sure the price was easy to find, and sent it out.

    Before slapping China around, make sure your internal checks are ok. And that is where labelling comes in – if the companies concerned claim to be accredited, then the accreditation companies aren’t doing a good job and they should be investigated. After all (and my gf has just gone through CE accreditation at her company) the process of getting certified is extremely expensive – they better be doing a good job.

    In other words, you already have legal recourse in the US to punch bad companies practices on the nose. Don’t demand that the Chinese – who admittedly do have lower standards than your own – do the work for you. Demanding that developing nations impose standards that your own companies won’t install (because they’re too expensive) is crass protectionism.

    And only the final company in the chain needs to ensure that the correct health-checks are in place before selling to the public. As long as the labels are there, the public has been informed.

  3. “You asked for it, now you got it.” This implies there is informed consent on the part of the consumer. When have you ever been asked: “Do you want melamine with those shakes?” I haven’t.

    How about, would you like to feed your dog, your child, your immunodeficient partner arsenic? I, like most consumers, have never been given an equal opportunity when balanced with that of manufacturers and producers, to influence what is in these products until after the damage is done.

    And them, we the consumer, are held to blame because “you had it coming” because you wanted an affordable product.

    If you want to produce adulterated products, the balance for the consumer is effective, fully funded mandatory regulation and NO TORT REFORM.

  4. Ah – well, you’ve read my posts so you know that my biggest issue isn’t the melamine thing itself (although yeah, that’s an issue). It’s with the way our regulators have been systematically co-opted by industry. We have dramatically damaged our ability to do the very things you’re pointing to.

    Those regulatory bodies HAVE to function because we can’t expect every business that imports consumables to have their own full-spectrum lab (nor should we allow companies, which are driven by intense profit motives, the opportunity to cut corners).

  5. As you see from “One disgusted consumer”, the “how were we supposed to know” excuse is rampant. No, you don’t have to think about arsenic and so on, not because companies choose to put it in (or not), but because standards bodies and oversight labs set standards and award certification to companies that keep those standards.

    Standards bodies must not just be effective, but communicate their purpose and brands to consumers so that consumers don’t get to pretend that they have no culpability in what they buy.

    And, as one who lives in a country with no torts: message to the US, you really need tort reform; it is a form of protectionism and means only those who can afford tort insurance can sell things to you – which means you don’t allow (for example) small South African start-up companies to sell you anything. And, trust me on this, you’re missing out.

  6. Excuse? Really, your pride and arrogance are truly showing. Do you know the standards and practices for acceptable adulteration of each and every ingredient, and/or the compliance level of each and every ingredient manfucturer for a particular product or foodstuff available on shelves in markets in the United States? If not, why not?

    Do you propose that each consumer carry around the standards manuals and and scientific research for each ingredient in their with them in their pockets as they go shopping each day?

    Consumer alert: Omniscience required. All others stay home.

  7. Fortunately, I don’t have to “know the standards and practices for acceptable adulteration of each and every ingredient” – melamine isn’t even supposed to be there, so standard testing would be unlikely to spot it.

    No doubt you travel in mechanical vehicles (even if a Luddite, such as yourself, doesn’t own one) and do so safe in the knowledge that they have been subjected to tests.

    Our distributed and highly evolved society relies on trust-relationships and division of labour. You rely on others. What happens, though, when the “others” you rely on don’t do their jobs?

    My argument is, and continues to be, that you don’t do the work for the person who let you down; you let them sort it out. So, if there is a food certification on the label of the food you bought and it turns out that the food contains a toxic ingredient – in clear contravention of what you were lead to believe by the presence of that certification label – then you have an issue with the certification body.

    It is their problem if they aren’t doing their job properly. If that means they refuse to certify companies sourcing feedstock from specific suppliers, then that is part of their job.

    Blaming the whole of China for the infraction of a few of their companies is vicious, malicious, protectionist and harmful.

    If I were to use that logic then, as has been remarked elsewhere in this blog, Iraqis have the right to nuke the US for the harm caused them by the policies of a few Americans.

    It is an asymmetric response and I caution a rational response that targets the problem, rather than appealing to the protectionist and xenophobic tendencies of the masses.