China's Trade Damages

Article excerpt


Lethal tampering with food or drug ingredients (to say nothing of lead paint in toys and poisonous toothpaste) from China seems to be business as usual.

In 2007, melamine was deliberately added to an ingredient in pet food that sickened and killed cats and dogs in various parts of the world. In the same year, Chinese-made diethylene glycol, mislabeled as nontoxic glycerin, was mixed into anti-fever medicines for children, killing at least 100 in Panama. Last year, the contamination of precursors of the blood-thinning drug heparin with another chemical caused hundreds of allergic reactions and 19 deaths in the United States and at least 80 serious adverse events in Germany. Like melamine in dairy products, it was added intentionally to give falsely high readings of protein in the finished product.

The most recent Chinese adulteration debacles include melamine contamination of eggs produced in three Chinese provinces that has caused kidney stones and renal failure in children, and widespread milk contamination with melamine that has sickened more than 300,000 and killed at least six. There are surely many other examples yet to be discovered.

China is in the thick of another similar problem - the systematic counterfeiting of prescription drugs. In 2007, warehoused drugs seized in Dubai were found to be part of a complex supply chain of counterfeits that ran from China through Hong Kong, the United Arab Emirates, Britain and the Bahamas, finally leading to an Internet pharmacy whose American customers believed they were buying medicine from Canada.

Yet another related problem - the cause of which is more negligence than fraud - plagues China. Medications not intentionally adulterated are produced without sufficient quality control to ensure drug safety and efficacy. As the production of many generic drugs has shifted from Europe and the United States to Asia, manufacturers in China and India have become frequent offenders.

Chinese government officials have attempted to restore consumer confidence in the country's goods. Last October, for example, they established limits for allowable trace amounts of melamine in dairy products, and tightened quality-control regulations for the dairy industry. But these measures are not likely to reassure foreign consumers and importers of Chinese products: The problem is vast, China's brand is severely compromised and policymakers seem not to grasp the importance of crafting appropriate incentives and disincentives in order to achieve the desired outcome. Beijing focuses on top-down quality control, while Western regulators and companies are more inclined to craft appropriate incentives to force every link in the supply chain to be more quality- and safety-conscious. …