China Law Blog

New Reuters article (h/t to the always scintillating bezdomny ex patria blog) postulating that China's toy problems are not really China's problems at all "since the majority of problematic toys in fact come from other countries."

According to a study just out by Paul Beamish, professor at the Richard Ivey School of Business in London, Ontario, and Hari Bapuji and Andre Laplume (does that sound like one of the characters in the French version of Clue or what?) with the Asper School of Business in Winnipeg, Manitoba, toys made in countries other than China had a higher rate of recalls on a proportional basis. In other words, toys made in China are "no more a danger than toys made elsewhere."

The study also concluded that "design-related problems, such as the use of detachable parts, outpaced defects attributed to manufacturing issues such as the use of lead paint or toxic chemicals."

Bashing on China goods has gotten out of hand. I am reading countless articles where so-called experts are saying China's quality problems are going to cause foreign companies to start looking at Vietnam and Cambodia for their production. Now I am actually a huge fan of both of those countries, but I cannot resist wondering what these people are smoking if they think Western companies are just going to be able to waltz into Vietnam and Cambodia and walk out with quality product. Very roughly, Vietnam is about ten years behind China in both production standards and corruption and I would put Cambodia another ten years behind Vietnam.

A few months ago, I did a post, entitled, "China Quality Control: Darkness Before The Dawn" on Paul Midler's article on quality fade Midler posits Chinese companies oftentimes deliberately cut back on the quality of the product they provide to their western buyers so as to increase profits. In my post I wholeheartedly agreed with Midler's thesis on this and I still do. But, after giving it more thought, I want to put this concept in its proper perspective. First off, my sense, and the sense of just about everyone with whom I talk, is that, overall, product quality from China improves every year. So quality fade is a micro concept, not a macro one. Secondly, much of what might be viewed as quality fade, very likely is not. A Chinese manufacturer who provides poor product after having provided excellent product for a year is not necessarily deliberately cutting back to increase its margins. Statistics say the more product produced, the more likely some of it will be bad. My old law firm represented a hospital that was sued after one of the state's best surgeons, in what was about his 3,000th operation, operated on the wrong knee. This doctor was a victim of numbers; he was not engaging in quality fade. When Jack in the Box and Odwalla had their e-coli problems, nobody would say they had engaged in quality fade. Ditto with respect to the countless car and tire recalls to which we are so often subjected. Bad Chinese product is due to many things, quality fade being just one of them.

The problem now is that the media just cannot get enough of the big bad China product story and Forbes Editor, Paul Maidment, does a great job explaining why this is so. In an article whose title, "Nothing Abstract About Big Bird," beautifully sums up the whole thing, Maidment posits that product safety is something on which we Westerners have no trouble getting our arms around:

There is nothing abstract about Big Bird.

Other subjects on which the U.S. and China are in dispute, such as yuan revaluation and financial markets reform, can, however, seem remote to many Americans.

But when Mattel (nyse: MAT - news - people ), which makes two-thirds of its toys in China, recalls 1.5 million of its Sesame Street and other China-made toys because their paint may contain excessive lead levels, it brings home the product-safety trade issue in a way nothing else can.

And once there, it is fodder for the growing protectionist sentiment being directed in the U.S. against China.

Maidment then rightly points out that quality and safety issues are not confined to China:

As the recent cases involving Tyson Foods (nyse: TSN - news - people ), Sanderson Farms (nasdaq: SAFM - news - people ), Cargill, AJC, and Triumph Foods (tainted chicken and pork), Sarah Lee (bread) and Castleberry's Food (hot dog chili sauce suspected of being contaminated with botulism bacteria) show, no one has clean hands when it comes to food safety.

I give Maidment a lot of credit for this because the overwhelming majority of articles make it seem as though these issues are confined to China, and, as noted above, some even ridiculously imply that places like Vietnam and Cambodia are much better.

Maidment then starts talking politics:

But a latently protectionist U.S. Congress does not take much to get its anti-China spirits stirred.

* * * *

Time is a political commodity in short supply. The clock is ticking down to 2008's presidential elections in the U.S. and Olympic games in China--both important events that will give nationalists plenty of opportunity to raise their voices stridently.

There are already discordant notes being heard in China's state media to match some of the rhetoric in Washington.

However well Mattel handles its product recall--the company was held up in The New York Times only last week for being maybe "the best role model for how to operate prudently in China"--there will inevitably be more and more product recalls getting more and more public attention. Mattel has had 25 recalls in the past 10 years, but none will have had the same glare of political publicity as the latest. That will send free traders ducking for cover.

Well I am and always have been a free trader and I ain't running for no cover:

A telling sign of how the mood is changing comes from Dan Harris, an American lawyer who runs the China Law Blog. He posted that he had been approached by four U.S. publications looking for companies who would talk about their operations in China.

Not one of his clients, all of which, he says, have done a "superb job in maintaining quality control over their China products" would do so. There is among companies, he notes, a "desire not to publicize their China connections in today's anti-China climate."

Recalls of China products will continue to occur, as they should. But at the same time, the ratio of bad to good Chinese product will continue to decline, but we will see very little of that in the press. Bad Chinese product is the story du jour right now, when in reality there is very little story at all.

I cannot even believe how fast all of this has shifted. Just a few years ago, my firm would give out all sorts of advice to our clients on what they needed to do to protect themselves against bad China product and at least half the time we would be viewed as overly cautious or assured that our client's Chinese suppliers were not at all like those we would describe to them. Now, the pendulum has swung so far in the opposite direction, that one of the first questions we are usually asked is "what can we do to guarantee" good product from China. There are no guarantees, but to see the basic recommended protections (335 words worth) go here or pay $1295 to hear me (and others) speak at "Mealey's Product Recall Liability Conference: Made in China and Beyond," in Washington DC on December 10.

And for an interesting article looking at the problem from the perspective of the Chinese factory, check out this Chicago Tribune article, entitled, "China's factories feel the squeeze: Vendors fight for work, cut costs Caught between rising costs at home and low-cost pressure abroad, some firms decide to cut corners." (h/t to Plastics News)