Friday, July 13, 2007

China’s global customers are learning cheap products can be quite expensive — and deadly.

Shoddy workmanship may be a judgment call, but lethality is not. In Panama, cheap exacted the highest price: More than 100 Panamanians died after swallowing a Chinese-made cough syrup.

The list goes on. In March, pet food made with Chinese-manufactured ingredients killed or sickened several thousand American pets when a Chinese exporter “bulked” food ingredient shipments by adding melamine, a byproduct of plastic. Tainted Chinese-made toothpaste turned up in Central America, the United States and Canada. Canadian authorities later identified 24 different toothpastes (all from China) containing hazardous material.

The U.S. Food and Drug Administration recently restricted the sale of Chinese seafood products after discovering high levels of carcinogens and antibiotic drugs in recent shipments. A recall of Chinese-made tires is also under way.

Belatedly, U.S. regulators have begun removing other Chinese-made processed foods, manufactured goods and personal products for American shelves.

We’ll return to exports in a moment — but China’s risky products also plague its own domestic market. China’s nascent regulatory agency, the General Administration of Quality Supervision, Inspection and Quarantine, examined domestically sold Chinese agricultural products and manufactured goods and estimated almost 20 percent of the products and food sold to its own citizens were “substandard or tainted.”

China depends on exports, and the United States is China’s chief export customer. Exports are key to China’s entire modernization strategy. Its lethal products are killing its customers and, in doing so, seriously damaging its own economic engine.

Which is why China will eventually adopt U.S. and European Union regulatory standards, to everyone’s benefit.

At least, that’s the argument made in a fascinating new book, “All Politics Is Global,” by Daniel Drezner and published by Princeton University Press. Mr. Drezner teaches international politics at Tufts University’s Fletcher School of Law and Diplomacy.

This is a detailed, scholarly book that explicates the arcane aspects of regulatory law and regulatory agreements. It won’t crack the popular market. However, it will percolate and influence because it also explains quite well the “big picture” elements of global trade and global regulation.

The book was published earlier this year, before China’s tsunami of tainted exports, but it accurately anticipates just this kind of a global trade regulatory conflict — or conflict based on a lack of agreed-upon and enforced product and liability regulations.

Mr. Drezner slams globalization popularizers like Thomas Friedman and his “The World Is Flat.” That includes the crowd that has written off the nation-state as dying or already dead.

Mr. Drezner says bluntly that, on this planet, “states make the rules,” and rules matter a great deal. He provides case study after case study of agreements ranging from Internet protocols to money laundering to prescription drug safety. He scotches claims of a borderless globe where standards are “a race to the bottom.” The “pop globalization” description Mr. Drezner concludes is “simple, pithy and wrong.”

Mr. Drezner examines the case of exporters abandoning markets, perhaps based on regulatory issues, but a competitor fills the niche. No, all regulations don’t necessarily “converge” to a single standard, but globalization does increase the “rewards for policy coordination.”

And who enforces the rules in a global political economy? The nation-states.

The size of a nation’s market (“aggregate demand”) is a very powerful force, and the United States is the superpower of markets. “Global exporters who kill American pets and sicken American seafood lovers will be shut out of the market. When shut out, they impoverish themselves.”

Austin Bay is a nationally syndicated columnist.

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