Trading Down: “Made In China”

Our most popular export is our nearly 3 million manufacturing jobs lost since mid-2000, as U.S. companies have moved production overseas to lower-waged nations. Yet the Bush administration is still not heeding the advice from economists warning that the United States cannot sustain its current $800 billion annual trade deficit, which has led to trillions in dollar-denominated reserves being held by China and other Asian countries, and by Saudi Arabia and the other major oil producers. Such large reserves give these countries that possess them undue leverage over the United States, which could lead to a sell-off of dollars that would send the value of the currency skidding. This in turn might force the U.S. to raise interest rates, choking off future economic recovery.

The U.S reported trade deficit with China alone for 2006 is a mind-blowing $232.5 BILLION dollars. Recently closing 180 food plants due to inspectors uncovering more than 23,000 food safety violations, the country’s exports of contaminated vegetable protein earlier this year triggered one of the largest pet food recalls in American history. Industrial chemicals including dyes, mineral oil, paraffin wax and formaldehyde have been found in everything from candy, pickles and biscuits to seafood. One suspected cause is a lack of cold storage and logistics systems but these chemical additions into their products were not by accident.

Cutting corners in manufacturing is not strictly a food industry predicament for China. Four hundred and fifty thousand radial tires are being recalled due to the tires missing a necessary gum strip that prevents tire separation. To add insult to injury, the company importing the tires, Foreign Tire Sales, had originally sought the U.S. federal government’s help with the recall, saying it did not have enough money to recall all the tires itself. This New Jersey company wanted to import inexpensive tires to save a few ‘pennies’ but then wanted the taxpayers to pay for what is readily their product and their responsibility.

In more uplifting new, bargain toothpaste now contains diethylene glycol, a known poison commonly used in antifreeze. It has been profitable to substitute this chemical for its cousin, glycerin, which is usually more expensive. Glycerin is used as a thickening agent in toothpaste and is also commonly found in food, drugs and household products.

But not everyone is China is profiting from these the high export rate. There is a widening income gap and threats of social unrest. “Under China’s “iron rice bowl” system of the 1950’s and 60’s, all workers were protected by the government or by state-owned companies, which often supplied housing and local health coverage. But by the 1980’s, when the Maoist model had given way to economic restructuring and the beginning of an emphasis on market forces, China began eliminating many of those protections-giving rise to mass layoffs, unemployment, huge gaps in income and pervasive labor abuse.” *

With much of the international spotlight now focusing on these issues, where the Chinese government is not lacking is in the severity and punishment of corrupt executives. Unlike the U.S’ mockery of a judicial system in handling Enron, Tyco, etc., the Supreme People’s Court approved the death sentence against Zheng Xiaoyu, who was convicted of taking bribes worth some 6.5 million yuan ($850,000) from eight companies. He was executed earlier this month. “Zheng Xiaoyu’s grave irresponsibility in pharmaceutical safety inspection and failure to conscientiously carry out his duties seriously damaged the interests of the state and people,” reported Xinhua news agency citing the high court.

Investigators found Zheng and his subordinates abused new rules in renewing drug production licenses to squeeze kickbacks from companies. “We must ensure that those who have power fulfill their duties and responsibilities, and if anyone abuses their power they will be punished,” proclaimed Yan Jiangying, spokeswoman for the State Food and Drug Administration. Perfectly stated…should not those leaders allowing the U.S. economy to be held hostage to foreign nations be held responsible?

Sources:
* “China Drafts Law to Boost Unions and End Labor Abuse”, New York Times, 10/13/2006
“China’s Trade Surplus Surges 73 Percent”, New York Times, 6/11/2007
“Trade Deficit Soars To Record”, Associated Press-The News Journal, 2/11/2006
“In Food Safety Crackdown, China Closes 180 Plants”, New York Times, 6/27/2007
“Chinese Tires Are Ordered Recalled,” New York Times, 6/26/2007
“U.S Trade Deficit Is Called a Threat to Global Growth”, New York Times, 9/5/2006
“Toxic Toothpaste Made in China Is Found in U.S.”, New York Times, 6/2/2007
“China Executes Ex-Drug Chief for Graft”, http://www.cnn.com/world, 7/11/2007