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Time to adjust the 'China Price'

Arthur Kroeber

TEXT OF COMMENTARY

KAI RYSSDAL: In Washington tomorrow a House committee takes up Chinese imports. The topic is one you can probably guess: Whether those products are safe or not. Not too long ago all the talk was about something called the "China Price" -- multinational firms shifting production from countries with clear laws and tough regulations to countries with neither but where production costs were lower. Commentator and economist Arthur Kroeber says now there should be a real price to pay.


ARTHUR KROEBER: Thanks to globalization, 21st century consumers can buy low-priced products made in places with 19th century conditions. But who drives this process? It's hardly the Chinese.

The people who hold power in the production chain are the ones who control final distribution in the U.S. and Europe.

They are the multinational owners of brands, and the distributors -- especially big-box retailers like Wal-Mart, Best Buy, and Toys R Us.

These firms earn at least 75 percent of the total profit in the sale of each can of pet food or Barbie doll.

They have the power to dictate that their suppliers cut their prices every year, or risk losing their business. China-based suppliers, operating on wafer-thin profit margins, have little choice but to do whatever they can to comply. The Chinese government, with just a few hundred product-safety officials to oversee more than 300,000 industrial companies, is little more than a bystander.

Ultimately, the multinationals that set the terms for the global production chain are the ones responsible for keeping it safe.

Rich-country governments must hold these companies accountable by enforcing strict product quality standards.

And consumers should remember that they benefit enormously from the vast majority of Chinese exports that are cheap, reliable and safe -- things like iPods, cellphones, and laptops.

Instead of panicking about goods from China, they should vote for politicians who will adequately fund product safety regulators, not starve them like the present administration.

Multinational firms control the global production chain, and rich country consumers and governments benefit immensely from it. If we want China to clean up its own regulatory act, we should lead by example.

RYSSDAL: Arthur Kroeber is a principal in the Beijing-based economic research firm Dragonomics.

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