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U.S., China work on their co-dependence

Kai Ryssdal May 22, 2007

U.S., China work on their co-dependence

Kai Ryssdal May 22, 2007


KAI RYSSDAL: Didja hear the news about the toothpaste?

CONCERNED WOMAN: No, I didn’t know about the toothpaste. What about the toothpaste?! Which one is it?!

It’s Chinese. Two different brands: Mr. Cool and Excel.

Officials in the Dominican Republic and Panama have pulled them from store shelves there. Tests showed they had high levels of diethylene glycol in them. That’s a chemical that doesn’t do anything for cleaning your teeth, but it can keep your car’s engine running nice and cool.

Today’s development comes on the heels of the pet-food recall and the discovery of imported Chinese catfish down in Alabama laced with antibiotics. Add ’em up and it’s enough to get customers outside a Trader Joe’s here in L.A. wondering about where their food does comes from.

MAN: With these recent contaminations, yeah — I think it’s important to look and see, you know, if it’s coming from y’know, a country like China, where regulations may not be as strict.

OTHER WOMAN: I’m not really aware of the system, but I’m sure there’s a lot of room for improvement. Like you know, there’s certain things that I don’t trust about the government, and probably how they inspect food would be one of them.

Which brings us neatly to the U.S.-Chinese trade talks that got started today in Washington. Henry Paulson is meeting with his Chinese counterpart to talk about food safety and a long roster of other items.

Ted Fishman’s the author of the book “China, Inc.” Ted, good to have you here.

TED FISHMAN: Glad to be with you, Kai.

RYSSDAL: American companies have been using China as a source of cheap labor, cheap manufacturing for years. And yet somehow now, it seems to me that we’re shocked that something has gone wrong when, in effect, we’ve gone to the lowest bidder for these things.

FISHMAN: Absolutely. I mean, we are being hoisted on our own petard on this one, Kai. If you look at bad drugs that come into the country, bad food products for humans and for animals, these come at the end of 20 years of jurisdictional arbitrage, in which you move away from American standards to Chinese standards. And then once you’re in China, you shop for the place in which you can operate as the lowest road operator you possibly can. When I visit companies and they say “We are here for environmental reasons,” they never say because this is a good environment — it’s always because they can be as dirty as possible.

RYSSDAL: Is there, Ted, do you think, going to be a market solution to this problem, or is it just going to have to be a political solution?

FISHMAN: It has to be both. We need to be good cop and bad cop with China. The market solution would take precedence over a political one, but unless we have a Congress which is willing to say, “We’re going to take action against China,” nobody’s going to be prodded into a market solution.

RYSSDAL: Frame this entire discussion for me, Ted, in the larger context of the bilateral relationship. The trade gap and the revaluation of the renminbi, the currency, and how each side is going to approach it now that there’s increased pressure and a public relations spotlight.

FISHMAN: Well, I think once the doors are closed on the negotiation, both sides will have to say, “We are in this both together.” The premiere American industries need China to have a low-priced currency, which goes against the public relations campaigns here. The importers from China tend to be American companies bringing goods in, so they bought into China’s regime. And China really needs us to have a low-interest environment, so we can continue to consume. And as time goes on, our interests get more and more comingled, and it’s very, very hard to see where their trade system stops and our trade system begins. The people who are hurt mostly in the United States are those who are still producing here. But unfortunately, they tend not to be the ones who are involved in the political discussions.

RYSSDAL: When Henry Paulson became Treasury secretary, he made a big show of going to China, about how he was going to use his Goldman Sachs and his Wall Street experience to improve the bilateral trade relationship. Do you think he’s getting the job done?

FISHMAN: Well, he might be getting the job done through the frame of somebody with a lot of Wall Street experience. China was one of Goldman Sachs’ best customers. He was one of China’s best friends. What he has yet to prove is that he can speak for all of American industry and help us get the kind of negotiations that make us as strong going forward as we need to be. Despite the interests of our multinationals, that will be some sort of change in the currency regime, which helps American domestic manufacturers. And it will be hard issues that relate to health and safety, which involve a comprehensive and effective inspection regime inside China, which does not exist today.

RYSSDAL: Ted Fishman’s book on China and doing business there is called “China, Inc.” We reached him today up in the San Francisco Bay Area. Ted, thanks a lot.

FISHMAN: My pleasure, thank you.

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