Jungle of Problems: Beijing’s Failure to Protect Consumers
By Stanley Lubman, The Wall Street Journal, China Real Time Report
What do organic foods, the blood-thinner heparin, and auto airbags have in common? They are among the products recently reported to have been counterfeited in China and exported to the U.S. Chinese businesses that knowingly manufacture unsafe products continue to arouse concerns, both in and outside China. Consistent with long-established practice of using “campaigns” to promote specific policy goals, the Chinese government announced a food safety campaign in February 2011. But campaigns are not enough to attack the many ongoing product safety violators and the business culture that encourages them. China needs both robust consumer protection laws and the means to enforce them, especially at the local government level.
The severity of the problem has been illustrated by Chinese author Sang Ye, who interviewed a number of Chinese citizens to illustrate various aspects of life in China for his book “China Candid” (2006). Among the people he talked to was an employee of a Consumer Protection Association in Hunan, who summed up the prevailing view: ” …the sheer scale of fraud these days is unprecedented. We make fakes, we sell fakes, we trade in counterfeit currency, and we buy imitation goods. Everyone is a victim, and everyone is cheating everyone else.”
Five years after Mr. Sang’s book was published, the Chinese government has acknowledged problems protecting consumers but faces a number of obstacles in changing the status quo. Zhang Yong, head of the State Council’s Food Safety Commission, remarked earlier this month “it does take time and public support to improve the situation.” Mr. Zhang is correct, but the underlying issues are even more complex than he stated, involving a combination of decentralization, neglect of social services and regional government reluctance to take any action that might affect jobs.
There is no doubt that China’s product safety issues are serious and ongoing, despite measures taken in recent years. Only last month the U.S. Food and Drug Administration (FDA) announced discovery of a plot to fake certification of Chinese grains as organic. Three years ago, adulterated heparin, a blood-thinning drug, was exported to the U.S. in a case that continues to baffle the FDA and fuel anger in Congress. A quick Internet search readily discloses reports of a whole host of other faked products: automobile parts, cigarettes, wine, and (just to show how inventive fakery can be these days), counterfeit U.S. coins.
The Chinese government has tried to use legislation as a weapon against violators. Over the years, a series of consumer protection laws has been issued, including the Consumer Rights and Benefits Protection Law, which was enacted in 1993 and reportedly will soon be amended (pdf), and a comprehensive Food Safety Law enacted in 2009. Most recently, heightened concern about safety of food and food-related products prompted the National People’s Congress (NPC) to pass a law in February 2011 that raises the penalties for food-related crimes and includes the death penalty. In the meantime, companies are reported to be “allocating more resources to product testing and emphasizing high-quality materials” despite added costs.
But as Zhang Yong’s statement suggests, more than legislation is necessary. The effectiveness of legal remedies depends on basic cultural and systemic factors that are now in the midst of inevitably slow change. The decentralization of the Chinese state apparatus places much responsibility for compliance with legal requirements and standards on the lowest levels of government, but funds allocated by Beijing for such purposes are often spent on other matters.
A January 2011 World Bank report (pdf) notes that, generally, transfers from the central government are “disproportionately spent on urban development, leaving a shortage of resources at the county level and below to spend on essential social services.” A study written in 2007 at the Nixon Center in Washington (pdf) reached the same conclusion, and in addition cited other problems such as the reluctance of local governments to close businesses that contribute to local employment, as well as collusion with illegal or unlicensed manufacturers in order to continue to collect fines from violators. The World Bank study concludes that implementation of China’s 2009 food safety law has been poor and that food safety problems persist. The Nixon Center study pointed to China’s lack of a “robust and productive civil society that collectively represents the interests of consumers as well as manufacturers.” More specifically, it concluded that “without a strong legal system, insurance companies, industry associations and ‘consumer watchdogs’” to support government efforts, “the Chinese system lacks many tools that ensure food and drug processors adhere to good manufacturing practices.”
To put food safety problems in historical perspective, the 19th century saw American industry, including food manufacturing and processing, develop at great speed and with little regulation. By the end of the century, problems with the quality of meat products were shocking. Public attention was aroused in 1906 when Upton Sinclair published “The Jungle,” a novel that vividly described conditions in the meat-packing plants of Chicago. As Stewart Macaulay and other noted in “Law and Society: Readings on the Social Study of Law” (1985), President Theodore Roosevelt used the book to push Congress to pass legislation that led to the creation of the FDA.
The history of the FDA suggests that public concern and outrage can influence government action to increase regulation of an industry that is injuring or killing consumers. China has already experienced instances of citizen anger that have stimulated government enforcement. However, citizen protests are too often suppressed by local governments, such as the way authorities in Henan in 2008 delayed any response after the adulteration of milk powder was shown to sicken and, in some cases, kill children.
Even if there is no Chinese Upton Sinclair likely to arouse the Chinese government and public, the Party-state should have an interest in energizing public concern. The “social stability” that the Chinese leadership is so anxious to maintain would benefit from central government pressure on local governments to solicit and heed expressions of citizens’ worries, not only about food safety but product safety and counterfeiting generally.
Chinese business is deeply marred by extensive counterfeiting of almost anything that one can think of. In this context, the efforts necessary to bring about significant modification of the conduct of manufacturers and processors will have to go beyond mere campaigns. Government efforts should be directed at raising consciousness over the long term (not difficult, given the ubiquity of unsafe or counterfeit products), such as by promoting consumer protection NGOs and websites. More basically, there is a need to strengthen local governments’ enforcement of product safety laws by assuring that they have the necessary resources to attack violations and use those resources for that purpose – rather than pursue development for development’s sake. 3/16/2011