Yesterday, Mattel recalled another 700,000 lead-tainted, made-in-China toys. Now we can add Barbie accessories to the long list of dangerous goods coming out of China. And we can expect yet another round of calls for new regulations, new agencies, and new trade barriers. Clearly, something has to be done; but what?
Chinese government officials are trying everything they can think of. First, they executed the director of the State Food and Drug Administration. Then they closed a few thousand factories. More recently, they asked Ogilvy Public Relations for help.
Meanwhile, there’s a lot of tough talk here at home, from consumer advocacy groups, industry associations, and, of course, politicians. Most of this talk focuses on assigning blame – which is doing about as much good as China’s tragicomic approach to image management.
But, clearly, something has to be done. Recognizing this, President Bush has convened a Cabinet-level Working Group on Import Safety. In the span of 60 days (now down to 9), this Working Group will have to develop recommendations that take into account a number of uncomfortable truths:
First, unless we are prepared to pay significantly higher prices and cope with a global depression of historic proportions, a huge percentage of the goods that we find in stores are going to come from other countries. Second, as China has so aptly demonstrated, foreign governments are not well-equipped to prevent the export of tainted goods. Third, we’re kidding ourselves if we think China is the only country sending us tainted goods. And, fourth, the U.S. government cannot possibly inspect every item that crosses our borders.
Given all this, one might conclude that we’re going to have to get used to reading articles about toxic toothpaste, carcinogenic toys, and deadly pet food. Fortunately, this is not the case. There is much that we can do to significantly reduce the risk that tainted goods find their way across American borders, onto the shelves of American businesses, and into the homes of American consumers.
A good first step is setting a clear and high standard for supplier behavior. This is where President Bush’s Working Group can be most useful. Right now, suppliers are bewildered by a blizzard of standards: some set by companies, others set by ad hoc industry associations, still others by non-profits. As a result, the vast majority of suppliers do not abide by any meaningful standards.
In consultation with large importers, industry associations, and foreign governments, the Working Group should develop a unified standard for supplier behavior. This standard must go beyond simply listing substances which are banned for inclusion in products destined for America. To be useful, this standard should define the process that a supplier can follow to ensure that both its inputs and its outputs are free of banned substances. Specifically, the standard should spell out the tests a supplier is expected to perform on inputs received from further down the supply chain, as well as the tests a supplier is expected to perform on finished goods, just prior to shipment, to ensure that no subsequent contamination has occurred. Moreover, the standard should identify industry-leading methods for minimizing the risk of contamination during the manufacturing process itself. (For an example of what such a standard might look like, check out the FDA’s HACCP standard.)
Given the level of attention currently being paid to the threat of tainted goods, there is a unique opportunity to communicate a single standard for supplier behavior. Given the importance of the U.S. market to exporters around the world, any standard developed by the Working Group, and endorsed by the President and Congress, will carry significant weight. Supplier adherence to this standard can be voluntary, because market forces will put us on a path toward improved import safety. Safety conscious consumers will look to buy goods from businesses that only work with “Safe Suppliers.” Businesses will, in turn, seek out these Safe Suppliers, leading suppliers around the world to seek independent verification of their Safe status.
Importantly, cash-strapped government agencies can use data on which suppliers are Safe to focus inspections on imports coming from high risk suppliers.
If the Working Group focuses on voluntary standards, it might be criticized by consumer advocacy groups for failing to simply mandate better business behavior. Of course, no such mandate would be remotely enforceable in this country, let alone around the world.
On the flip side, some companies might be concerned that demanding more of global suppliers is going to raise the cost of doing business across borders. However, the potential cost of flailing around (much as we are today) is enormous. Consumer confidence in the global supply chain is wavering. If it falters, politicians may start to heed those calls for new regulations, new agencies, and new trade barriers – and they will be justified in doing so.
Your thoughts? E-mail me: josh@panjiva.com.
