Notably, New York Crane and Equipment Corporation did not have anyone experienced in sourcing working on this project. The entire research-to-installation cycle was handled by a mechanic working for James F. Lomma, the company owner.

The tragedy highlights problems that sourcing professionals face often: ascertaining supplier company credentials and ensuring quality control can be difficult, especially when using company-provided information to do it.   Top-level assessments of a manufacturer’s history and production levels can be made with services like Panjiva, but that is only the first step. These are real problems that require experience and attention, as well as comprehensive product assessments and quality control procedures, to deal with properly. They don’t—and can’t—afford shortcuts.

Over the last several months, I’ve been asked this question by a lot of people who care about global trade. Indeed, Candidate Obama generated a fair amount of concern with statements that suggested he’d put the brakes on trade. For instance, he called the North American Free Trade Agreement (NAFTA) a “bad” trade deal, criticized the U.S.-South Korea Free Trade Agreement, and opposed the Central American Free Trade Agreement (CAFTA). For a detailed accounting of Candidate Obama’s statements on the subject of trade, visit the Council on Foreign Relations website.

Candidate Obama’s statements notwithstanding, I predict President Obama will be good for trade. Some more specific predictions:

1) President Obama will be far more pro-trade than his campaign statements would suggest

Because of the electoral college system, U.S. presidential campaigns are all about swing states — states where the electorate is evenly divided between Democrats and Republicans. For some reason, the most evenly divided states (Ohio, Pennsylvania, Michigan) are states that have been particularly hard hit by globalization. Therefore, it’s not surprising that a candidate for president would employ anti-trade rhetoric. (Indeed, I’m surprised when candidates don’t employ anti-trade rhetoric!) With the campaign over, President Obama will be intensely focused on enacting policies that can jump-start America’s economy. Will these policies be pro-trade or anti-trade? To answer this question, I look at the economic advisers that Obama has surrounded himself with. At the top of this list: Robert Rubin, the former Goldman Sachs executive turned Clinton Treasury Secretary, who is decidedly pro-trade. In the months ahead, look at who President Obama appoints to key economic posts in order to assess whether my prediction is likely to be right or wrong.

2) President Obama will be more effective than his predecessor at facilitating new trade agreements

Over the last eight years, America’s unilateralist stance — in a number of arenas — has diminished its ability to play a constructive role on issues of concern to the global community. President Obama will put an end to America’s unilateralist stance which will likely enhance America’s ability to lead on, among other things, trade. And leadership is needed. The failure of the Doha round and the failure of governments to effectively coordinate on consumer safety issues are just two examples.

But let’s say President Obama proves effective at facilitating new trade agreements; will he be able to get them passed here in the U.S.? My prediction: yes. Republicans tend to support free trade, while Democrats need some convincing. A Democratic president is far more likely to succeed in bringing enough Democrats along to ensure passage — either by including “fair trade” provisions, or via old-fashioned arm-twisting. It’s no accident that NAFTA was passed while a Democrat was in the White House.

Your thoughts?

What is perhaps most interesting, though, is that there really aren’t a lot of good ideas on how to effectively manage this category of risk.  I was struck by this comment from a professor at NYU, who was quoted in Barboza’s article:
“’A year ago, everybody should have been in a complete panic about it and done something then,’ said Marion Nestle, a professor of food studies and public health at New York University and the author of ‘Pet Food Politics: The Chihuahua in the Coal Mine.’ ‘Someone should have required that melamine not be in any food product.’”

Professor Nestle seems to be assuming that simply requiring that melamine be excluded from the supply chain would have solved the problem.  Not so — and particularly not so in China.  The number of participants in the food supply chain — just in China — is huge.  How would you communicate new requirements to all these participants, let alone enforce these requirements?

Putting the right regulations on the books is perhaps a necessary step, but a much more comprehensive approach to solving the problem is required.  As noted above, regulation must be coupled with communication and enforcement.  In addition, key players (government regulators, inspection agencies, private sector leaders) must agree on standards and provide for transparency about who is abiding by these standards.  This last piece creates positive incentives for good behavior — an important complement to punishments for bad behavior.

Your thoughts?

Clearly, familiarizing yourself with the CPSIA and its implications is essential. Some suggestions on how to go about this:

• * Sandler Travis, one of the leading law firms focused on trade, provides a very nice overview of the new requirements. Visit their site, and click on the link entitled “New Mandatory CPSC Import Documentation Requirements Effective November 12.” At the bottom of the summary, you’ll also find the names of a few different lawyers you can call to get more info.
• * The big inspection agencies are very focused on the CPSIA and can provide a lot of helpful information. SGS has a bunch of web-based seminars; check out the schedule here. You’ll see that there’s a seminar on toy safety tomorrow (Wednesday, 10/29) at 1 pm Eastern.
• * And, if you’re feeling really ambitious, you can read the entire CPSIA. (Have fun.)

What’s Panjiva’s take on efforts to improve the safety of consumer products through regulation? Some thoughts:

First, there’s no doubt that more needs to be done to improve the safety of consumer products. Last year, we advised President Bush’s Working Group on Import Safety that much more could be done with existing resources. Specifically, the government could be using data it’s already collecting to more effectively focus inspection resources on goods that are potentially unsafe.

But there’s more to the story than just using data to effectively allocate scarce government inspection resources – undoubtedly, new regulations were needed to protect American consumers and the businesses that will fail in the absence of consumer confidence in product safety. The CPSIA would seem to be a step in the right direction then. Nevertheless, there are some in the business community who worry the CPSIA will simply create another set of bureaucratic hurdles that increase the cost of doing business, without actually helping consumers and the businesses that sell to them.

So will the CPSIA succeed in protecting consumers or simply create more bureaucracy? At this point, it’s hard to know – because much depends on implementation. Our take is that the CPSIA will succeed if those implementing it put particular emphasis on two concepts: harmonization and transparency. More on this in future posts.

Today, not just one — but two great powers are struggling; each facing a crisis of confidence in a key industry.  For China, it’s the manufacturing sector that’s in turmoil.  For America, it’s the financial sector that’s in turmoil.   Though there are of course real differences between these twin crises, it’s the similarities that are most striking.

* In both cases, the troubled sectors had recently experienced rapid growth.
* In both cases, questionable business practices were largely left unregulated.
* In both cases, greed is being blamed, and heads are going to roll.

Interestingly, the remedies being discussed are similar as well: new codes of conduct, increased regulation, stiffer penalties.  While it’s beyond the scope of this blog to discuss how to remedy America’s financial sector, it is clear that the remedies being discussed for China’s manufacturing sector must be supplemented with a push for transparency.  The profit motive is incredibly powerful — historically far more powerful than the most stringent codes of conduct, regulation, and penalties.  The best way to promote safe practices is to make them profitable.  And the best way to make them profitable is to focus, intensely, on providing transparency about who is engaging in safe practices and who is not.  More on this in future posts.