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December 1, 2008

Exclusive: ‘Made in China’ – Is It Time for This Label to Leave America?

Dr. Robin McFee

As we approach Christmas (yes, we say Merry Christmas in this column), critical issues of security, employment, product safety, commerce, and our influence as consumers and voters converge. A cautionary tale for this Holiday and entertaining season….

Caveat emptor!

Over the last few years Americans have seen a decline in service and quality. Why are we surprised? Money talks and you know what walks….we voice our opinions in all things commercial by our purchasing patterns and as a nation we demanded lower prices: enter the WalMart effect. But the old adage “you get what you pay for” is as true today as when the phrase was first coined. Note that “cheaply made” goes beyond the reality of early obsolescence; consumers should worry about health risks resulting from companies cutting corners through unsafe manufacturing practices, overproduction which strains safety check capacity, poor sanitation, or substituting inexpensive industrial chemicals for human safe ones to increase profit.

With the current economy all but the wealthiest will be more price sensitive, but there remains an expectation of corporate responsibility – whether manufacturing or importing products. Infant formula in the U.S. are the latest products to cause concern; probably the result of faulty manufacturing. More on this later.

Déjà vu?

We all remember the toy debacle of 2007 where millions of toys were recalled during the Christmas holidays – most made in China. Can this happen again? Yes!

Try to shop at any major retailer and avoid buying a product “made in China!” Good luck! That’s just the tip of the iceberg. If you think the vast expanse of full shelves sporting “Made in China, Pakistan, Mexico, India” or quite frankly anyplace other than the USA is daunting, try finding a product without a Chinese component or ingredient. Product labeling laws do not require companies to state where all the components or ingredients come from. If you think the Chinese have a corner on just the electronics, consumer and toy market, think again. Many of the foods in your kitchen and medications in the local hospital have ingredients from China or other developing nations. In the process are cornering the market, by pushing niche U.S. and allied countries’ companies out of business. And with it, more American jobs are lost.

As if dwindling U.S. market share (translation loss of jobs, and income) isn’t bad enough, over the last few years, Americans have seen a dramatic increase in the risks to their health and safety from imported products. We all remember last year’s Christmas when the term “Made in China” sent toys back to the return aisle at most department stores faster than kids can race to see what’s under the tree. While the threat of lead paint was worrisome to most parents, this year when it comes to medications, “Made in China” has far more deadly implications. So far, the FDA estimates 149 deaths attributable to tainted heparin with component origins in China. The label “Made in China” is more a warning than a place of product origin in terms of threat to health.

Before being falsely accused of xenophobia, realize this article is about protecting people, ours and hopefully by extension those who live in the country of origin from whence we get our products. One would only hope, perhaps on the heels of articles in ASIS International, TIME, FamilySecurityMatters.org and other places that labels with the words “Made in China” may start raising serious concerns among consumers and policymakers. After reading this article, maybe you too will make a concerted effort to boycott products “made in China.” With only a few weeks left for Christmas, Hanukkah and other Holiday shopping, consider the following facts over the last year or two:

Fast Facts – Import (un)-Safety

More than 40% of all product recalls in the U.S., and 79% of toys involved products from China. Note the range of products involved – from tires and toys to food and toothpaste. These are everyday products that if tampered with or produced with substandard parts, unsanitary procedures or cheap chemicals not designed for human consumption but illegally substituted for more expensive human safe ingredients – all common business practices in China and other nations trying to develop industries – can be harmful.

While most recalls are from China, in April 2007, the New York Health Department issued warnings about cosmetics, especially eye makeup, imported from Pakistan which had lead levels ranging from 4 – 47% - significantly above U.S. safety levels. As an FYI, lead is added to paint to make colors brighter and is especially toxic to youngsters whose brains are still developing. Lead can damage nerve cells and cause cognitive/behavioral problems.

Here’s a snapshot of when certain products started being recalled, and the type of industries China has a strangle hold on that you might want to take into consideration when you make up your shopping list:

April 2007: A & A Global Industries recalled 4 million “Groovy Grabber” and other Chinese made children’s bracelets that contained high levels of lead in the colorings.

May 2007: wheat flour laced with melamine – a toxic chemical used in manufacturing and sterilization but NOT intended for human consumption and capable of causing a variety of adverse health effects (people/animals) found its way into approximately 100 brands of pet foods and resulting in thousands of animals sickened and several pet deaths reported. Moreover, certain animal feeds – food given to livestock – were contaminated. Melamine was added to make wheat and rice products appear to be more protein-rich and substituted for more expensive food additives.

Also, over the last few years, several brands of toothpaste imported from China contained diethylene glycol – a chemical used in antifreeze. Some estimate there were over 50,000 boxes of toothpaste were recalled. Diethylene glycol can cause kidney failure, respiratory failure, abdominal pain, nausea, headaches, liver toxicity and coma – it was the same chemical that caused the death of 100 people in Panama when they ingested cough syrup from a Chinese company that mislabeled the medication as having a harmless sweetener instead of disclosing that this cheaper and toxic additive was present. Chemicals in antifreeze are often noted for their sweet taste; something reported by street people who ingest such products as alcohol alternatives or suicide attempts.

June, 2007: the National Highway Transportation Safety Administration recalled 450,000 tires from China.

Also during 2007, Chinese food products were recalled because they appeared grossly decayed. Other products, such as mushrooms, were recalled due to tainting with pesticides long since banned in the U.S. Seafood was recalled that had been laced with antibiotics and antifungal medications to treat fish farm raised in severely polluted waters (sewage, garbage). Such medications include nitrofuran, fluoroquinolones, chloramphenical and malachite green – all potentially toxic or capable of causing adverse health effects as well as promote antibiotic resistance – a global problem.

In addition to toys, certain herbal teas may have high lead levels from the method of drying the leaves, which involves driving trucks over them: the exhaust dries the leaves. The trucks are fueled by leaded gasoline. Too bad we can’t use the tea in our cars. I wonder how many MPG they would get?

The cocktail garnish “Rimmer Brand Mojito Cocktail Garnish” was recalled after testing positive for salmonella bacteria. Veggie Booty Snack Mix was also tainted with salmonella and resulted in 100 people, mostly children, being affected. Salmonella, one of the more common food poisonings, can cause significant gastrointestinal symptoms such as nausea, vomiting and abdominal pain. In severe cases, bloody diarrhea and kidney failure can result.

In Chicago, two people became seriously ill – one requiring hospitalization – after eating fish that was labeled as monkfish but instead was probably puffer fish, containing the potentially deadly toxin tetrodotoxin. The Food and Drug Administration (FDA) asserts that beginning in September 2006, a total of almost 300 22-lb boxes from China that were mislabeled as monkfish, when in fact they contained puffer fish. Tetrodotoxin is a neurotoxin that can cause ascending paralysis, respiratory arrest and death within 24 hours. The toxin is not destroyed by cooking or freezing.

Christmas 2007: Toys R Us recalled baby bibs that were tainted with lead. Soon thereafter, WalMart stopped the sale of similar baby bibs which contained 9,700 parts per million (PPM), which is 16 times the legal limit for lead in paint. Disney bibs also had high lead paint levels. Fisher Price recalled almost 900,000 toys (over 80 different objects) with high lead paint levels.

Mattel, one of the worlds leading toy manufacturers, announced their third product recall (over 770,000 toys) this summer over concerns of high lead levels in 2007. The first recall involved over 400,000 die-cast cars. August 2007: Mattel’s second recall included 1.5 million Chinese-made toys, again for high lead levels in the paint. This recall will cut second quarter operating income by almost 50%. China produces ~ 80% of the world’s toys.

2008: In case toxic toys, hazardous heparin and deadly dinner isn’t enough to turn you off from Chinese products, the latest example of Beijing’s total disregard for people other than the ruling class should leave no doubt about the kind of people we are dealing with, the threat they pose to our nation – whether from a security, commercial, industrial or political perspective.

Probably starting before 2008, but continuing to date, milk products – especially baby food and infant formula – were diluted with melamine, which in this case acted as a masking agent to hide the dilution of protein. So far over 50,000 young children in China have developed kidney stones from this toxic chemical and several have died. The extent of this latest wave of Chinese greed over human safety has spread to at least 11 countries, and involved tainting baby formula, coffee creamer, instant milk coffee and milk tea products, as well as chocolate products including Cadbury and other brands. Tainted products were sold during Halloween, as some were not pulled from the shelves in time.

As of October 2008: the government reported its FDA Import Refusals: a total of 153 “refusals” (i.e. products ranging from medical devices and pharmaceutical ingredients to food products and other consumer items) were refused entry from China into the United States because they were mislabeled; had poor manufacturing practices; were putrid or filthy; or contaminated with harmful chemicals, antifungal or antibiotic additives. China (153), India (115), Mexico (84) had the most products among the over 70 nations represented on the FDA Refusal list. Seafood, vegetables and other foods, as well as cosmetics, vitamins and pharmaceuticals intended for U.S. consumption were the leading products.

FDA testing disclosed over the last few days revealed that Mead Johnson baby formula "Enfamil" contained traces of cyanuric acid and Nestle's Good Start had small amounts of melamine. While both were considered non-toxic exposures, and the result of manufacturing errors, not intentional tampering; time will tell how extensive or if a health effect will result.

However, tainted or substandard products imported from China is not a new phenomenon, but the recent events have occurred in such magnitude and involve such a wide variety of industries as to raise serious questions concerning regulatory oversight, security, economics, public safety and supply chain vulnerability. Are these intentional acts of greed? Or are they the natural evolution and growing pains of nations without strong infrastructures trying to emerge from being third world, underdeveloped countries to economic powers and players in the industrialized world? China has few safety controls on food and drugs. Yet, against this backdrop, China has increased its food exports to the U.S. by over 20% in this year alone and has become the leading supplier of many food ingredients that become part of virtually every edible category. Outdated pesticides, unsafe chemicals like lead or kerosene, or some of which are look-alike or taste-alike for safer ingredients (melamine, glycols), bacteria and poor sanitation are associated with ingredients from developing nations such as China or Pakistan.

Many U.S. companies are involved in China, such that the commercial interest of the United States has become dependent upon allowing imports to enter our borders as quickly as possible. Yet supply chain partners may not have the government infrastructure, regulatory capacity or desire to scrutinize products when commerce is the imperative. Herein lies the complexity of the problem and a convergence point/challenge for the security professional. Cheap imports have become critical to corporate profits at a time when globalization has placed enormous pressure upon national and company economic survival. Consider the prices of pharmaceutical ingredients. A U.S. company in September 2007 can purchase a kilogram of erythromycin base antibiotic for $65 from China; in 1995 a kilogram would cost $110 if purchased from a U.S. company. It is this magnitude of cost reduction, including labor that is 1/5 to 1/10 that of domestic workers, that makes trade with China and other developing nations so attractive. Moreover, unfettered by regulatory enforcement, costs can be kept down as well. Yet the risks to domestic companies relying upon foreign components may alter this equation as concerns about toxicity, human health (and animal health) emerge.

Heparin is a good example. Heparin is derived from pigs. Surprise! Nearly half the world’s pigs are in China. A significant portion of the journey from pig to medication involved in heparin production involves Chinese companies; many are substandard or cut corners. The result – people die from a medication designed to save their lives.

China now supplies over 30% of the world’s Vitamin A, along with B-12 and many health food supplements as well as 80% of the world’s ascorbic acid (Vitamin C) which is used as a preservative and enriching agent in literally thousands of foods. In the spring of 2007, lead-contaminated multivitamins were found in U.S. health food stores and Vitamin A contaminated with bacteria ended up in European baby food. It has been suggested that China sells ingredients at ultra low products in order to capture the global market. Recent events and economic indicators do not dispute this assertion.

Discussion

The U.S. has a $232 billion trade deficit with China – a reality that sets the stage for competing demands among policymakers and regulators. Of concern, China is aggressively attempting to change U.S. policy and regulations to allow importation of Chinese poultry – and with it the risk of avian influenza and other pathogens.

On September 11th, 2007, the U.S. Consumer Product Safety Commission hosted the second Sino-U.S. CPS Summit. President Bush created a panel to study whether the U.S. needs more stringent safeguards for imported food and consumer products. The resulting Interagency Working Group on Import Safety came out with their report in November 2007 with recommendations to the White House outlining strategies – many of which rest upon cooperation and memoranda of agreement with Chinese regulatory agencies. How lucky do you feel?

Why America is on the short end of the stick with Beijing, enamored by the growth spurt of Shanghai, or gaga over the ridiculously expensive Olympic extravaganza when the regime is built on blood and repression is beyond belief, unless you own a company benefiting from the enormous cost imbalance that China offers. Are we so naïve to think Burger King and Wendy’s will somehow transform a power hungry, oppressive government into a pro-West open society? Are we deluding ourselves to soothe the conscience and rationalize corporate decisions favoring profit over people? The medical device industry is increasingly being exported; the products of course then get imported from companies which benefit from the fact the U.S. is still the leading buyer of medical technologies. The typical product can be built in India, China, the Dominican Republic or other places at a fraction for what it can be produced in the U.S. China of course offers perhaps the biggest bang for the buck. Or are we taking the foot in the door approach; exposing people in developing nations to better jobs, Western culture and connectivity with the world community may set the stage for greater human rights? Consider Google – a valuable source of information worldwide, and defender of free speech; even they made concessions to Beijing before commercializing in China. Remember, this isn’t an indictment, merely a cautionary tale.

Chinese officials – business, government and regulatory cannot claim innocence or error. China set out upon a corporate strategy to underprice and thus eliminate the competition (think WalMart in the U.S. – hmmm, wonder why China and WalMart are joined at the hip?)

As our dependence upon Chinese and other nations' exports increase, questions about supply chain integrity, quality, regulatory oversight, inspections and product safety will persist. It is wishful thinking to think this trend, this threat will stop, barring action, not year old memoranda of agreement or government sponsored talk festivals.

In 2006 there were over 13 million food imports with less than a thousand food inspectors; FDA only looked at 1% of shipments and rarely examines food ingredients like the Chinese product wheat gluten associated with melamine contamination. It is expected for 2007 that China will have 300,000 ingredient exports to the US. Once ingredients are incorporated into processed foods (as of now, nations of origin of ingredients do not have to appear on labels), it is difficult to check whether unsafe contaminants are in the products. The likelihood of people getting unsafe food is increasing. These numbers are not about to shrink any time soon unless we demand that our government inspects more, allows less into the nation, creates a tariff system that protects U.S. industry and holds Beijing accountable; without which their products can sit on docks in the Far East.

Given only a tiny fraction of all consumables are inspected, and a significant proportion of ingredients/components are imported from numerous countries, many of which are developing nations – greater attention is needed to protect the supply line and ultimately U.S. consumers. The trillion dollar bailout will likely limit the expansion of agents to protect us – whether against terrorism or food threats.

Let us not forget that for the moment the tainted products are largely born from greed. But the intentional tampering of food and other consumables is neither difficult nor unheard of. Terrorist groups repeatedly have shown interest in exploiting weaknesses in the nation’s food and agriculture industry. As recent events have shown, the U.S. and its consumers are highly vulnerable to supply chain risks. While current recalls and tainted products were presumably the result of profiteering, poor sanitation or manufacturing practices, they could have just as easily resulted from intentional tampering. In 1984 a cult in Dalles, Oregon intentionally used salmonella, sickening over 700 members of the community. It is clear an effective response requires an increased level of coordination among agencies, corporations and different levels of government – domestic and foreign.

Conclusion

While much of the security world is focused on personal and facility safety, executive protection, local threats, even WMD (weapons of mass destruction), the impact of a nation (China) that is both the largest monthly net buyer of U.S. securities and a leading exporter of ingredients, components and products purchased domestically – will we become as one writer opined victims of “weapons of mass production?”

Outsourcing, efficiencies in manufacturing, profit optimization and just-in-time inventory are business strategies that minimize costs; these also can stretch or expose supply chains. Beyond normal vulnerabilities such as natural disasters (hurricanes, earthquakes) terrorism, political instability or product fraud can impact supply chains and corporate health. Consistently, financial executives identify supply chain risk as having the greatest potential to disrupt their revenue drivers. Compromising the quality of the end product – Mattel Toys being a good example – can undermine consumer confidence, impact profitability and damage credibility with investors, which ultimately can drive up cost of capital or jeopardize market share. While recent tainted product events and recalls were not intended to harm U.S. consumers, they could just as easily been intentional acts of industrial sabotage or terrorism – biological or chemical.

Thomas Friedman and others suggest that ‘the world is flat’ – globalization and multinational corporations becoming the new economic reality. At this crossroad rests often competing yet intersecting stakeholders: business and consumers, governments – politicians and policymakers, security professionals – corporate and government, regulators, inspectors, safety and health advocates and prosecutors.

How to remain good corporate citizens by providing high quality, safe products, manage costs and supply chains that might stretch from Beijing to Boston are critical questions for America – our policymakers, regulators, business community and ultimately the consumer.

At this Holiday time of year, we give pause to be grateful for what we have. But much of our focus remains on the economy, the Holidays and getting through the cold winter months without a hike in oil prices requiring us to take a second mortgage out just to heat the house and drive our cars. Americans have all but forgotten critical issues that can impose severe burdens upon us – failed energy policies, homeland security, poor trade policies and inadequate protections from inferior, tainted or just plain dangerous products. And in the aftermath of increasing unemployment, job insecurity, high cost of living without commensurate levels of income, people will turn to less expensive alternatives and industries will attempt to cut costs and in many cases cut corners. But cutting costs and corners comes with a price – danger!

In the interest of public safety, Congress and the new Administration need to do a better job.

First – change the insane policy of allowing the very industries that are supposed to be regulated by various and sundry government agencies here and in the originating nations, that allows them to examine themselves or set policy on how they should be regulated. There needs to be a clear separation between regulated and regulator. Having the pharmaceutical companies call the shots at FDA, or the meat packing industry tell USDA how increasing food safety measures or inspections imposes a burden on their industry sounds a lot like asking the 6-year-old with chocolate on his face who robbed the cookie jar and oh, by the way little fella, would you start an investigation for the culprit?

Second – our elected should initiate legislation that mandates listing the countries of origin that our products’ components or ingredients originate from. The three card Monte game that U.S. corporations – domestic and foreign ownership – play by coming as close to the letter of the packaging laws in terms of how many nanoseconds off the docks a product needs a whiff of US air, or what % of ingredients make it allowable to be called a U.S. product must be reexamined.

Third – this is a difficult economic environment; profit and cost will trump many other considerations. This is a bad time to ask the American consumer to pay more dollars for a better product. But should this be a zero sum game? Choosing quality/safety or cost especially when health is at stake is wrong. It is immoral to use toxicants when safe chemicals are available. We can do a better job with stronger trade policies, stricter control over imports, sanctions over nations that do not implement effective oversight are just the first realm. Holding U.S. industries accountable for their U.S. and foreign supply chain partners may be the answer if companies cannot or will not follow good manufacturing practices across their production process.

Four – government investment in new cost cutting, product enhancing technologies or processes, monetary support for start up or niche companies – from food growers and ingredient producers to electronics and other consumer goods manufacturers will be an important driver towards rebuilding small businesses, which have always been the backbone of our nation and catalyst for the next industrial revolution.

Five – addressing our trade imbalance is critical. There remains a significant disadvantage facing U.S. industries trying to enter foreign markets compared with foreign industries trying to enter US markets. Who have our government officials been working for? It is NOT wrong to remember Congress and the Administration are supposed to protect the U.S.; protectionist policies are not bad; they are responsible. Counterpoint arguments that our industries will be blocked out if we try to reduce the disadvantage that we face worldwide are lame; how much more disadvantaged can we be on the one hand while we give away the store on the other? The new administration must reevaluate our import/export policies, courageously, strategically and tactically using tariff policies that level the playing field. Our safety and the preservation of US jobs may rest in the balance.

There are few issues more fundamental to domestic security than safe products, good jobs and fostering industries reflective of the values that created America. The clock is ticking; what labels will be on our Christmas, Hanukkah and Holiday presents? What will they be in 2009, which products will be the next threats to our health and from where will they be imported from? And when will our elected officials remember to protect the interests of the U.S.?

FamilySecurityMatters.org Contributing Editor Dr. Robin McFee is a physician and medical toxicologist. An expert in WMD preparedness, she is a consultant to government agencies, corporations and the media. Dr. McFee is a member of the Global Terrorism, Political Instability and International Crime Council of ASIS International. She has authored numerous articles on terrorism, health care and preparedness, and coauthored two books: Toxico-Terrorism by McGraw Hill and The Handbook of Nuclear, Chemical and Biological Agents, published by Informa/CRC Press.

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