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| June 30, 2007 | Saturday | Jamadi-us-Sani 14, 1428 |
Can tainted toys spark US-China trade tiff?
WASHINGTON: From tainted pet food to lead-painted toy trains, a string of recalled Chinese-made goods threatens to tarnish the Made in China label in the United States and intensify calls for trade protection.
Americans love a bargain and it will take a lot for them to give up the Chinese-made toys, furniture, clothing, food, cosmetics, appliances and other goods that fill discount store shelves – and increasingly the upscale chains too.
But there are signs that China trade sentiment is souring: in Congress, on the editorial pages of US newspapers, and even in a new advertisement criticising retailer Wal-Mart Stores Inc. for its heavy reliance on Chinese imports.
“Quality is one thing, safety is a different matter, and if we continue to hear this drumbeat of safety (problems), that could clearly impact consumers’ perception of goods made in China,” said Jack Ablin, chief investment officer at Harris Private Bank in Chicago.
If the next case of tainted goods proves deadly, that may be all it takes to trigger a trade tussle.
Trade relations with China already are fraught, with some on Capitol Hill arguing that China has an unfair advantage because its yuan currency is undervalued, making its exports more affordable here.
They want the administration to take tougher action.The United State’s trade deficit with China hit a record $233 billion in 2006 and has continued to swell this year.
“The Chinese better take heed and crack down hard (on faulty goods) now or they will be faced with anti-Chinese trade legislation soon,” said Andrew Busch, global foreign-exchange strategist with BMO Capital Markets in Chicago.
As its exports soar, China has stockpiled more than $1 trillion in US assets, leading some lawmakers and economists to warn that the US economy would be vulnerable if China decided to dump dollars in the event of a trade war.
Many on Wall Street dismiss such concerns as far-fetched, arguing that China’s investments would also lose considerable value if the country purged assets.
Mickey Levy, chief economist with Bank of America, told a congressional hearing that such fears were ‘misplaced’.
But some lawmakers see the massive US trade gap as reason to pressure China on its currency and trade policies, and several senators, including New York Democrat Charles Schumer, have used the string of recalls to bolster their case.
Trade imbalances may not be a hot topic around the dinner table, but lead-painted Thomas the Tank Engine trains probably are, and that could dampen consumer sentiment, slow demand for Chinese imports, and boost support for trade restrictions.
In addition to the Thomas trains, well-publicised problems with tainted pet food that killed dozens of animals, and toothpaste laced with a dangerous chemical have made Chinese quality concerns front-page news.
Merrill Weingrod, head of China Strategies, which advises companies on doing business with China, said testing and regulations had improved in the past 20 years but the country was clearly facing a ‘public relations nightmare’.—Reuters
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