The Chinese Export Crisis: Consumer Demand for Cheap Imports Backfires

Barbie Dolls, Polly Pockets and Hot Wheels will probably not be filling up children’s stockings this holiday season. Last month, Mattel, international toy company and producer of the aforementioned playthings, was forced to recall millions of toys manufactured in China that contained lead paint and hazardously small magnets that children could swallow (see picture at right). This announcement came at an inopportune time for Mattel, which consequently released a dismal third quarter forecast, and more so for Chinese manufacturers who have been chastised all year for their faulty, unsafe products. From toxic shrimp to contaminated toothpaste, one scandal after another has besieged China’s export-based economy, leaving American consumers both worried and incensed. In fact, a Reuter’s poll, released September 19th, reported that “around 78 percent of Americans worry about the safety of Chinese imports, and a quarter have stopped buying food from China.” While these fears are well founded, most customers are too occupied with blaming the U.S. and Chinese corporations to realize that, ironically, consumer demand for inexpensive products is a significant part of the problem.

The development of outsourcing to meet demand for cheap goods, has greatly contributed to the import issue. By employing inexpensive overseas labor, large corporations such as Mattel, General Motors and Safeway have been able to reduce overhead costs and pass off these savings to their customers in the form of cheaper items. In fact, according to the latest U.S. Bureau of Labor Statistics report, the average Chinese wage is $0.57 per hour—or $104 per month—which is about three percent of the average U.S. manufacturing worker's wage. While these figures may be good for U.S. companies’ bottom lines, the blatant disparity illustrates China’s alarming lack of enforced labor laws. Chinese employers have hardly any repercussions if employees are mistreated or underpaid and sadly, more often than not, U.S. companies choose to overlook this fact in the pursuit of profits. Peter Morici, a former chief economist at the U.S. International Trade Commission, claims that China’s "tilted trade balance" with the U.S. has allowed Chinese manufacturers to act undisciplined. “Beijing,” he says, is "letting manufacturers do whatever they want without regulation to the point that it borders on atrocities." The absense of accountability allows Chinese businesses, which are strapped for cash, to cut the corners in their manufacturing processes in order to fulfill the demands of their U.S. employers. Often, this ultimately results in a shipment of faulty, unsafe goods.

Furthermore, once these imports land on American soil, entities like the United States Food and Drug Administration (FDA) are responsible for inspecting the items. This, however, has become nearly impossible due to the sheer number of products entering the country. Currently, the U.S. trade deficit is absurdly high at $59.2 billion dollars (see graph at left), but this figure is solely the difference between imports and exports. The actual amount of goods and services coming into the country is close to $2 trillion per year. Thus, it comes as no surprise that the FDA or the U.S. Consumer Product Safety Commission can only regulate two percent of all imported products, and it is unlikely that this figure will increase anytime soon—hundreds of new agencies would have to be formed requiring unrealistic amounts of personnel to complete the inspections. Consequently, deficient goods often pass through the substandard checkpoints, make their way onto store shelves, and ultimately land in the hands of unassuming shoppers. It often takes a tragedy to remind consumers that the cheap goods they regularly purchase are sub-par.

Of course not all inexpensive imports are of poor quality and consumer demand is not the only reason that inferior products exist—the manufacturers that produce the goods make the ultimate decision of what materials to use and should be held legally accountable if something goes awry. However, demand dictates supply in all capitalistic economic situations. If low prices are requested, companies will surely comply. For years, American consumers have enjoyed falling prices for goods made in China thanks to relentless cost-cutting by retailers such as Wal-Mart and Target. Often times, the majority of these products are acceptable and can even be considered beneficial to the economy because low prices increase individuals' disposable income. However, buyers must be aware that the cheap goods they appreciate are hardly ever produced without paying the price elsewhere. Perhaps a seven-dollar Barbie seems like a steal initially, but when it comes at the cost of human rights in China or the compromise of child safety, is the bargain really worth it?