KWAME HOLMAN: China is home to one of the fastest-growing global economies. A workforce of 800 million churns out nearly a trillion dollars in goods and services of all types.
Forty percent of U.S. consumer imports come from China. But the safety of many Chinese-made products, from toothpaste to tires, pet food and seafood, has come into question.
China is the world's largest exporter of seafood. Last week, imports of several types of Chinese farm seafood effectively were suspended by the U.S. Food and Drug Administration after alarming quantities of an antibiotic were found in catfish, eel and shrimp, among other products. The U.S. imports 80 percent of the seafood Americans consume with China, the largest supplier.
With concern widening about Chinese exports overall, the foreign ministry today sought to reassure consumers both in China and abroad.
QIN GANG, Chinese Foreign Ministry Spokesman (through translator): Chinese products shouldn't make consumers cautious; Chinese products are of high quality and inexpensive.
KWAME HOLMAN: Prior to suspect seafood, it was Chinese-made tires that garnered concern. Faulty tires were blamed for causing at least one fatal accident; 450,000 tires were recalled last month.
Toxic toys also have been found among Chinese imports. Some of the popular Thomas the Tank Engine toys were discovered with coatings of lead paint.
AMERICAN CONSUMER: Now I will be looking at the labels to see if it's from China.
KWAME HOLMAN: Over the last year, at least 100 people in Panama died after consuming cough syrup tainted with a Chinese-produced additive that contained diethylene glycol, a component of car antifreeze. That led American regulators to see if that toxin was in any U.S. imports. It was found in toothpaste sold under several discount brand names.
New York Senator Charles Schumer has proposed creation of an import czar to focus specifically on Chinese products.
SEN. CHUCK SCHUMER (D), New York: You shouldn't have to worry whether the toothpaste we buy has a poison in it, whether the toy we buy for our child has lead paint in it, whether the tires we buy on the road are safe.
KWAME HOLMAN: The first sign of problems came in March, when imported Chinese wheat gluten tainted with melamine, a chemical used to make plastics and fertilizer, was found in pet food. Authorities were alerted by an extraordinary number of kidney ailments in dogs and cats.
Millions of cans were recalled, but dozens of family pets had died. Hundreds more were sickened. The FDA said none of the affected wheat gluten entered the human food supply.
GWEN IFILL: Margaret Warner takes it from there.
MARGARET WARNER: For more on what's behind the recent problems with goods, especially food, from China and what it means for American consumers, we're joined by Caroline Smith DeWaal, director of food safety for the Center for Science in the Public Interest, an advocacy group; and Donald Straszheim, a long-time China watcher and former chief economist at Merrill Lynch. He's now vice chairman of Roth Capital Partners, a California-based investment bank.
Welcome to you both.
Ms. DeWaal, beginning with you, how widespread a problem is this of tainted products from China for American consumers? Are we looking at a few high-profile cases, or is it more systemic?
CAROLINE SMITH DEWAAL, Center for Science in the Public Interest: Tires, toys, toothpaste, and now seafood, I think American consumers are increasingly shunning products made in China. And it's critically important that both our government and the Chinese government get a handle on the situation before it becomes impossible to sell these products to U.S. consumers.
MARGARET WARNER: And which sectors do you think -- from which sectors are American consumers most at risk?
CAROLINE SMITH DEWAAL: Well, clearly food products are critically important. We have to eat three times a day. And so many of the food products that we buy have no information about where the ingredients come from or even where the products come from.
MARGARET WARNER: And so a lot of products, even food products made here in the U.S., may have, for instance, the wheat gluten, apple juice, something like that, imported from China.
CAROLINE SMITH DEWAAL: That's right. A "Made in China" ingredient may be incorporated into the foods or drugs that we buy, as well as cosmetics, so it's critically important that those items now be labeled to show where, in fact, they're coming from.
MARGARET WARNER: Donald Straszheim, on the China end, how widespread a problem do you think it is? Again, are we seeing some high-profile cases or is there really a systemic issue here that's growing?
DONALD STRASZHEIM, Vice Chairman, Roth Capital Partners: Well, Margaret, there is a widespread issue there, and the problem is that none of us really know how serious it is. In China, they do not have a history of providing this kind of information broadly among the public, so the public there doesn't know. They don't have a real regulatory regime or history of regulatory regimes that include inspection and monitoring and enforcement of laws.
When this was product and food consumed domestically in China, the world didn't care about it. But as your set-up piece pointed out, now that these products are sold around the world, we and others care. This is a big issue going to get, I think, much, much bigger.
MARGARET WARNER: Now, is the problem in China one of, shall we say, covering or producer incompetence? Or do they know exactly what they're doing and it's driven by profit?
DONALD STRASZHEIM: Well, there is a profit motive here. If you can substitute chalk for the milk powder and still sell it as milk powder, the chalk being cheaper, that's a way for unscrupulous businesspeople to raise their profit margins. That's part of it.
But the bigger problem is that enforcement is so difficult because China's economy is so fragmented. There are three million producers of apples in China that goes into the apple juice that we buy. Half of our apple juice comes from China.
The toy says "Made in China." We can look at it, and we've got some line of defense. But in apples, the apple doesn't say "Made in China." And that's why the point made earlier about labeling is, I think, a very important one.
MARGARET WARNER: And explain, what is the problem with regulation and enforcement? You said they didn't have much of a tradition, yet the Chinese government says, "Oh, we have all these standards and regulations." What's the problem there?
DONALD STRASZHEIM: Well, they have these standards, but take the example of intellectual property rights. China has the most up-to-date intellectual property rights laws in the world on the books, but they're simply not yet enforced. The government has made...
MARGARET WARNER: Do government officials just ignore them? Or why aren't they?
DONALD STRASZHEIM: Well, yes. One of the reasons is China is much more federal than America is. The power in the economy in America lies in Washington, not with the governors and the mayors.
In China, it's just the other way around. So Beijing passes a law, some regulation or whatever, and the provinces and the mayors just simply ignore it. You can see that all throughout China's economy.
MARGARET WARNER: Now, what about the regulation, Ms. DeWaal, here on the U.S. end? Which agency or agencies are responsible for overseeing, let's just take food safety? And how do they go about it?
CAROLINE SMITH DEWAAL: Well, there are two major federal agencies that regulate food safety. The Food and Drug Administration, where many of these problem products have come in, regulates 80 percent of the food supply, but they really don't have the resources to manage the problem.
Imports from China have nearly quadrupled in the last 10 years. It's a huge new issue, and yet the inspectors that check those products at the border are actually declining, the number of inspectors. So while we've seen huge growth in imported products generally, and especially coming from countries like China, we don't have the inspection resource at the border to deal with that.
But more importantly, FDA is managing this problem using 100-year-old law. And Congress needs to step in here. They need to modernize the law, and they need to give FDA the resources, the manpower and womanpower to actually check these products.
MARGARET WARNER: Now, what about the American both food manufacturers and retailers? They're the ones importing this stuff. Either they're importing the raw ingredient and putting it into a product, or they are actually importing the seafood and selling it in their stores. How much responsibility do they take? Do they have any legal liability or responsibility to do so?
CAROLINE SMITH DEWAAL: Well, where food products are not labeled, if a consumer gets sick, in fact, the first place they go, from a liability standpoint, is to the retailer, and then eventually back to the wholesalers, and all along the supply chain. So it actually would be a huge benefit to the retailers to be able to demand that these products show their origins, show the source, because that gives them greater accountability.
MARGARET WARNER: I want to ask you both quickly about consumers. On the China end, Mr. Straszheim, you said that the consumers -- there hasn't been much outcry, when, in fact, people in China have actually died from some of these tainted products, especially drugs, unlike here in the U.S. Why isn't there any consumer outrage there, or not much?
DONALD STRASZHEIM: Well, part of the problem is the locals don't really know about as much about the problem as we do. There was an announcement today by one of the Chinese officials trying to talk down the problem and shut the media up. This is not helpful.
And as long as they don't know that there is a problem, they're not going to cry very much, but the hopeful sign is the word is getting out. And just like in SARS in 2003, when the word got out about that, the government acted responsibly. And as the word gets out on this issue, the government is going to act more responsibly and accept the accountability again, as well. I think that's really quite positive.
MARGARET WARNER: So, Caroline DeWaal, in the meantime, what can American consumers do essentially to protect themselves?
CAROLINE SMITH DEWAAL: I think it's time for consumers to start demanding this traceability, that the products be labeled that they're purchasing. They may say, "Made in America." They may say, "Ingredients from China," but it's critical that consumers start demanding it.
We can ask Congress to take action here, and we will. But if consumers demand it of the retailers, they'll get faster action and better results.
DONALD STRASZHEIM: Margaret, I think companies are already going to start to look for alternative sources to China. And that's going to be a real wake-up call to China, as well.
MARGARET WARNER: Yes, and I noticed and read the other day that both Kellogg's and General Mills and also Toys 'R' Us are also adding a whole layer of scrutiny that they hadn't before.
DONALD STRASZHEIM: Exactly.
MARGARET WARNER: So thank you both very much. Thanks for being with us.
CAROLINE SMITH DEWAAL: Thank you.
DONALD STRASZHEIM: You bet.