Tuesday, July 31, 2007

Will the New Chinese Food & Drug Resolution Be Enforced Resolutely?

If there is one vivid way to describe the crisis faced by the “made-in-China” label, it has to be the ancient Chinese idiom “四面楚歌”, meaning besieged on all sides and surrounded by “enemy” battle cry.

Against the backdrop of intense domestic and international pressure, on July 26, 2007, Premier Wen Jiabao signed a new executive order, titled Special Rules on the Supervision of Food and Drug Regulations (“Special Rules”) (in Chinese only).

To a cynical China watcher, this law represents another manifestation of the all-too-familiar syndrome in Chinese authority’s response to problems—when existing laws and regulations are not enforced against certain problems, more new laws and regulations are thrown at problems resulting from a lack of such enforcement.

If you are do think so, I’d argue that this seemingly familiar pattern was woven with a different fabric. And let me explain why.

Textually speaking, the Special Rules packs some potent new measures unseen in a host of existing laws, regulations, measures, rules, circulars, and opinions (almost impossible to calculate the total number and no wander enforcement has been…), to wit:

a. calls for coordinated actions amongst ministries of agriculture, public health, quality inspection, commerce, industry and commerce, and medical quality control. Each has the power to crack down food and drug quality violations in accordance with its designated authority;

b. specifies the administrative authorities and power of the above-mentioned ministries/departments in connection with executing quality regulations;

c. any person or entity has the right to report quality violations;

d. establishes food quality violation recording system to track repeat offenders;

e. increases administrative penalties for violations (where amount in question exceeds 10,000 yuan, the violator will be fined 10 to 20 times of the amount in controversy.)

f. requires distributors/sellers to establish mandatory quality inspection system to record purchase and sale information relative to products distributed or sold;

g. requires producers to recall problematic products;
h. ties food quality regulation results with evaluation of county-level officials;

i. specifies incentives and penalties for importing high or low quality products.

In a political sense, the Special Rules pronounce a loud and clear message—an admission that the existing regulatory scheme is too fraught with overlapping responsibility among ministries to be effective, too ambiguous to enforce, and too toothless to have a bite. Each ministry has a portion of authority in food and drug quality control, and authorities have been dispersed among six ministries. Down to the provincial or county level, the sharing and overlapping of authorities severely hinders effective enforcement of existing rules because no one has clear understanding of what they can do and no one wants to take responsibility. To a large extent, the quality woes of China can be blamed on this ineffective distribution of power and authority. The problem is compounded with relatively insignificant consequences for quality violations.

Special Rules clearly states that ministries/departments must act in concert, and they all have identical authorities in their execution of the Special Rules. Of course, the sharing of enforcement power problem is still not eliminated, but the newly created Food & Drug Special Group under the State Council and the specification of enforcement authorities are two mitigating factors.

To put things in a historical context, China is at a very critical stage of development where sharp social conflict exist between and among segments of the society. Harmony cannot be cultivated when people cannot even trust what goes into their stomach. As a Chinese proverb puts it nicely, food is of first priority ("民以食为天") (literally means people regard food as important as the sky). Food quality concern is not just an international trade problem; this is one that affects the very fiber of the Chinese society, and the stability of the country as a whole, for which the CCP has sworn to maintain. Therefore, I believe (and hope) that the government has the critical impetus to enforce the Special Rules.

Examined in a purely economic sense, export will in the near future continue to be a major engine for the growth and development for China. When the world’s faith in “made in China” is shaken, the consequences are as clear as the Tibetan blue sky. The United States already issued a ban on certain Chinese seafood imports, which is a billion dollar industry. Without drastic measures, the image of Chinese products could spiral further down, thus jeopardizing China’s economic bottom line—export. China has no other option other than enforcing quality control laws, now.

Historical records of the idiom—“besieged on all sides” account an impossible and hopeless situation for General Xiang Yu. His beloved wife committed suicide amid intense pressure. Most of his brave soldiers suffered low morale due to enemy’s siege. Seeing a complete loss of support, General Xiang Yu killed himself by the Wu River. What distinguishes the current Chinese government from General Xiang Yu is that the situation is not impossible and hopeless. EU’s chief consumer protection, Meglena Kuneva, went to China last week for joint efforts to solve problems; likewise, the American food and drug safety team is in China with the purpose—to develop an agreement on food and drug safety in cross-border trade.

Short of a complete loss of hope and support home and abroad, the current government is no General Xiang Yu. However, continued hope and support depend on China itself. Do you think the Chinese leaders know that?

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