11/07 - China on the Bayou: The Cost of Buying Cheap

What is the true cost of buying goods made in China and other countries?

This Holiday Season, what will your artificial Christmas tree, the tree ornaments and many of the gifts beneath that tree have in common? They will likely have a Made in China label on them. Is that a good thing or a bad thing? Some say the cost of saving money on Chinese merchandise is the loss of American jobs - including seafood industry jobs here in Louisiana. Others argue that cheap goods help workers on tight budgets make ends meet. Watch Louisiana Public Square's "China on the Bayou: The Cost of Buying Cheap." Wednesday, November 28 at 7 PM. The program features author Sara Bongiorni, who wrote "A Year Without 'Made in China'." Our panelists:

Sara Bongiorni, author of "A Year Without 'Made in China'." Her book details her and her family's experiences trying to live for a year without purchasing any items made in China.

Larry Collins heads the International Section of Louisiana Economic Development.

Professor Lee Ann Lockridge, who teaches Advertising Law and Unfair Competition Law at LSU's School of Law.

Backgrounder

Humans have traded with other humans for millennia. Trade often brought a higher standard of living and economic advantage often led to political advantage. As nation states emerged, they tried to secure or create centers of trade around the globe.

In the 1600s, the French, Dutch, Spanish and English vied for supremacy in North America. The French gained control of the Mississippi River, and built the port city of New Orleans in 1718. Two hundred and ninety years later, the five ports districts that stretch from New Orleans to Baton Rouge handle the majority of Louisianas international trade. About half of all of the grain that the U.S. exports, is handled by Louisiana ports. Agricultural products  mainly from the plains states  account for nearly 40% of the dollar value of all cargo shipped through Louisiana [$9.1 billion in 2006]
Please Note:
The data in this report is based on something called "transportation origin," i.e., the state from which goods began their journey to the port (or other point of exit from the United States. The transportation origin of exports is not alway the same as the location where the goods were produced.

With 95% of the worlds consumers living outside of the United States, theres a big market awaiting American products. Trade between the U.S. and China  especially through the ports of Louisiana -- is substantial and growing. Forty percent of all consumer goods imported into the United States come from China. Proponents of international trade say it provides customers with more choices and lowers costs. It also drives certain important business sectors  such as the maritime trades and those in the import-export business. Some opponents of free trade blame the steady decline of U.S manufacturing jobs on the use of cheap labor in foreign countries like China. They also point to cases of human rights violations, pollution and lack of product health and safety regulations as cause for concern.

The following is excerpted from Louisiana: Exports, Jobs, and Foreign Investment, Sept. 2007

Prepared by the Office of Trade and Industry Information, International Trade Administration, U.S. Department of Commerce.
Data updated 10 September 2007.

Exports Support Jobs for Louisiana's Workers

Export-supported jobs linked to manufacturing account for an estimated 5.6 percent of Louisiana's total private-sector employment. Over one-seventh (14.7 percent) of all manufacturing workers in Louisiana depend on exports for their jobs. (2005 data are the latest available.)

Source: State Export-Related Employment Project, International Trade Administration and Bureau of the Census.

Exports Sustain Thousands of Louisiana Businesses

A total of 2,292 companies exported goods from Louisiana locations in 2005. Of those, 1,936 (84 percent) were small and medium-sized enterprises, with fewer than 500 employees.

Source: International Trade Administration and Bureau of the Census, Foreign Trade Division: Exporter Database.

Louisiana's export shipments of goods in 2006 totaled $23.5 billion. Louisiana ranked 12th among the states in terms of total exports in 2006. Louisiana increased its merchandise exports $5.9 billion (34 percent) from 2002 to 2006.

Louisiana exported globally to 193 foreign destinations in 2006. The state's five largest markets in 2006 were:

Japan $2.5 billion.

China $2.2 billion

Mexico $2.2 billion

Canada $1.8 billion

The Netherlands $1.1 billion

Louisiana's biggest growth market, in dollar terms, has been China. From 2002 to 2006, export shipments to China rose from $768 million to $2.2 billion, an increase of $1.4 billion.

Among Louisiana's top 30 markets, China was Louisiana's biggest growth market, in percentage terms. The state's export shipments to China increased 188 percent, from $768 million in 2002 to $2.2 billion in 2006.

Among manufactured products, the state's leading export category in 2006 was chemical manufactures, which alone accounted for $5.1 billion, or almost one-fourth (22 percent) of Louisiana's total merchandise exports.

Source: Origin of Movement State Export Series, Bureau of the Census, Foreign Trade Division.

Consumer Goods

Sixty percent of all consumer goods recalled in 2007, came from China. Examples of recalled Chinese products include: toothpaste made with antifreeze; auto tires not glued together properly and many dangerous toys. The toys have garnered a lot of attention because of the dangers posed to children.

Impact of Imported Items

Consumer Safety

Nearly 80% of all toys sold in the U.S. are made in China. In 2006, 70 % of all recalled toys sold in the U.S. were from China. Among the recalls in 2007:

* 9 million Mattel toys coated with lead paint*, or containing small magnets kids can swallow
* 51,000 Curious George toys containing lead paint
* 1.2 million lead paint-coated wooden railway toys
* 43,000 packages of Ugly teeth Halloween novelty toys with high lead levels

*Lead is a hazardous metal. Its effects on children can be especially harmful. Children can ingest lead by sucking or chewing on toys

Health

While U.S. agricultural imports have nearly doubled in the past 10 years, food imports from China have more than tripled. About 13 % of the American diet is imported. Seafood may be the most popular food import. Almost80% of all seafood consumed in the U.S. is imported. But only 1.3% of it is inspected. And that percentage is going down, not up, in the foreseeable future.

About 200 Chinese food import shipments were stopped by the FDA in 2007. Some of the contaminants found: melamine in pet food; illegal veterinary drugs in frozen catfish and cancer-causing chemicals in fish and shrimp.

This past summer in Louisiana, the state Agriculture and Forestry Department withheld from sale Chinese catfish and shrimp when they failed to pass random checks for banned antibiotics and other substances. The U.S Food and Drug Administrations [FDA] recent decision to intercept Chinese catfish and shrimp was a vindication of Louisianas action, according to Agriculture Commissioner Bob Odom. All we are saying is that theyve got to make sure they meet the same standards [as Louisiana products], Odom said.

Job Security

Louisiana crawfishermen have long dominated the U.S. market for crawfish. Each year, they gather as much as 100 million pounds of crawfish  mostly, the large red swamp variety. But over a four year period starting in 1993, they saw their nearly 100% market share decline precipitously. Farmers in Jiangsu Province, China had cornered 80 % of the frozen crawfish market by mid-1997. Chinese crawfish were selling for about half the price per pound of Louisiana crawfish. Depressed prices and lack of sales forced the loss of about 4,000 seasonal jobs in Louisiana, according to complaints files with the U.S Department of Commerce by the Crawfish Processors Alliance. The Alliance  a coalition of seafood interests funded, in part by state tax dollars  prevailed in their petition and secured a tariff on Chinese crawfish that ranged from 86% to 210%.

In May 2007, Senators David Vitter and Mary Landrieux complained to the U.S. Commerce Department about what they and other Gulf Coast senators said was a lack of enforcement of anti-dumping laws. The laws are meant to American companies from unfair pricing by foreign nations. In this case, the alleged victims were shrimpers. The accused: Chinese seafood exporters.

Consumer Protection

The Louisiana Legislature passed two laws aimed at protecting Louisiana consumers from being deceived. Presumably, the laws would also protect Louisiana industries from competition deemed unfair by the state. The so-called Cajun statute declares:

No person shall advertise, sell, offer or expose for sale, or distribute food or food products that do not qualify under this Section for labeling as Cajun, Louisiana Creole, or any derivative thereof in any packaging that would lead a reasonable person to believe that the food or food product qualifies as Cajun or Louisiana Creole food or food products, as defined in this Section.

The second law, referred to as the catfish statute, reads, in part, as follows:

No one shall misrepresent the name, or type of any fruit, vegetable, grain, meat, or fish, including catfish, sold, or offered or exposed for sale, to any actual or prospective consumer. Catfish shall mean only those species within the family Ictaluridae [and Anarhichadidae] and grown in the United States of America.

The Crawfish Stature has had a shaky legal start. The U.S. 5th Circuit Court of Appeals upheld a lower court ruling that & the Catfish Statute violated the dormant Commerce Clause [of the U.S. Constitution] because it was a protectionist measure that discriminate[d] against foreign commerce in favor of local interests.

Benefits of China Trade

$357 million worth of manufactured chemicals were shipped from Louisiana to China in 2006.

The Louisiana fire equipment Ferrara has recently entered the Chinese market, selling $3.5 million in firefighting gear to several cities in China.

The Shaw Group has signed a $700 million deal to install nuclear reactors in China.


U.S. Consumer Product Safety Commission
CPSC Recall Hotline: (800) 638-2772

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