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Tilting at Windmills

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June 27, 2007
By: Christina Larson

BREAKIN' THE LAW IN CHINA .... Responding to domestic and international panic over food safety in China, regulators in Beijing announced on Tuesday that they had closed 180 food-processing plants in the past six months for breaking food-safety laws.

That sounds tough. But it's a small fraction of the 23,000 total violations the watchdog agency says it found. And that's a small fraction of the estimated 750,000 total food-processing facilities in China, where other problems may exist and inspections are few and far between.

China has laws on food-safety. There's a good argument they should be stricter.

But the first problem is how to enforce the laws already on the books. Stricter laws won't have much impact without better enforcement. Although Beijing can take dramatic punitive measures, its powers of routine oversight and enforcement are typically overestimated in the West. Almost all recent headlines from China, those that affect American consumers and whip up concern on this side of the Pacific — pet-food scares, toy recalls, food-safety shut-downs — are, at root, instances of regulation breakdown: laws ignored, misapplied, or bribed away.

Here's another example: In China this spring, less than 25 percent of those required to submit personal-income statements for tax purposes actually did. By preliminary figures, four out of five are tax evaders. It's possible to argue that, in some instances, Beijing may not be motivated to enforce its own laws (perhaps intellectual property). But massive tax-evasion can't be in the interest of the central government. Nor can recalled exports totaling billions in lost revenue. There's a capacity problem, folks.

I was in China this spring reporting on what the gap between laws and reality means for the environment. For China's air and water, and ours too. For global warming. More soon in the Monthly.

Christina Larson 12:41 PM Permalink | Trackbacks | Comments (29)

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Comments

They seem to do better at inspecting citizen's e-mails than they do food processing plants. So it's just a matter of priorities. They've already got lots of nosy-parkers on the payroll.

Posted by: skeg on June 27, 2007 at 1:07 PM | PERMALINK

In China this spring, less than 25 percent of those required to submit personal-income statements for tax purposes actually did. By preliminary figures, four out of five are tax evaders.

Combine that with the farcical enforcement of enviromental, food safety and labor laws, and the Chinese government's obsession with secrecy and censorship, and you've got Dick Cheney's idea of the capitalist paradise.

Posted by: Peter Principle on June 27, 2007 at 1:10 PM | PERMALINK

It's a bit hard to believe for anyone who has ever been to China that there even _are_ laws regarding safety, much less enforcement of them if they actually do exist. When they are enforced, it is no doubt to make superficial motions to placate non-Chinese governments and people.

Posted by: Oolong on June 27, 2007 at 1:15 PM | PERMALINK

If the four who died of CJD since January in Allen County in northeast Indiana--five if you count a death in Lynnville in 2005--had the sporadic version of CJD which strikes one in a million and has no clear cause then it's bad luck, a tragedy and Something We Need To Study Further.

But if the Indiana patients had variant CJD (vCJD) caused by something in their environment or lifestyle like the four letter word everyone is avoiding?

Let's just say this is why "food disparagement laws" were slapped on the books after US talk show queen Oprah Winfrey "disparaged" hamburgers on her TV show in 1998. To protect ranches, packers, big food processors and agribusiness interests from economic collapse if their products are found to sicken and kill.

Posted by: Brojo on June 27, 2007 at 1:40 PM | PERMALINK

A definition of our importing food all the way from far-off China = madness.

Posted by: Rula Lenska on June 27, 2007 at 1:53 PM | PERMALINK

This is a global supply chain nightmare of immense proportions. It's not just China, and it's not just food. Think about all of the electronic/mechanical components that are outsourced for complex assembly. What about long-term safety, liability, and reliability issues, not to mention IP issues? There seems to be a disturbing downward trend in quality in the past 10 years or so at the expense of ever cheaper sourcing for everything. Exporters are cutting corners for short-term gain all over. This is going to be a big messy slow-motion train wreck. The food stories are just now getting attention because of the fear factor. What happens when sources of other things cannot be trusted and we have a diminished or absent domestic industry to source from?

Posted by: Doc at the Radar Station on June 27, 2007 at 2:08 PM | PERMALINK

The problem both in China and many other countries is bribery, plain and simple. The public servants charged with regulating business and enforcing the laws make very little money, whereas the people who want to break the laws not only have quite a lot of money, but also realize that bribing someone to look the other way is usually cheaper than doing whatever the law requires.

The only real solution to the problem is to scare the living daylights out of people caught giving and receiving bribes by throwing them in jail (or executing them as is sometimes the case in China). There's no economic solution, given that governments generally cannot afford to pay public servants enough to make them ignore bribes.

Also note that bribery is an accepted part of the business process in many countries besides China. After all, the lobbying process we have here in the USA is really nothing more than legalized bribery. The concept of rich people being able to pay money to avoid the law exists just about everywhere.

Posted by: mfw13 on June 27, 2007 at 2:48 PM | PERMALINK

bleaking the raw

Posted by: dent on June 27, 2007 at 2:49 PM | PERMALINK

Doc at the Radar Station: There seems to be a disturbing downward trend in quality in the past 10 years or so at the expense of ever cheaper sourcing for everything.

I agree. As for the market cultists who say "that's what people want, or they'd pay for higher quality", I'd like to refer them to a lesson not taught in Economics Indoctrination 101 (you have to take the optional 2nd semester to get this nugget):

The Market for Lemons

Posted by: alex on June 27, 2007 at 2:51 PM | PERMALINK

1) They evidently used a bunch of lead paint on Thomas the Train toys

2) They largest source of mercury in many western rivers will soon be aerosols from coal burning in China.

If this continues we'll have a bunch of young parents, sports fishermen, cat ladies, and tooth brushers fire bombing the next WTO meeting.

Posted by: B on June 27, 2007 at 2:54 PM | PERMALINK

mfw13,

I lived in China for several months, my girlfriend is Chinese, and I took a course on Chinese law, so I know a bit about Chinese culture (not a lot, but a little).

Anyway, bribery is endemic in China, it's the way the Chinese have conducted business for centuries. Trying to stamp out bribery in China is like trying to part the Red Sea, it's just not going to happen. And even if there were a few show trials, people are still going to conduct their business that way.

Having said that, the Chinese government and Chinese officials are rather selective when it comes to enforcement of their laws. In general, they will look the other way regarding bribery, but if someone does something really bad and gets caught and causes embarrasment, they're up shit creek without a paddle.

Anyway, my take on China is similar to Oolongs. China enforces things selectively, when they enforce anything at all.

Although, on a side note. I did live in Shanghai during the avian flu epidemic. And before you could say "Ni hao ma?" there were no more chickens or ducks or other birds in the open markets. So, the Chinese government can react quickly when it really wants to.

Posted by: adlsad on June 27, 2007 at 3:13 PM | PERMALINK

There's a section at the beginning of Jonathon D. Spence's The Rise of Modern China that describes how every problem of Imperial China was the result of their inability to collect taxes or create a reasonable tax system.

What Imperial China did have was a system of aculturated tax evasion that reads like a Republican daydream.

Posted by: cld on June 27, 2007 at 3:19 PM | PERMALINK

China sounds a lot like Mexico, just with 10 or 15 point higher average IQs.

Posted by: Steve Sailer on June 27, 2007 at 5:28 PM | PERMALINK

adlsad writes:

Trying to stamp out bribery in China is like trying to part the Red Sea, it's just not going to happen.

I would disagree - the problem is the system of government, not the entity of "China." Look at Singapore, Taiwan, or Hong Kong - they're all ethnic Chinese countries, and they've stamped out corruption. This probably has as much to do with the speed that China transitioned from a collective economy to a free market one as cultural mores. Enforcing the law uniformly will happen when China becomes more democratic.

Singapore

Posted by: Andy on June 27, 2007 at 5:35 PM | PERMALINK

Ok, not "more democratic -" when China *becomes democratic.*

Posted by: Andy on June 27, 2007 at 5:37 PM | PERMALINK

adlsad writes:

So, the Chinese government can react quickly when it really wants to.

You do realize that China is a dictatorship, right?
So yeah, it can shut down newspapers, stores, and jail anyone at their whim.

Posted by: Andy on June 27, 2007 at 5:42 PM | PERMALINK

And now a word from the resident racist:

China sounds a lot like Mexico, just with 10 or 15 point higher average IQs.

Thank you for your comment.

Posted by: Disputo on June 27, 2007 at 5:48 PM | PERMALINK

I would disagree - the problem is the system of government, not the entity of "China." Look at Singapore, Taiwan, or Hong Kong - they're all ethnic Chinese countries, and they've stamped out corruption. This probably has as much to do with the speed that China transitioned from a collective economy to a free market one as cultural mores. Enforcing the law uniformly will happen when China becomes more democratic.

andy wrote the above.

Thanks Andy, I haven't laughed that hard in years. Hong Kong and Taiwan stamping out corruption? Good god, I thought I was actually going to pee my pants.

Posted by: charles parr on June 27, 2007 at 6:07 PM | PERMALINK

Andy,

You actually make several points in your post, all of which require better answers than I have time to give. And I apologize for not being able to address them in better detail.

1. I have to agree with Charles Parr. I don't think that Hong Kong and Taiwan ever "stamped out corruption." If they did, I think they forgot to tell the people living there.

Singapore is a different beast entirely. Although it is clean and wealthy, and it is a nice place to visit, it is essentially a one party state of the People's Action Party. Although I like Singapore, and I have several friends who live there, it is not a liberal democracy like the U.S.

2. You gave me this snark regarding China being a dictatorship (although I said China, I really mean the People's Republic of China, or PRC). Which is true, it is very clear that China is not a democracy. But, you did not seem to object to the point that I was making, which is that China can act quickly if it really wants to. China is actually quite complex. I can go to an internet cafe in Shanghai, and get the New York Times, or any other online version of a Western Newspaper. Another example is that China has a law prohibiting satellite dishes. You can go down any street in Shanghai and see high rises that are full of satellite dishes. Believe it or not, China actually has trademark, patent, and other intellectual property laws. But they don't choose to enforce them.

I guess the general rule is that, in China, if you cause trouble, beware (and yes, it's up to the government who determines who makes trouble). If you mind your own business, you will be tolerated. Yes, it is not a democracy.

3. I think that something that I should have mentioned earlier, and that you did not mention in your posts, is that the PRC is just so much bigger than Taiwan (22 million people), Hong Kong (6 million people), or Singapore (4 million people). The PRC has 1.2 billion people. Part of the problem of corruption and selective enforcement of laws is just the sheer size of the PRC, and the governmental infrastructure (police, etc.) has never kept pace. I mean, it is much easier to fine someone for walking down the street with an ice cream cone in Singapore than in the PRC.

4. I don't want to seem like I am defending the PRC government. I'm not, and I fully know what they are capable of. But I am a bit optimistic of China. A lot of the younger generation of Chinese are more globally aware, like American values, and are probably more likely to be democratic in the future (of course, they also seem to be more nationalistic as China becomes more of a superpower). Also, being a member of the Chinese Communist Party is not as important in the PRC as it once was. I think that in a generation or so, China will become a democracy.

Posted by: adlsad on June 27, 2007 at 6:39 PM | PERMALINK

I would also like to predict that China will probably become a more successful democracy before Iraq does.

Posted by: adlsad on June 27, 2007 at 6:41 PM | PERMALINK

adlsad: Part of the problem of corruption and selective enforcement of laws is just the sheer size of the PRC

Which is why large countries like the US and India generally have a federal system. Is this so in China - do the provincial governments have any real power?

Posted by: alex on June 27, 2007 at 8:15 PM | PERMALINK

Alex,

You ask a really good question. I have had experience with China, but I am not a China expert. Having said that, I will try and answer the question as best as I can. And if anyone knows more than me, please correct me if I am wrong.

The short answer to your question is "sort of." China has a provincial system, with Beijing in control and Beijing sets the laws. But it is more complex because there are different types of administrative regions, and some are given more autonomy than others. Also, some provinces are a lot wealthier than others.

The political divisions of China are as follows:

China has 22 provinces (the PRC counts Taiwan as a province, I will not for obvious reasons). Most of these cultural divisions that go back centuries (think more like Europe than the U.S., remember there are several dialects of Chinese, but they all used the same written language - now they all take Mandarin in school). They are the equivalent to states in the U.S.

China has 4 municipalities (Shanghai, Beijing, Tianjin, and Chongquing), which are essentially large cities that are given the same status as provinces.

In addition, China has 5 autonomous regions (Tibet, Xinjiang, Inner Mongolia, Guangxi, and Ningxia) - these are essentially provinces that are predominantly made up of minority groups and are governed by whatever the dominant minority group is (for example, Uighurs are mainly in charge of Xinjiang) - and they are given a little more autonomy than normal provinces.

Finally, there are "Special Administrative Regions," which are Macao and Hong Kong who are given a lot of autonomy.

In terms of power, that depends. I think (and if anyone knows, please correct me if I am wrong), that Chinese law is more akin to European style civil law, and not common law - like the U.S. or England. Therefore, the law is basically the same throughout all of China (as opposed to in the U.S. where there is Federal and State laws).

However, in terms of economic policy of provinces, apparently "provinces are theoretically subservient to the PRC central government, but in practice provincial officials have a large amount of discretion with regard to economic policy (wikipedia)." And provinces "have wide descretion to implement policy goals which are set by the PRC central government and in which provinces and localities actively compete with each other in order to advance economically."

Posted by: adlsad on June 27, 2007 at 9:11 PM | PERMALINK

The statement "4 out of 5 in China are tax evaders" wouldn't make practical sense if less than 25% of those eligible file, and if taxation works in China similar to how it works here. The reason: if they practice withholding, then most of the money is supposed to be collected from wage payments. The kickers are, how much that applies to employers, and how much "capital gain" wealth (which isn't withheld in most nations, I suppose) is being hidden. As usual, this may mean that even in a "socialist" state, the traders and wheeler-dealers (often, those affiliated with the "communist" party) avoid paying taxes while the working class stiffs pay up.

Posted by: Neil B. on June 27, 2007 at 9:37 PM | PERMALINK

"...Believe it or not, China actually has trademark, patent, and other intellectual property laws. But they don't choose to enforce them..."
Posted by: adlsad on June 27, 2007 at 6:39 PM

Interesting. A very close analogy to the current Republican administration here that fails to enforce immigration laws with respect to employers.

Posted by: Doc at the Radar Station on June 28, 2007 at 12:47 AM | PERMALINK

Ok, I used the wrong term in saying that Taiwan and HK "stamped out" corruption, but both have a vibrant and free press, which at least exposes the cases of corruption, which is much better than in the past, when the KMT could get away with bloody murder and suppress information about it. The wife of Taiwan's President got indicted, which was unheard of in the past. And considering how corrupt HK's police force was in the 60s & 70s, with the ICAC, HK is on par with Western democratic countries in terms of corruption. Also, adlsad, I basically agree with you - I wouldn't be surprised if China become democratic in the next quarter century; however, *my* point still stands - as a dictatorship, of course China can act quickly. They're not subject to the checks and balances a democracy has.

Posted by: Andy on June 28, 2007 at 3:57 AM | PERMALINK

For reference, according to transparency.org, HK is above Japan, Germany, and the USA, and Taiwan is right there by Israel, and China is down at #70:

transparency.org

http://www.transparency.org/content/download/10825/92857/version/1/file/CPI_2006_presskit_eng.pdf

Posted by: Andy on June 28, 2007 at 4:06 AM | PERMALINK

>>Which is why large countries like the US and India generally have a federal system. Is this so in China - do the provincial governments have any real power?

The central government has way less power than people in the West assume, e.g., "It's a dictatorship!" Many local governments at the city or county level are quasi-mafia organizations which almost completely ignore the central government. Under the current system, the central government couldn't enforce the laws even if they wanted to in many places -- and they generally don't want to. It doesn't help that 90% of the Chinese couldn't give a rat's ass about democracy. (Hey, just like Iraqis!)

Posted by: 88 on June 28, 2007 at 10:18 AM | PERMALINK

Way too late, but...

last week I heard a speaker who's a consultant in China for large companies that want to expand their presence in China. some of the things he said that struck me:

Re: Adlsad 9:11 - yes and no. One of the challenges is that Chinese law isn't based on precedent, it's based pretty much on however the judge feels at the moment based just on interpretation of the law. So a legal victory in one province can't be used to strengthen a case anywhere else.

in regard to bribery, he said it's possible to do business without giving bribes, but (1) cultivate guanxi and (2) have a large entertainment budget.

Posted by: Hillary on June 28, 2007 at 10:25 AM | PERMALINK

While massive tax evasion might not be in the interest of the PRC govt (or specifically the Finance Ministry), it might be in the interest of the CCP Politburo and its members' kiddies.

Posted by: Tod McAvoy on June 28, 2007 at 1:02 PM | PERMALINK




 

 

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