Seeking Alpha
Long only, foreign companies, tech
Profile| Send Message| ()  

Richard over at AsiaBizBlog (just blogrolled - not sure what took me so long) is less than impressed with the idea that the FDA will open an office in China. He believes, not without justification, that the office will be a non-factor in the effort to improve the quality of China's exports of non-farm foods, medicines, and medical devices.

Watching the Watchers

I tend to agree. Unless the FDA is prepared to seriously staff-up its efforts, even getting deep access to factories (by no means a given, as Richard points out) will not be enough to regulate the immense and growing flow of consumables out of China and into the U.S.

Where they will help, though, is in certifying and monitoring third-party inspectors, and anything else they can do to help promulgate a quality-control system based on commercial standards and contractual requirements rather than government regulation and inspection.

There are already a decent number of enterprises and organizations engaged in product inspections in China, ranging from massive companies like the SGS Group, to entrepreneurial operations like David Dayton's Silk Road International, to religious purity inspectors like the Orthodox Union. What is missing is a guardian to watch the guardians, and the FDA would likely be better off spending its time on that effort, and on requiring U.S. importers to show proof of inspection by one of these outfits.

I suspect that over time they will get this (if they don't already), and that the noises made by the Secretary of Health and Human Services suggesting his A-Team of eight inspectors were going to personally clean up the collective act of China's factories were, in fact, nothing more than spin for the home audience.

A Reason to Believe

Richard also noted that the Foreign Ministry is already publicly prevailing on the U.S. to accept certificates issued by the Chinese quality inspection department on goods to be exported to the United States.

It would serve us all well to remember that for a long period after the U.S. discovered a few cases of Mad Cow disease in American beef, the Chinese authorities refused to accept any beef approved by the United States Department of Agriculture until such time as PRC regulators could be convinced that the U.S. system had taken appropriate action to eliminate the danger, and the USDA approval was once again credible.

In the wake of an ongoing sequence of quality issues that have killed and injured far more people than Mad Cow ever did, China needs to appreciate that rebuilding the credibility of its certification authorities will likewise be a process, one that I expect the new FDA offices could assist by observing and providing feedback on the Chinese certification process.

If, however, the FDA receives something less than the full cooperation of Chinese factories and authorities, U.S. acceptance of any Chinese government certification will be a long time coming - even if this gets turned into a political football between Beijing and Washington.

Source: FDA's New China Office: How Much Can an 8 Person A-Team Really Do?