There is a lot of China import-bashing in the news and a lot of it warranted – food health and safety issues and now toy recalls. But it has spurred protectionist rhetoric in the media while ignoring costs.
On the August 15 “Good Morning America,” Chris Cuomo berated Mattel CEO Bob Eckert and asked him if his drive for profits was endangering children.
“But fundamentally it comes down to where you’re having the toys made,” Cuomo said. “They’re being made in China, you don’t have oversight, there’s tremendous pressure for them to cut corners and keep costs down, because that’s how you make money. So allow me to ask you sir, how much money are you saving having these toys made in China?”
Still, according to the ABC report, Mattel – the world’s largest toymaker – “is considered to have some of the best safety standards in the business.”
“Every batch of toys we’re producing meets our rigorous standards and we’re testing every batch of toys before it’s released to the retail chain,” Eckert said.
In the controversy about lead paint and magnets in toys being dangerous to children, Cuomo and others in the media have ignored some important economic realities by propping up a protectionist agenda in the name of consumer safety.
As an August 16 Wall Street Journal editorial [1] pointed out: “Parents will decide in coming months how much they trust products made for Mattel in China, but Mr. [Dick] Durbin [Democratic Illinois U.S. Senator calling for an increase in regulation of Chinese imports] is not helping nervous financial markets. Most investors know that consumers will punish companies for safety problems, but that politicians pose an even greater threat if they use the product recalls as an excuse for protectionism.”
If political pressure or regulation caused companies like Mattel to produce items in the United States instead of China, what would happen?
For one thing, cost of production would go up. According to the August 15 ABC “World News,” a Chinese toymaker makes 25 to 50 cents an hour versus a toymaker in Louisiana, Mo., who makes $18 an hour. Those costs would be passed along to the consumer and make toys much more expensive. However, there are some other costs the media are ignoring.
According to James Sherk, the Bradley Fellow in Labor Policy at The Heritage Foundation, if goods usually imported from China were manufactured in the United States instead, it would have serious implications for how our resources are allocated. That would have a direct effect on our economy.
“If you were to require that we have no imports from China, then we’d have to take those resources to produce some things to export to China and instead use those to make Barbies instead,” Sherk told the Business & Media Institute. “We wouldn’t be making as much computer chips or as much software or what have you. And on the whole, we would have less stuff in general.”
Sherk also said U.S. labor is much more skilled and has more capital invested in it for tools (e.g. laptop computers, word processors, etc.) than the Chinese labor, and the market dictates which goods and services are produced where as a result of this.