China

How Wal-Mart (and Capitalism) Are Increasing the Standards of Chinese Exports

|

It's a sloppy process, but this is exactly one of the ways that trade and markets work to increase the general quality of goods available: If you sell stuff that is sub-standard, much less dangerous, you'll go out of business.

Mike Duke, vice chairman of Wal-Mart's international division, said the company is expecting "greater transparency…from our supplier partners" [in China] beginning next month.

They will be required to "tell us the name and location of every factory they use to make the products we sell," according to Duke's prepared remarks delivered at a company conference in Beijing. "Essentially, we expect you to ask the tough questions, to give us the answers and, if there's a problem, to own the solution."

Wal-Mart will apply the new standards to apparel first and eventually use them on all its products, Duke said. No other details were given.

The measures by Wal-Mart, China's largest foreign retailer, come as confidence in Chinese exports has been shaken after a series of product safety scandals.

More here.

The net result of this sort of action will be an increase in the standards of living both for the people consuming Chinese goods and those creating them.

Advertisement

NEXT: Stone Age Stoners

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  1. At this point, Walmart can probably put more pressure on the Chinese than the US government can. And that’s a good thing.

  2. While I agree with R C Dean, the article left me with a question: So Walmart doesn’t know where its stuff comes from right now?

  3. I am so sick of Wal-Mart bullying its suppliers like this. I expect the usual Wal-Mart hate groups to protest this outrage immediately!

  4. Not to be a dick or anything but, isn’t this kind of regulation bad for a free market worldview? Or any kind of regulation for that matter?

  5. isn’t this kind of regulation bad for a free market worldview?

    You mean to say that a retailer having influence over the manufacturing process and quality of products provided by its suppliers is a bad thing for free markets? I hardly think so.

  6. Ben – this is a free market solution to a lack of effective government regulation. A private party (although very powerful market actor) insisting on information and quality of the products they buy from another private actor.

  7. Now, if you want to argue that Wal-mart is, at least in part, subsidized by the government and has artificially high market power, you can argue that. But the concept isn’t wrong.

  8. But, but, if they do that it will put government regulators and planners out of work. This is simply Wal-Mart hurting the economy by destroying jobs.

  9. They already know the manufacturing location for products Listed by an NRTL (ETL, UL, CSA, TUV, etc). That is part of the certification agreement with NRTL’s. It’s hard to have quarterly factory audits if you don’t know where the factory is. This assumes Walmart asks for copies of the safety reports for NRTL-listed products (very likely they do).

  10. You people just don’t get it. High quality at low prices it what makes Wal-Mart BAAAAD. How can Main Street Mom & Pop stores compete with that?

  11. Warren, I wasn’t baggin on wally world, in fact I loves me some Wal-Mart. It’s my one stop shopping center. and they ain’t all uppity and snooty like the k-mart.

  12. This “Wal-Mart” concept sounds too libertarian. Somebody call Jacob Weisberg!!

  13. They already know the manufacturing location for products Listed by an NRTL (ETL, UL, CSA, TUV, etc).

    Particularly when the SPOO has too much FLEEM.

  14. They already know the manufacturing location for products Listed by an NRTL (ETL, UL, CSA, TUV, etc).

    Particularly when the SPOO has too much FLEEM.

    IMO, WRT the PRC, WMT needs SA besides VIP’s ASAP or else be SOL PDQ.

  15. I’m surprised most of the people here would ever be caught dead at a Wal-mart. Mostly rural areas and too many rednecks.

  16. -,

    You seem to have a suspicion of higher Cosmotarian participation here than I do, or perhaps you are adding in Leftoid trolls?

    I heart The Wal*Mart! Buy almost all ofym s hotgun shells there, most of my Mibil 1 oil, oil filters, air filters, fuel filters, car wax, okay auto supplies in general.

    The Super Wal*Mart near my mom’s house has the best produce department anyplace too.

  17. Man oh man! Did I mangle that comment or did the server squirrels help?

  18. The measures by Wal-Mart, China’s largest foreign retailer, come as confidence in Chinese exports has been shaken after a series of product safety scandals.

    In just a couple years the US government will begin working on solving the problem.

  19. I’m surprised most of the people here would ever be caught dead at a Wal-mart

    So what? Does that mean we have to disapprove of their business model?

  20. “Wal-Mart will apply the new standards to apparel first…”

    Is it just me, or would others apply any new standards to food products which might contain melamine first, rather than clothes? Something’s illogical here.

  21. Actually according to Jason Furman, a senior Obama economic adviser, it’s now “A Progressive Success Story” http://www.americanprogress.org/kf/walmart_progressive.pdf (PDF. One of the few small hopes of an Obama presidency.

  22. the food doesn’t come from china, JMR

  23. What’s wrong with Wal-Mart? While I personally prefer Target, I don’t have a deadly aversion to Wal-Marts.

  24. In history books, Wal-Mart will probably get the same attack job that Standard Oil always gets. We’ll be told how they used predatory pricing, bullied suppliers, and got sweetheart deals with transporters. The claims will never be looked at closely, because the people writing the history books want to see Wal-Mart as evil.

  25. You people just don’t get it. High quality at low prices it what makes Wal-Mart BAAAAD. How can Main Street Mom & Pop stores compete with that?

    Mom & Pop can open their own forced labor camps and cut out the middleman.

  26. Has anybody gone to look and see if Ezra Klein is haveing a big ‘Progressive’ fit over this yet?

  27. I am the owner of a dog that still throws up frequently as a result of a near fatal case of melamine poisoning.

    Fuck Chinese edible products forever. Who gives a shit about sweaters?

  28. Right. The real issue is Wal-Mart expecting quality in products. It has absolutely nothing to do with the slave wages they pay overseas (or here, for that matter) or the deleterious environmental impact of their activities.

  29. Market forces are part of the equation.
    Walmart doesn’t want to scare off customers due to dangerous products.

    They also feel pressure from government forces.
    Walmart would be the hardest hit if the US were to start requiring more careful inspection of Chinese products, which could hurt their price advantage.

    Yadda yadda.

  30. From Gillespie:
    “It’s a sloppy process, but this is exactly one of the ways that trade and markets work to increase the general quality of goods available”

    From the article linked to:

    “China is still reeling from the revelation last month that melamine, used to make plastics and fertilizer, was added to infant formula to artificially boost nitrogen levels and make it seem higher in protein when tested.

    Melamine-laced baby formula has been blamed for the deaths of four babies and sickening another 54,000 children.”

    Sloppy??? I guess it’s comforting to know that after 4 babies are killed the market acts to improve the “general” quality of goods. Although if it’s only 4 babies killed out of thousands upon thousands of babies that drank the formula, it seems that the “general” population of babies drinking melamine-laced formula has survived. And that means that Wal-Mart is just overreacting, right?

    Also from Gillespie:
    “If you sell stuff that is sub-standard, much less dangerous, you’ll go out of business.”

    Sure. But, if you do as Wal-Mart initially did and “quietly” pull dangerous shit from your shelves, many fewer people will realize that you stock your shelves with products that could kill you. Sweet.

  31. Concerned Observer.

    FYI. Walmart has been working with the Rocky Mountain Institute to lower their environmental footprint. They are targeting transportation efficiency and heating/cooling/lighting of stores. Both wise approaches.

  32. OK, you asked for it…..

    In English this time. Certain products are required to be listed by a Nationally Recognized Test Lab (NRTL). Each NRTL has its own marking that they authorize a manufacturer to apply to specific tested products. In particular, products used in the workplace have this requirement. In the USA, this is driven by OSHA, but that (being driven by OSHA requirements) is the extent of the government side of the process. OSHA certifies labs as NRTLs. They have to be independent of the companies that hire them to inspect products, and the labs need to meet the guideline of ISO/IEC/EN 17025 for laboratory procedures.

    Insurance carriers may require use of NRTL tested (“Listed”) products. The threat from the insurance company may be they will not pay to rebuild your house if it got burnt to the ground because you purchased and used equipment for which safety standards existed yet no testing was done. During lawsuit time, having got your product Listed (tested, certified reasonably safe) is your protection against charges of outright negligence.

    So, when you pick up a product at Wal-Mart, if there is an applicable safety standard for that type of product, Wal-Mart (being quite sueable) will have made sure that product comes to them with certification testing complete. They are going to want their vendor to either show them the safety report, or an Authorization To Mark letter or certificate from the NRTL, and the product will be expected to bear whatever safety mark that particular NRTL created for this purpose. Intertek will issue the ETL mark (used to stand for Edison Test Labs), Underwriters Laboratories will issue the UL mark, and so on. The safety report will indicate where the product is being manufactured. This is required because the NRTL is required, per OSHA rules, to make regular visits to the factory to ensure the Listed product is still being constructed with the proper components that were deemed critical to safety during the initial engineering evaluation at the NRTL.

    Samples of test reports/data. Note the manufacturing addresses and critical component lists.

    ftp://ftp.atcomp.cz/Fortron/FSP350-60PN(PF)/CB%20REPORT%20-FSP250-60PNA(PF.PDF

    http://support.advantech.com.cn/CNTFile/d5ac03f1bbedbf7048256d1a0020c8f1/E180881-A7-CB-1-add%20power.pdf

    Note that the following example, the safety report for a guitar amp, does not list the mfg address:

    http://www.ashdownmusic.com/tech/certs/MAG%20EVO2%20LVD.pdf

    That is because this product is marketed in Europe. Even though this product is evaluated by an organization that happens to be an NRTL, Intertek, nobody has to perform factory audits because the European Union only requires a declaration of safety (the CE mark) by the manufacturer. Different rules. Yes, Europe has LESS regulation, less verifiable safety inspection. Whoda thunkit.

    So, that is why, for certain products, the Mart is very likely to already know the manufacturing location. But unregulated (not government regulation, but private industry driven) products are different. That’s why they may not automatically know where a pair of undies was made.

  33. It has absolutely nothing to do with the slave wages they pay overseas

    Help me out, slaves are paid wages? And free to come and go? That really contradicts everything I learned about the US Civil War.

  34. Sure. But, if you do as Wal-Mart initially did and “quietly” pull dangerous shit from your shelves, many fewer people will realize that you stock your shelves with products that could kill you. Sweet.

    Wait, you mean Walmart’s interests don’t align perfectly with the customers? You mean their motivation to make money may result in fraud, concealment, or neglect of safety?

    Say it isn’t so.

    ;^)

  35. Help me out, slaves are paid wages?

    Do you consider room and board equivalent to wages?

    Slave wages may be a way to frame wages that do not cover these basic needs for a full-time worker.

    No?

  36. “You mean their motivation to make money may result in fraud, concealment, or neglect of safety?”

    You forgot to add “dead babies” to the list.

  37. Do you consider room and board equivalent to wages?

    I consider them a component of an overall compensation package.

    Slave wages may be a way to frame wages that do not cover these basic needs for a full-time worker.

    No?

    No. Wages are the result of an agreement between employees and employers to perform certain duties in return for certain compensation. They are entered into freely and by definition are consensual. Slavery involves none of this.

  38. “The net result of this sort of action will be an increase in the standards of living both for the people consuming Chinese goods and those creating them.”

    More likely it will improve the fortunes of the People’s Liberation Army, which I believe still owns significant portions of China’s factories — Beijing’s assertions to the contrary notwithstanding.

  39. gmatts,

    Why did the dead baby cross the road?

    It was stapled to the chicken.

  40. Swillfredo,

    English is a more flexible language than that.
    Many/most terms are defined based on analogy.

    If the agreement you have with your employer is not a much better deal than the one given to slaves then it is permissible to call your wages “Slave Wages.” This is true even if some of the semantic features of “slave” do not apply.

  41. They are entered into freely and by definition are consensual.

    Freely, sure.
    I wonder who has more power in the relationship?

    Does a significant difference in power result in one of the parties being more “free” than the other?

    Does the stark difference in the consequences of their choices make the worker less free to reject the employer’s offer than the employer is to reject the workers?

    Or is it just black and white?

  42. If the agreement you have with your employer is not a much better deal than the one given to slaves then it is permissible to call your wages “Slave Wages.” This is true even if some of the semantic features of “slave” do not apply.

    That’s a rather tautological argument, Neu Mejican. What makes slavery very, very bad is the, uh, SLAVERY much more than the coniditions. Some slaves (more in Arab world than in pre-Civil War US) aren’t treated all that bad at all. But they’re still slaves, which veritably sucks, and that’s what gives the word its horrible connotation. What you call an analogy is a misleading conflation!

  43. I wonder who has more power in the relationship?

    Examined that way, there are inequalities in almost every relationship. Poor people with few choices are in an unfortunate situation, but they still choose freely, and they’re still not slaves!

  44. If the agreement you have with your employer is not a much better deal than the one given to slaves then it is permissible to call your wages “Slave Wages.” This is true even if some of the semantic features of “slave” do not apply.

    I don’t think slaves really had “deals”. I also find the attributes of slavery to be more than just semantic.

    One way of looking at the circumstances that people in a country like Vietnam, working for a company that sells to Wal-Mart, deal with on a daily basis is that their standard of living is comparable to that of slaves in the United States 150 years ago. I assume that is the analogy.

    Another way of looking at the circumstances that people in a country like Vietnam, working for a company that sells to Wal-Mart, deal with on a daily basis is that they are better off than they were before the arrival of these jobs, regardless of how unattractive you and I might find their current standard of living, and were it not for Wal-Mart their circumstances would be even worse. I don’t see Wal-Mart or their employers as villains.

    Slave wages is a pejorative, plain and simple. In cases I am familiar with the companies Wal-Mart use overseas pay prevailing or better wages, and the fact that they are by our standards low is irrelevant.

    Does a significant difference in power result in one of the parties being more “free” than the other?

    Even if I accept your proposition that there is inequitable power significantly on the side of the employer, there is no distinction between the worker’s freedom to accept or refuse the job offer, and the employer’s freedom to offer or refuse to offer the job.

  45. if they were slaves walmart would be using press gangs instead of recruiters

  46. Neu Mejican,

    To follow up on what swillfredo said, consider that Wal-Mart’s offer of a job provides an opportunity for workers to better themselves! This is not done out of the goodness of Wal-Mart’s heart, of course, but my point is that the apparent fact that the workers’ other choices are even worse is NOT Wal-Mart’s fault! In other words, the worker has not been made worse off by Wal-Mart!

    Contrast that to the circumstances of a slave. His enslavement is his owner’s doing, and whatever punishment he would suffer, i.e., brutality or even death, for trying to choose otherwise, would clearly be the slave owner’s doing. Thus the slave clearly is being made worse off by his enslaver!

    This important distinction gets lost when the term “slave wages” gets tossed around so haphazardly. You can always find some worker who may materially compare favorably to some slave, but so what?

  47. Or is it just black and white?

    There’s lots of gray area in the world. And there’s plenty of nuance one could examine within the world of poor, overseas workers. But the distinction between having the freedom to choose and not to is a stark one. At least to some of us. Maybe not to you. And maybe that’s a stark distinction between us?

  48. Neu Mejican,

    As bad as a job may be in an overseas factory in comparison to so what we would expect in the U.S. that job is far superior to the sorts of employment (basically rural jobs of some sort) that existed prior to the coming of said factory. the work provides higher remuneration, is generally less dangerous, etc.

    As for the floor, cashier, etc. jobs provided by retailers in the U.S., they are providing employment for people who would likely not be able to find positions outside that niche. Furthermore, government intervention into the market for those jobs will at some point create some level of genetrification, thus driving out of the workforce those said interventions were meant to help.

  49. Neu Mejican,

    If the agreement you have with your employer is not a much better deal than the one given to slaves….

    It would be helpful if you were define what a slave actually is.

    For my part I would note that a free worker in a free society has very little in common with a slave. For example, their offspring are not owned by their employer, for example. They are not subject of surveillance and/or harrassment by any form of internal police. They are free to enter contracts. What personal or real property that they accumulate is their own and not subject to seizure by their employer.

  50. “If you sell stuff that is sub-standard, much less dangerous, you’ll go out of business.”

    Or in China, executed.

  51. How about…

    Sustenance wages? You sidestep the semantic slave wages argument, yet still imply an unfair power balance that leads to an undervalued position in respect to either a true rule of law free market value negotiation, or a modern wage-support-through-regulation state.

  52. “I’m surprised most of the people here would ever be caught dead at a Wal-mart. Mostly rural areas and too many rednecks.”

    I live in a major metropolis, but when I vacation in Cajun country, I LOVE shopping at the Wal-Mart in Breaux Bridge, Luoisiana. They have evertyhing from guns to butter!


  53. Wait, you mean Walmart’s interests don’t align perfectly with the customers? You mean their motivation to make money may result in fraud, concealment, or neglect of safety?

    True of Walmart, true of Target, true of the Mom and Pop stores, true of the US gov, true of you and me – greed is the nature of man. So do we put greed to good use, or do we stifle in, as in Cuba?

  54. Or in China, executed.
    Unless you’re in China selling it to Americans. Then you get, what, a medal?

  55. Sustenance wages?

    What’s that supposed to tell me? That the wages are sustaining? I don’t get it.

    You sidestep the semantic slave wages argument, yet still imply an unfair power balance

    What’s unfair about it? Well, beyond what’s inherently and unavoidably unfair about practically anything in life.

    that leads to an undervalued position in respect to either a true rule of law free market value negotiation

    What are you talking about? Doesn’t make sense to me in lieu of coercion, as in, work for me or I kill you, which of course would be wrong and vile and should be punished. Are you really saying Wal-Mart does that?

    or a modern wage-support-through-regulation state.

    What? Wal-Mart’s supposed to pay Vietnamese workers as much as the US minimum wage, is that what you’re saying? What does that have to do with sustenance? Anyway, if Wal-Mart couldn’t pay Vietnamese workers less than they would here, they wouldn’t open factories there and those workers would have one choice many of them seem to prefer to their other available ones taken away from them.

  56. Wait, I’m supposed to be happy that the quality of Wal-Mart products is slowly approaching that which my parents expected when they were my age?

  57. Regarding the term “Slave Wages.”

    It is an idiom with a specific meaning that is not directly connected to the meaning of the word “Slave.” The idiom is, however, a compositional idiom. The modifier slave is used for a motivated reason that flows from its dictionary definition.

    The reason “slave wages” is an acceptable term in English is due to the negative connotations of the term “slave” adhering to the generally positive term “wages.” It’s use is meant to highlight the perceived lack of choice that the person willing to work for that wage has. (see my comments above about the unequal power relations in the contract between employer and employee). It is a useful and meaningful term.

    Whether it can be properly applied to employment in a Wal-mart supplying factory in China is a different debate.

    Comments like this:

    Help me out, slaves are paid wages? And free to come and go? That really contradicts everything I learned about the US Civil War.

    however, are attempts at pedantry/humor that fail due to the lack of understanding of English semantics they demonstrate.

    PS. I’m more smug than you are.

    8^p

  58. I don’t think slaves really had “deals”.

    Sure they did.

    Slave owner: Here’s the deal. You do everything I say and I won’t kill you. I will also provide you with food and shelter.

    Slave: So if I say no you kill me?
    Slave owner: Yep.

    Slave: I guess its a deal then.

    I also find the attributes of slavery to be more than just semantic.

    The attributes of slavery are one thing. The semantic features of the word “slavery” are another. But you know that.

  59. For my part I would note that a free worker in a free society has very little in common with a slave. For example, their offspring are not owned by their employer, for example. They are not subject of surveillance and/or harrassment by any form of internal police. They are free to enter contracts. What personal or real property that they accumulate is their own and not subject to seizure by their employer.

    Can all of these conditions be said to apply to a worker in China?

    In the US even?

  60. The problem with the “cost-savings” idea is that blood has to be shed before quality improves. Otherwise, it goes (further) down the “cheapened and/or hazardous” path. This isn’t something Walt would allow, but what his successors allowed.

    Americanized junk is what happens when you allow the wants of the developing world to squelch the wants of quality from the developed world. That is what comes from China and the rest of the developing countries. It reduces choice to junk or “slightly better” junk.

    How about this: Make the product high enough quality that you do not want to return it (even if the only restriction was that you had to legally acquire it in the first place).

    Wal-Mart’s supposed to pay Vietnamese workers as much as the US minimum wage, is that what you’re saying?
    That and/or require a parallel to US labor standards and quality standards. The developing nations shall not be used as a end-run around regulation and the wants of a developed nation.

Please to post comments

Comments are closed.