I recently wrote about the mass recall by Mattel, where I commented that “news” that appears in the media is often slanted as anti-China.  So you can imagine my surprise when I opened up the Globe & Mail today and saw the headline Don’t bash China - U.S. toy makers are at fault.

I’ve taken the liberty of highlighting some key parts of the article, but you should really read it for yourself.

In a typical outsourcing arrangement called Original Equipment Manufacture (OEM), U.S. toy makers design a product, transfer design and production knowledge to subcontractors in China, buy back the final output, and resell it to consumers under their own brand names.

Outsourcing is a magic trick for U.S. manufacturers to enjoy low production costs abroad without the hassles of managing plant operations themselves. Critics of outsourcing focus mostly on job losses and the risk of ceding proprietary technology to foreign firms.

and…

After a series of recalls that involve Chinese-made products, the media, governments, and public opinion are all pointing their fingers at China for flooding the U.S. market with unsafe and contaminated products, ranging from pet food, toothpaste, tires, to toys.

The reality is that U.S. importers have failed to install a quality control system and reject any outsourced product that does not meet the benchmarks. We are not talking about a few random errors in production that escape the eyes of quality control managers, but about a colossal failure of the outsourcing firm that let 19 million pieces of unsafe toys slip into the marketplace.

I am not giving Chinese manufacturers an easy pass here. Together with their government, they must find an effective way to root out bad apples that ship faulty products to foreign markets and as a result damage the “Made in China” label as a country brand worldwide.

But, if we really need to find someone to blame, don’t blame China for U.S. toy makers’ failure to protect consumers. Let me explain why:

First, U.S. firms outsourcing products from China pocket most of the savings on production costs as profits. A recent study sponsored by the Alfred P. Sloan Foundation’s Personal Computing Industry Center at the University of California Irvine found that it costs only $4 to assemble an iPod in China, using parts and components from South Korea, Japan, Taiwan, etc. Apple keeps $80 in the total price of $299. If subcontractors in China must split the blame for quality failure with Apple, their fair share should not exceed 5 per cent (i.e., $4 divided by $80).

Second, most buyers rely on product brands rather than country names in making their choice decision. They purchase a Chinese-made Barbie not because they value the country name, but because they trust the product brand. Thus, the liability for breaching consumer trust should be assigned to the party who brands the final product, regardless of its country of origin.

Third, U.S. manufacturers take full credit for the success of an outsourced product if their subcontractors happen to deliver high quality to consumers (as they do in most cases). Has Steve Job ever said that “a subcontractor in Taiwan makes my iPhone” or Phil Knight told anyone that “shoemakers in China assemble the Air Jordan line”? If not, is it acceptable that U.S. toy makers scapegoat a subcontractor for their failure in screening out unsafe products?

My answer is “no”. The party who takes full credit for product success must bear full blame for product failure - it’s as simple as that.

Last year I met someone who had experienced the tail end of the industrial revolution in the UK. This individual described the environmental conditions in the UK to be much worse than those currently being experienced in China. This is not to say that the current environmental impact that China is having is OK, but I find that people often forget where we came from. While it is easy to claim that China is today’s second highest contributor to carbon monoxide pollution, people often neglect that the period of 1830 - 1960 saw some of the worst pollutants entering our environment - and China was barely contributing at that point.

So let’s play a game, can you guess which country the following quotes are describing?

“Thirty or forty factories rise on the tops of the hills…six stories (high). The wretched dwellings of the poor are scattered haphazrd around them. Round them stretches land uncultivated but without the charm of rustic nature.,, the fetid, muddy waters stained with a thousand colours by the factories … Look up and all around this place and you will see the huge palaces of industry. you will hear the noise of furnaces, the whistle of steam. These vast structures keep air and light out of the human habitations which they dominate; they envelope them in perpetual fog; here is the slave, there the master; there is the wealth of some, here the poverty of most.”

A description of Manchester, UK in 1835.

“It is no exaggeration to say that … there is hardly an unpolluted river in the whole of (sic). Between the sewage of towns and the odsconrings of manufacturers, distilleries, breweries, and the like, every stream and river in the country is poisoned and rendered unfit for domestic use.”

The British Public Health Act description of pollution in 1875.

“It was a town of machinery and tall chimneys, out of which…serpents of smoke trailed themselves forever and ever…It had a black canal in it, and a river that ran purple with ill-smelling dye, and vast piles of buildings full of windows where there was a rattling and a trembling all day long, and where the piston of the steam-engine worked monotonously up and down like the head of an elephant in a state of…madness.”

Charles Dickens describes “Coketown”, an average 19th century city in the novel Hard Times.

I leave you with this interactive timeline, describing the effects various nations have had on our environment, starting at the period known as BC - 1200 AD.

I recently finished reading a great book that has nothing to do with China, but has a lot to say about Canada. The book, Why Mexicans Don’t Drink Molson, is a must read for any person who is a resident of, or wishes to do business with Canada. This book should actually be required reading for any business major or individual wishing to be an entrepreneur.

The book vaguely touches on the protectionist view that many Canadians have, so it came as no surprise to me to see this article in last week’s Globe and Mail. Although the article is based on US information and studies, the information is highly relevant to Canada. It should come as no surprise that

“large majorities of Americans acknowledge the benefits of open borders - lower prices, greater product diversity, a competitive spur to firms.” At the same time, though, they recognize that open borders put downward pressure on the wages that Americans are able to earn - whether their own jobs are threatened or not.

“Polling data show that people’s opinions about [free] trade, foreign investment and immigration are closely correlated to skill and education,” they say. “Less-skilled Americans - who make up the majority of the U.S. labour force - have long led the opposition to open borders. Workers with only high-school education are twice as likely to support protectionist policies as workers with college education.”

But what I found particularly interesting is that

this working-class opposition to open borders has now spread across skilled and highly educated workers along with a pervasive assumption that globalization puts a lid on their incomes, too. (The two academics note that the unique professions of doctors, lawyers and corporate executives with MBAs do not share this negative sentiment.)

What I find troubling is that while the benefits of globalization have been well documented, there is a growing trend to feel the need that closed borders are the only way to survive in this new economy; unfortunately, globalization is here and it is not going anywhere in the foreseeable future. Read the book mentioned above, and you’ll see that while Canada has traditionally taken a protectionist mentality, these views have only come back to hurt Canadian companies in the global economy.