In 1972 Richard Nixon made the first U.S. presidential visit to China. From this one brief sojourn, a new relationship with the nation began. Over the course of these last few decades, China and the United States have become deeply interconnected. It is a complex love/hate relationship that has half of America infuriated and scared, and the other half hopeful because of the entrepreneurial possibilities in manufacturing through "cheap" labor. This relationship, as dysfunctional as it may seem, is one that will endure, complete with the growing pains and hard-learned lessons that are inevitable.
But the world doesn't stop while these lessons are being learned. The global economy keeps churning and business owners are looking to manufacture products at what has been dubbed the "China Price," or the lowest possible price that can be paid to get something made. As simple as that, thousands of product containers float into American port cities from China each and every day.
With all this cross-country commerce happening at lightning speed, it's easy to forget the foreign hands that have stitched seams on T-shirts and assembled hard goods that are then re-sold stateside within our very industry. It is in those anonymous hands that we entrust not only our business, but our safety and our children's. It is also these hands that depend on us for their safety. Utilizing an ethical and transparent supply chain, American suppliers and distributors can create a socially responsible path for safe products to enter the United States.
DISPELLING THE MYTHS
"20 years ago China was a very different place. We had little information about the outside world," said Helen Wang, Forbes, consultant, expert on China's middle class and author of The Chinese Dream. Over the course of those 20 years, much has changed in The People's Republic. The quick industrialization of this nation has sustained a Gross Domestic Product (GDP) rate of a whopping 10 percent or better for more than a decade and sprouted a middle class that simply didn't exist beforehand. This rate of growth could be unsettling to Americans whose GDP has dipped to frightful recessionary levels and is now holding steady in the 3 to 4 percent range.
"Today, the West has a lot of fears and misconceptions about China. Most of the fears are unrealistic because of a lack of understanding," noted Wang. The World Trade Organization reported in 2009 that China became the world's largest exporter of goods, but this does not necessarily translate to strength. "Americans are afraid that China is becoming a global manufacturing power, but in reality they basically take orders from Western companies. They are not involved in innovation, design, marketing or even packaging," explained Wang.
Here lies the American advantage. The U.S.-China Business Council reported the United States imported nearly $300 billion worth of products from China in 2009. We are one of China's biggest clients and in sales everyone knows who is in power and who is "always right." "The Chinese consider their manufacturing the world's sweatshop. They consider themselves at a disadvantage and want to move up the value chain," stated Wang.
THE WORLD'S SWEATSHOP
If this is true and China is the world's sweatshop, have conditions improved since the days when Americans first lifted the veil with the Kathie Lee Gifford sweatshop scandal in 1996? And have the calls by China's top client (the United States) for safe products and social responsibility in manufacturing jobs (i.e. fair wages, factory conditions, housing conditions, etc.) been answered? Have we been vocal enough or complacent and content with low cost at the price of others?
"When I started out in this arena, a socially responsible factory had reasonable health and safety standards in place and paid their workers. That evolved to also employing only those legally eligible to work and ensuring that minimum wage for factory jobs is based on an hourly basis, then ensuring an amenable psychological environment and provision of legally required benefits," said Denise Fenton, executive director compliance, Quality Certification Alliance, Seattle, Wash. Today, because the rapid industrialization of China has caused such massive environmental damage, Fenton also noted that some socially responsible factories are even monitoring effluents and air emissions and the impact they are having on the community.
The trick for distributors here is how to recognize who is running a socially responsible factory. When factories pop up at an unmeasurable pace and factories subcontract out to subcontractors, it is difficult to have transparency in your supply chain. "You'll find all levels of quality and product safety process knowledge, just like you'll find here in American factories," said Fenton. "There are advanced factories and there are places that you'd take a step into and immediately turn around and walk out of," she continued. A distributor's best bet is to ask questions—lots of them—and also request supporting documentation.
"Distributors should be asking their suppliers about their social accountability policies and the practices that those suppliers have in place to assure their manufacturing partners are producing product in a legal and ethical manner," Fenton explained.
While having a social accountability policy in place is a good place to start, it is a wise idea to dig even deeper. "If I were buying a specific product from a supplier, I would ask to see the supplier's in-house evaluation of the facility manufacturing the product. If my client were asking to see a third-party report, I'd ask the supplier to ask the auditor to release the audit directly to the client," said Fenton.
WHERE WE STAND AS OF RIGHT NOW
With many tough lessons learned, the Chinese government has also made advances in regulating Chinese manufacturing. "When the whole [toy] scandal broke out, the Chinese government really tried to become very strict about quality control," said Wang. "But we must understand this is a process. There have been product quality issues. Keep in mind the Chinese manufacturer, they compete on volume, on price, they try to cut corners whenever they can, because the margins are already very low. As Westerners, part of our responsibility is quality control."
Today, factory conditions and product quality are improving, partly because the U.S. is demanding it and partly because Chinese workers are becoming savvier and are demanding it for themselves. Suppliers and distributors must continue to keep the bar set high. "China has very explicit rules and regulations on factories, labor, the right to export/produce for foreign markets and has recently broadened the scope of regulation to environmental concerns. In the past, they have lacked the resources to police these rules and regulations. Over time, that has begun to change," explained Fenton.
Safe products and ethical manufacturing processes go hand-in-hand and are not the responsibility of one single entity; they are the responsibility of everyone involved in the supply chain. The world's "biggest client," the United States, must hold itself accountable when it comes to the purchase and production of products brought in from overseas. Wang concluded, "China and America, they complement each other and help each other. Both are finding balance. Together we can both become stronger."