Pass the preserves
China’s food industry is accident-prone. Milk laced with melamine, fake eggs, glow-in-the-dark pork and cadmium-tainted rice have all made headlines. Now there is formaldehyde-laced cabbage, found in Shandong province. Thus treated, the vegetables will last for a week. The economic effect of food-scares can last far longer.
Food accounted for just 2.8 percent of China’s overall goods exports in 2010, according to the World Trade Organisation. But the WTO reports that food exports – such as seafood, apple juice and garlic – have tripled since China joined in 2000. Food scares are toxic for trade. Since chemical-tainted milk killed six children and sickened 300,000 in 2008, China’s exports of powdered milk collapsed to almost nothing, while imports have roughly quintupled. Non-food products too may suffer from a kind of reverse halo effect.
However, the gravest side-effects of food scares are domestic. Cabbage fears are likely to lead consumers to pay up for guarantees of safety. That’s inflationary, since fruit and vegetables have the third largest weighting in the China inflation food basket, according to Rabobank. The poor get the worst deal, since they can’t afford to buy organic, or foreign goods as an alternative.
More subtly but more profoundly, such scandals undermine Chinese consumers’ faith in the country’s institutions and systems. Lack of trust lies behind many of China’s distortions, from too-high savings rates to frequently fraying tempers. Each report of poisoned meat, contaminated vegetables or undrinkable tap water erodes consumers’ sense that the rule of law is taking shape.
The answer is partly economic. Cabbage growers seemed to have used the poisoned spray because long transport times lead to rotting produce. Specific investments – think refrigerated vans and more mechanisation – can reduce this waste.
But there’s a broader political need. As China gets richer, its agricultural sector, with some 200 million household producers, looks increasingly backwards. It needs capital, reorganisation and more effective regulation. Farm reform should be high up on the political menu.