What Are China Traders?

By: Frank Vanderlugt

During the closing decades of the 20th century, the People’s Republic of China exhibited the most vibrant performance in trade and development. As China traders helped to move the country from a centralized economy to a market economy, China would show trade volumes that tripled in the 1980s and quadrupled in the 1990s.

Indeed, at the turn of the century, China began looking like the economic superpower of the future. The balance of trade between the U.S. and China began tilting very heavily in China’s favor. The U.S. trade deficit with China rose from $10.5 billion in 1990 to $83.8 billion in 2000; in 2004, the deficit would be $162 billion. Never before did the U.S. reach this level of deficit in any bilateral trade. For China traders, this was something good; for producers in the U.S., this was a cause for concern.

After China received most-favored nation (MFN) status in 1980 during the administration of President Carter, American producers felt that China traders were selling goods at less than fair-market value and filed numerous antidumping cases. But after a thorny interval, American producers realized that the larger share of the increased imports from China traders represented sales taken from other exporters rather than U.S. domestic producers, the adverse responses waned. But concern was rising.

Since 2004, China traders have increasingly had to contend with questions of quality in the products shipped to the U.S., particularly their adherence to safety standards imposed on products sold in the U.S. market. For instance the recent recalls of millions of toys, some of them sold as long ago as 2003, have involved the presence of lead in the products.

An analysis of the Consumer Products Safety Commission (CPSC) records shows that lead-related product recalls in the U.S. since lead was banned in 1977 have reached 140, and over half of these (75 recalls) have occurred in the last three years beginning January 2004. The 75 recalls involved 27 instances for issues on lead paint and 38 instances for lead metal. Close to 90 percent of all product recalls during this period have come from China traders and, ultimately, from China factory sources.

The issue of the safety of products from China traders has not been limited to toys — although this is one close to the heart as it affects U.S. children and because the industry is moving into the gift-giving seasons when the large majority of toy sales occur. During 2007, there have been recalls of tires, pet food, pharmaceutical products, toothpaste, and other products.

This is becoming a major trade issue between the U.S. and China, and China traders will have to assist their government in working this one out. Already, there are rumblings in the U.S. Congress to ban toys unless safety can be certified, by an independent third party. Both China traders and their counterparts in government have to address these concerns.