Lead toys and economic engagement

It was recently discovered that a certain Chinese supplier for Mattel, a US-based toy company, was using lead paint on some of its toys. The economic fallout for the supplier is likely to be severe.

It was recently discovered that a certain Chinese supplier for Mattel, a US-based toy company, was using lead paint on some of its toys. The economic fallout for the supplier is likely to be severe. The CEO of the affected company even committed suicide. China certainly seems to be taking the problem very seriously.

Chinese officials, eager to protect an export industry crucial to China's booming economy, have aggressively tried to shore up international consumer confidence by cracking down on makers of shoddy goods, crafting new regulations and stepping up inspections.

Suffice to say, China wouldn't have responded in this fashion if they were not reliant on foreign sales to sustain growth. Foreign trade, in other words, has led China to boost product safety.

But if improving Chinese product safety isn't at the top of your foreign policy goals, how about preventing sweatshop conditions at foreign factories? That was the situation faced by Apple a year ago with one of its iPod suppliers. Apple, of course, fixed the problem, putting pressure on its various suppliers to clean up their act.

A laundry list of things that matter to citizens in rich nations get improved through economic engagement. Rich nation consumers don't like to discover that the factories that create their products are dumping poisons into rivers that are killing off species, that they use child labor or maintain unsafe working conditions. Consumer pressure drives such foreign suppliers to meet western environmental and labor standards.

The simple act of foreign investment has beneficial effects. Foreign-built factories usually pay more than the local prevailing wage, and given the need to ensure that workers can actually get to and do the job, often spend large sums on infrastructure such as roads and schools. Western companies expect the laws aren't applied capriciously or unfairly and that corruption is kept to manageable levels, so they tend to put pressure on governments to fix these things. This helps to establish the rule of law, an essential component to any functioning marketplace...or democracy.

Governments have trouble maintaining the information lockdown that helps to prevent its citizens from acquiring information from the outside world. Modern business often requires lots of foreign travel, and governments can't pretend their previously-closed economic systems were vibrant sources of innovation when they are so dependent on information about foreign technology in order to compete. Modern communications links are essential, and though China endeavors to filter information accessed through the Internet, the results aren't perfect, and you can't block the interpersonal communications that are essential in a globalized economy.

The history of the policies of engagement and isolation provides a stark contrast. In the former case, you have South Korea and Taiwan, two former military dictatorships that are now vibrant (and wealthy) democracies. In the latter category, you have Cuba and Iran. Which of the two examples better suits American foreign policy goals?

Remember that the next time some politician hectors companies for "doing business" in countries that don't meet developed nation standards of freedom.