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March 26, 2007

Pet Food News - The Menu Foods Recall, Canada, China, and the Fine Points of International Commerce

Barbara Simpson's column reminded me that the contaminated wheat gluten used in the recalled Menu Foods products came from China. There are two points that need to be made.

1. In the mid Nineties, The United States consumed about 300 million pounds of wheat gluten each year. In 1998, the Clinton Administration instituted a three-year import limit. As a result, in 1999 the consumption had dropped to 250 million pounds. (I mention this because it's an excellent illustration of the futility of economic protectionism.) In 2001 the Bush Administration eliminated the import quotas in order to avoid a retaliatory strike against corn gluten by the European Union. Wheat producers are currently paid a subsidy to compensate for the loss of business due to imports.
2. The EPA, despite its faults, is fairly proactive regarding imports. In 1999, they investigated Australian wheat gluten imports because the manufacturers were protecting their shipments with a pesticide called Fenitrothion. So, if the EPA knew China were shipping poisoned wheat gluten to the United States, it would act. I'm not sure that's a good thing, mind you, because, like warrantless wiretaps, preemptive regulation is costly and tends toward false positives.

Neither of these points has any effect on the activities of Menu Foods, which is located in Canada, and gets its wheat gluten from China. Now, China practices mercantilism, an economic system in which what really matters is how much money the government can get its hands on. It's similar to socialism in that it gives the government vast powers to regulate commerce, but without the pretense that bribery is a bad thing.

It's worth noting, by the way, that import quotas and tariffs are a mercantilist policy, not a capitalist one. The goal of mercantilism is to be a net exporter, so that your country has more cash and less stuff. This is great for the people who rake taxes from the cash, but not so good for the common people who want to use their cash to buy stuff. For example, when President Clinton slapped an import quota on wheat gluten, instead of people buying more wheat gluten from local producers (the mercantilist theory), they just bought less wheat gluten (the capitalist reality).

That's the theme in this whole incident: the difference between capitalism and regulation. Consider the general problem of products that come out the end of a long and complicated chain of economic transactions.

Sometimes accidents happen: a bulb breaks during shipment, a part is not screwed in correctly, or a whole bunch of stickers are put on incorrectly because there was a national holiday the day before and everybody in the sticker department had a hangover. If the result is catastrophic, the North American component of the manufacturing chain will get fed to the personal injury lawyers. That's too bad, because Menu Foods has been buying wheat gluten from various places around the globe for years, and this is the first time they've been hurt by it. It doesn't make sense to punish them for doing something that worked a thousand times and failed once.

In a purely capitalist world, Menu Foods would take a liability hit and then pet food makers all over the United States would announce they're not buying wheat gluten from China any more. Maybe the Chinese will then start proclaiming that they won't use aminopterin, and the full pipeline can be restored.

But we are not a purely capitalist world, and I'll tell you why: it's because capitalism is about the long run, and the mercantilist/socialist mindset that has infected the modern world is about the right now. We must solve our problems right now, because in the long run we are all dead. Poisoned food is a stupid idea because in the long run, it will put you out of business. In the short run, however, who cares, because the government officials who made the most money on the deal do not have a reputation to get besmirched. In the long run, unemployment will fall to manageable levels, but we have to have it fixed right now by giving the government more power over everything. If you don't believe me, just watch the musical Annie. It's in the middle during the scene in the White House. Bruce was never able to get that far without severe stomach cramps, so if you have a similar constitution you'll need to speed through it.

Anyway, Menu Foods and their Chinese trading partners still have time to take my advice and apply the capitalist solution before this turns into a feeding frenzy. It will be annoying in the short run, but in the long run it will work out.

Menu Foods deals with cats all the time. They should know good advice when they see it.

Respectfully submitted,

Ferdinand T. Cat

# At Mon 2:55 PM | Permalink | Trackback URI | Comments (0) | More Pet Food News | Tags: aminopterin Canada capitalism cats China conservative economics exports fenitrothion imports international trade John Maynard Keynes Menu Foods mercantilism protectionism socialism the long run wheat gluten

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