Free trade in commodities is good. It helps developing nations build on their comparative advantages. It gives consumers the power of choice to pick the best products at least cost.
Free trade encourages enterprises to excel. In a competitive global market, only the best flourish.
But for free trade to work, nations need to constantly upgrade their regulatory institutions. Free trade must also be fair to consumers.
See what happened when China’s regulators failed to exercise regulatory best practices. Some of its milk producers contaminated their products with melamine. The market reacted forcefully. Imports of Chinese milk products were banned. Consumers shunned away from milk-based products across the board. Billions were lost and the entire processed food industry in China fell into disrepute.
As China is wont to do, the reaction on the punitive side was harsh, to compensate institutional weakness on the preventive side. Managers of factories found with contaminated milk products were jailed. At least one was executed.
China’s milk scandal was not the first case. A few years before, toys made in China were found to be contaminated with lead. That was a serious threat to children for whom the toys were intended. The products were taken off shelves worldwide. Billions, too, was lost here.
Free trade in commodities puts our regulatory agencies — particularly the Bureau of Food and Drugs (BFAD) and the Department of Trade and Industry (DTI) — on the frontlines. They need to be vigilant to protect our consumers. They need to be unremitting in enforcing product standards to ensure competitiveness.
Two incidents the past week demonstrate the need to keep our regulatory agencies keenly on the job and best-equipped to accomplish their vital functions.
The first incident involves the proliferation of something called “magic sugar”, an artificial sweetener. The product is ridiculously cheap and was found being used, without BFAD clearance, by vendors of street food. After reports of consumers getting sick, the authorities responded promptly. The police was sent out to destroy food and drink using the concoction.
Initial laboratory tests confirmed worst fears. “Magic sugar” attacks the digestive tract and could cause permanent damage, if not death. The product, it appears, was smuggled into the domestic market and sold without the required regulatory clearances.
The second incident involves the importation, in substantial quantities, of flour from Turkey. Like “magic sugar”, Turkish flour is a cheap substitute — although not necessarily a safe one.
Through 2009, about 19,000 metric tons of flour from Turkey was brought into the country and sold to bakers. The value of the flour was declared at $96 per metric ton, amazingly cheap considering the $300 per metric ton reference rate for flour.
Local flour producers are raising a howl about this pricing scheme. They say this constitutes technical smuggling and claim that government has lost millions in import duties because of this.
We are not sure if this is the real price for the product, considering their other claim that Turkey was dumping its own flour on the global market and importing better quality flour for its domestic consumption. The dumping price, at any rate, constitutes unfair competition say domestic flour dealers.
The more important issue against the Turkish flour we have begun importing concerns public safety. According to a scientific study done in 2007 and published the next year in the Journal of Food and Drug Analysis (Vol. 10 No 2 2008), 81 percent of Turkish flour was found contaminated with Odiratoxin A (OTA) and Aflatoxin. These are, according to the study quoted, “mycotoxins known to exert toxic effect on human and animal health.”
A second issue raised against Turkish flour is its quality and, consequently, the taste of the products produced from it. That, I suppose, boils down to a matter of, well, taste.
The BFAD is currently subjecting samples of Turkish flour to its laboratory analysis. We are not sure when they will be done with that. But we do hope they have the scientific instruments necessary to make a valid test.
If the flour is found to be indeed contaminated, the remaining stock ought to be destroyed of course — in the same way products containing “magic sugar” were destroyed. If the flour is cleared for human consumption, the manner the commodity was brought into the Philippine market should at least be looked into.
The two cases of toxic “magic sugar” and allegedly contaminated flour demonstrate the danger to public health posed by slack regulation. These will not be the last cases of injurious products entering the Philippine market.
The two cases underscore the need to upgrade our regulatory capacity to monitor goods entering our economy. The BFAD, for instance, is one of the vital but under-funded agencies of government. It is asked to do a yeoman’s job of monitoring thousands of commodities entering the market. But the agency itself operates with a miniscule budget.
When we think of public safety, we ought to include not just police and civil protection agencies. Sometimes, the most perilous threats to public safety come to our people by way of unexamined consumer goods. They slip through a weak net of undermanned and under-funded regulatory agencies.