Saturday, December 3, 2011

Best Reason to Avoid Retail FDI

The best argument against allowing foreign direct investment in Indian supermarkets is that it will open the door to virtually unrestricted entry of Chinese manufactures.

Giant Western retailers like Walmart source much of what they sell from Chinese small and medium companies, and that is unlikely to change if and when they move into India. It is also possible that a Chinese company -- perhaps the government itself -- will invest the $100 million necessary to get into the Indian market and open the sluice gates for sub-standard products.

Under WTO rules, once India sets the rules for FDI in multi-brand retail, it cannot discriminate on the basis of nationality or for strategic reasons. Chinese SME (small and medium enterprises) will be able to enter the Indian market as a matter of right, on equal terms with Indian companies, letting loose a flood of the substandard and poisonous products for which China has become notorious in recent years.

It is futile to hope that Indian regulators will be able to deal with the flood of hazardous products from China. According to a new book by Peter Navarro and Greg Autry, “Death By China,” even the United States, with its much better regulatory system, has been unable to do so.

The book begins with a chapter that examines the extent to which Chinese products now dominate American supermarket shelves. There’s seafood from aquaculture farms in the heavily polluted Yangtze river, the most bacterially infected waters in the world, into which the Chinese pour massive amounts of antibiotics. Frozen chicken, fruit juices, canned fruit, honey, garlic and numerous other food items also carry into the United States the residual poisons of one of the most polluted environments in the world.

With China producing some 90 per cent of the world’s Vitamin C, nearly three-quarters of its penicillin, half of its aspirin, a third of its Tylenol, and much of the drugs, enzymes, and other ingredients that find their way into a wide range of products, there is little escape even for the most health conscious consumer.

“These statistics should disturb all of us for one simple reason” say Navarro and Autry: “Far too much of what China is flooding our grocery stores and drug emporia with is pure poison.” And that is so despite the fact that Chinese imports consistently top the list of substandard products held up at their borders by American and European regulatory agencies.

How confident can Indian consumers be that we will fare any better?

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