NODEL LARSEN DISCUSSES FOOD SAFETY IN SHANGHAI

UNCLAS SECTION 01 OF 03 SHANGHAI 000620 SIPDIS SENSITIVE SIPDIS STATE FOR H AND EAP/CM STATE PASS FEDERAL RESERVE BOARD FOR JOHNSON/SCHINDLER SAN FRANCISCO FRB FOR CURRAN/LUNG NEW YORK FRB FOR DAGES/CLARK STATE PASS CEA FOR BLOCK STATE PASS USTR FOR STRATFORD/WINTER/MCCARTIN/ALTBACH/READE USDOC FOR 4420 USDOC FOR ITA/MAC DAS KASOFF, MELCHER AND MCQUEEN TREASURY FOR EXEC - TSMITH, OASIA/ISA -DOHNER/BAKER/CUSHMAN TREASURY FOR WRIGHT AND AMB HOLMER NSC FOR MCCORMICK AND TONG E.O. 12958: N/A TAGS: OREP ECON PREL ETRD CH SUBJECT: NODEL LARSEN DISCUSSES FOOD SAFETY IN SHANGHAI SHANGHAI 00000620 001.2 OF 003 (U) This cable is sensitive but unclassified and for official use only. Not for distribution outside of USG channels or via the internet. ¶1. (SBU) Summary. Shanghai-based U.S. businessmen told visiting Congressmen Rick Larsen (D-WA) and Mark Kirk (R-IL) that concerns about China's food and product safety were "legitimate." While China's laws and regulations were adequate, the inability of the Central Government to implement these laws created dangers for both U.S. and Chinese consumers. U.S. businesses were also concerned that Chinese retaliatory measures on imports from the United States would prove problematic for their companies. China's newly passed Anti-Monopoly Law was not targeted at U.S. businesses in China, according to Chinese officials. End summary. ¶2. (SBU) Representatives Rick Larsen and Mark Kirk met with Shanghai political leaders, U.S. business representatives, and held a press conference with Chinese press during their August 31-September 1 non-official visit. Larsen and Kirk are co-founders of the bi-partisan "U.S.-China Working Group" in the House of Representatives. The Members were accompanied by Rep. Larsen's Senior Legislative Aide Louis Lauter, Rep. Kirk's Chief of Staff Lester Munson, Johns Hopkins School of Advanced International Studies Professor David Lampton, and National Defense University Professor Phillip Saunders. The NODEL was sponsored by the National Committee on United States-China Relations. The major themes of their discussions centered on China's efforts to address its food and product safety concerns and the impact of China's recently implemented anti-monopoly law. -------------- -- Food And Product Safety Concerns Are Legitimate -------------- -- ¶3. (SBU) The NODEL met with Emerge Logistics Managing Director Jeffrey Bernstein, B&L Group President Phil Branham, ALC Advisors CEO Dale Colling, Cargill Investment President Norwell Coquillard, Asia Media Managing Director Wm Patrick Cranley, Hewitt Associates Consulting Regional Director (and Amcham Chairman) Eric Fiedler, Baker & McKenzie Partner John Grobowski, DE Global Managing Director Edward Gwinn, Charles Mo & Company Principal Charles Mo, and Weyerhaeuser China Shanghai Representative Office General Manager Zhang Renren at a meeting sponsored by the American Chamber of Commerce on September 1. In their opening comments, the Representatives noted their interest in steps that can be taken to protect the American consumer from unsafe imported products. ¶4. (SBU) ALC Advisors' Colling said that U.S. concerns over the safety of food produced in China were legitimate concerns, not only for the U.S. consumer, but also domestic Chinese consumers. He said that when he had visited a turkey jerky plant in July, he had been so horrified at the sanitation issues at the plant that he had refused to enter the premises. Quality control and enforcement of standards was something that the Chinese would need to address in order to maintain the competitiveness of their exports, he said. ¶5. (SBU) Cargill's Coquillard said that he spent a great deal of time meeting with General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ). He was concerned about politically-motivated retaliation against U.S. exports to China. AQSIQ had "locked a couple of silos" due to perceived problems with food products from the United States, including Chinese complaints about "noxious weeds in American soybeans." Cargill was "very concerned" about possible disruptions to their supply chain here in China that would be caused if the AQSIQ insisted on inspecting every shipment that arrived here. To address this concern, Cargill was working to negotiate a "certified supplier" status, he said. SHANGHAI 00000620 002.2 OF 003 ¶6. (SBU) Emerge Logistics' Bernstein said the problems with China's food and product safety were not caused by poor laws and regulation, but rather by China's inability to implement its own laws. Implementing and enforcing its laws would be very costly for the Chinese government and required addressing issues of corruption. He noted that many Chinese factories had been designated as "self inspecting work groups" in the past as a result of bribes to Chinese officials. ¶7. (SBU) Bernstein also noted that AQSIQ has not been a lead agency dealing with the United States over trade issues. AQSIQ has never felt any pressure from the Chinese government to act in a positive manner to address trade deficit or cost to supplier issues. As such, it has "always felt free to take potshots at the U.S. companies because it never had to deal with any political fallout." Now, however, AQSIQ has come under increased domestic and international scrutiny. ¶8. (SBU) Asia Media's Cranley said that a U.S. approach that engaged the Chinese government and "put the onus on U.S. companies to enforce their own specifications," would find traction within the Chinese government. He favored a solution that placed equal burden on all parties in the production chain -- the manufacturer, the shipper, and the retailer. -------------- -------------- Anti-Monopoly Law Does Not Target American Companies -------------- -------------- ¶9. (SBU) In a meeting on September 1, Minhang Party Secretary Sun Chao told the Members that the newly-passed Anti-Monopoly Law (AML) was "a very good law" and was necessary to regulate market order. He emphasized that this law was not designed to address issues within China stemming from its history of state-owned enterprises. The goal of the AML was to protect consumer rights. ¶10. (SBU) U.S. anti-monopoly laws and the new Chinese law "share the same spirit." Since U.S. companies abide by U.S. laws in the United States, Sun anticipated that they would not run into any problems with the new law in China. "American companies don't need to worry about this. It is not targeting U.S. companies," he said. ¶11. (SBU) Sun was confident that Shanghai's development would continue to be increasingly market-oriented. While there was still room for future reforms, Sun said that Shanghai would maintain its role leading China towards further reform and opening-up. ¶12. (SBU) Sun said that Shanghai government officials are very concerned about maintaining the integrity of its food supply and export products. Any "complaining" about food-safety problems is "healthy" since it helps the government solve the problem. He had visited a local farm just two days previously where he had been briefed on food safety efforts. ¶13. (SBU) Sun also noted that poor-quality Chinese products affect the marketability of all "Made in China" goods. It is the Chinese consumers, however, who bear the brunt of product-safety problems since they are much closer to the source and have fewer choices. ¶14. (SBU) Sun attributed the food and product safety problems that China is experiencing to the "very fast development" of China's market economy. The government's ability to monitor and implement regulations has been unable to keep up with the pace of this development. There are structural limits on government as well, he said. He said that when he had transferred from his position as mayor of the more urban Xuhui District in Shanghai SHANGHAI 00000620 003.2 OF 003 to his current post as Party Secretary of Minhang District, he had discovered that "the way of governing between these two adjoining areas in Shanghai was totally different." While "we speak the same language and are implementing the same regulations," there were "big differences" between the two districts. -------------- Meeting with MPC Zhou Muyao -------------- ¶15. (SBU) The Members met with Shanghai Municipal Peoples Congress (SHMPC) Vice Chairman Zhou Muyao on September 1. Representative Kirk expressed his appreciation for the strong "sister-city" relationship between Chicago and Shanghai. He noted that Chicago Mayor Daley would be leading a delegation to Shanghai in October. ¶16. (SBU) Representative Kirk said that Shanghai's role as China's leading financial center meant that it had a role in advocating for the greater opening up of China's financial service sector to foreign competition, particularly in regard to giving foreign banks more access. Zhou agreed, and said that while "overall foreign policy is determined by the Central Government, Shanghai has played an effective role in communicating its concerns." ¶17. (SBU) In response to a question from Professor Lampton on the SHMPC's use of the internet, Zhou said that the SHMPC uses its official website to communicate directly with Shanghai citizens. All meeting documents produced by the SHMPC are posted on the website, he said. Shanghai citizens also use the official website to engage in direct dialogue with the SHMPC. (Note: In the earlier meeting with Minhang Party Secretary Sun Chao, Sun said that he spends up to four hours every day reading and responding directly to emails sent by his constituents expressing their concerns. End note.) ¶18. (U) The delegation cleared this report. JARRETT