Chinese food exports plummet

SHANGHAI, China — Chinese exports of foods including garlic, honey and fish fell sharply this summer as Beijing officials tightened health and safety regulations. That has meant increased revenue for some American growers whose products are now in greater demand — but also higher prices for U.S. consumers.

The stepped-up enforcement by Chinese officials, who are trying to restore confidence in the Made-in-China label after a series of product-safety scares, has included intense inspections of certain food producers and new requirements in some cases, such as putting tracking stickers on every outbound box and increasing testing for a wider range of food- and soil-borne diseases.

In China's garlic capital in Shandong province, many of the larger exporters were forced to stop production during much of the summer while inspectors went through their plants and bo oks. Some were ordered to install stainless-steel ceilings in factories and new record-keeping systems. They said every container headed for the U.S. is now being checked before loading, instead of one out of every 15 or so before.

The result: Chinese garlic exports to the U.S. fell 39 percent in July from a year earlier — a stark contrast to the 59 percent year-over-year increase in value in the first half of 2007, according to the latest statistics from China's customs bureau. August isn't likely to be much different.

"It's a heavy burden for us, but we have no choice," said Yang Shenming, trade manager at Hongchang Fruits & Vegetable Products Co., which resumed shipping this month but worries about the future. Yang said that before this summer he could fill an overseas order in seven days. Now it's taking at least three weeks because of added inspections and lab tests. Among his added costs: dinner for government inspectors working late.

U.S. garlic importers haven't reported quality problems with Chinese garlic. But Chinese officials aren't taking any chances with some of their biggest food exports. China is the world's largest producer of garlic, supplying more than 80 percent of the crop imported into the U.S.

The influx of Chinese garlic in recent years has been a sensitive issue as it often sells for about half of what U.S.-grown garlic does. That's hurt farmers in Gilroy, Calif., the self-proclaimed U.S. garlic capital. But the latest slowdown in Chinese shipments has reduced supplies, pushing up demand — and prices — for California-grown garlic.

Effects from the shortage of Chinese garlic exports have been a bit of a boon to The Garlic Co. in Bakersfield, Calif., where co-owner Joe Lane said he has been able to raise prices.

A year ago, the garlic supplier sold whole bulbs of garlic for 80 cents to $1 per pound, he said. Now, Lane is able to sell it for $1.20 to $1.50 per pound.

"We're pleased with the price but the sad thing is, we can't react quick enough to increase our supplies to really take advantage of the situation," he said, adding that it takes a year to grow a crop of garlic.

China's government has said that 99 percent of the nation's food exports to the U.S. — totaling about $3.8 billion in 2006 — passed muster in each of the last three years. But after tainted pet-food ingredients from China sickened and killed thousands of dogs and cats in the U.S. this year, scrutiny of Chinese-produced food items has intensified.

U.S. regulators have restricted Chinese imports of shrimp, eel and catfish because they were found to have unacceptable amounts of antibiotics and other chemical residues. California importers have recalled ginger and fish from China, adding to the list of recalls of Chinese-made goods this year, including toothpaste, tires and toys.

Though some of the problems have stemmed from design flaws and different regulations on allowable drugs, Chinese officials have conceded that China needs to improve standards and modernize food production, and strengthen inspection and supervision of exports.

China's chief inspector of exported food, Wang Daning, said this month that he was adding 300 workers at ports to his bureau's overall current staffing of about 7,000.

But Wang and his crew face significant challenges, and nobody expects speedy improvements. Analysts say China's rapid growth has simply outstripped Beijing's capacity to regulate the industry.

Wang said about 12,700 food processors have licenses to export. An undisclosed number of these companies are monitored very closely by inspectors in their factories and at loading docks. But China has some 450,000 food processing companies, most with fewer than 10 employees. And it's some of these small, unlicensed and unscrupulous manufacturers, such as the two blamed for the pet food scandal, that present the biggest problem for Wang and China's efforts to improve food safety.

"There is an old saying in China that as virtue rises one foot, vice rises 10," said Wang, an official with the General Administration of Quality Supervision, Inspection and Quarantine. "Many of the food quality problems we found overseas, after our investigation, was that a large proportion of them are exporting illegally ... doing things to avoid and escape inspection and supervision and exporting unqualified products."

Chinese officials hope to stop some illegal shipments by suspending export licenses and publicizing the names of companies that violate regulations. At the moment, the blacklist has about 55 businesses, although there are indications that some were continuing to export.

Apart from these companies, a number of other food exporters said they had voluntarily cut back or stopped doing business with U.S. customers because of the increased government enforcement and political sensitivity surrounding food shipments.

"We do not dare to accept American orders . . . the risk is too high," said Chen Haibin, director of quality assurance for Guangzhou Hengfa Aquatic Product Co., a large supplier of tilapia, cuttlefish and other farm-raised fish.

Over all, food accounted for just 2 percent of China's total $128 billion of exports to the U.S. this year through July, according to China's customs figures. Toys — the subject of numerous recalls — accounted for even less. And thus far, there is no indication in any official data of a slowing of Chinese exports of toys and most other products to U.S.

But "if the food and toy problems are not resolved," said Andy Rothman, an analyst at CLSA in Shanghai, "China's image may be hurt enough that foreign companies and consumers become reluctant to buy computers, telecom switches and machine tools made in China."

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Zhou Qiushu, general manager of one of China's largest tilapia producers, has no doubt that his government is serious about improving food safety and quality.

Every day, he says, two or three inspectors show up at Shenzhen Allied Aquatic Produce Development Ltd. collecting samples and looking through shipments and records. If that wasn't enough, cameras placed throughout the factory grounds feed live video of the manufacturing process to officials in Beijing.

Beginning this month, Zhou's workers had to attach labels with government seals and tracking identification on every box of fish loaded onto containers. Before the containers are hoisted onto ships, he says, every one is now supposed to be opened and checked by inspectors.

"I think the government has racked its brain to improve the situation. . . . The strength of the measures and punishment is unprecedented," he said. "But the crucial problem is the honesty of the entire society. If the honesty system is not built, even more regulations won't touch the root of these problems."

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Times staff writer Andrea Chang in Los Angeles contributed to this report.

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