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China Attacks Shampoo

March 26th, 2009

In what has to be one of the strangest trade-related attacks against a foreign company to date, China last week made the declaration that Johnson & Johnson baby shampoo was “tainted.” The move made little sense, and media outlets scrambled to figure out what the fuss was all about. Brian Orelli of The Motley Fool guessed that it must have been some form of retaliation:  

It looks like China’s answer to sending us contaminated toothpaste, tainted ingredients that Baxter (NYSE: BAX) eventually made into heparin, and toys with lead paint on them sold by RC2 (Nasdaq: RCRC) and Mattel (NYSE: MAT), is to respond with a childish, “I’m rubber, you’re glue; everything bounces off of me and sticks to you.”

Like so many others, I was inclined to believe this interpretation of events. In an article that I wrote in the summer of 2007, I described the same sort of behavior:

Recent accusations of unreliability in Chinese products are now being met with tit-for-tat claims that U.S. products are faulty. This is an unfortunate strategy for China, and it means that we will continue to see quality problems. 

Jeff Steir also hinted that it had to do with vengeance. In an article titled, “The Empire Strikes Back,” he wrote:  

Scaremongering U.S. regulators have been indiscriminately attacking products from China for years, and China recently struck back.

The question remains, though — why shampoo? Typically when China lashes out against some product, there is a sector tie-in. When foreign economies reject tainted milk products from China, for example, authorities in China criticize milk products from foreign makers.

My new book, “Poorly Made in China,” was on its way to warehouses during all of this business about baby shampoo (Amazon made the book available just yesterday), and it might have been interesting to some to know that in it there is some talk about shampoo in it. A good portion of the book, actually — about one-fourth? — highlights efforts to make low-quality soap and shampoo products in China. 

I have no reason to believe that “Poorly Made in China” was directly tied to the baby shampoo episode, but the timing was certainly curious. The book is not focused on any one product sector. All the same, those who might read it will want to bookmark recent news stories involving Johnson & Johnson.

More later…


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