Sunday, June 03, 2007

Proliferation of Non-tariff barriers in China? The Evian Effect

With China now a fully fledged member of the WTO aristocracy traditional tariff barriers are harder to get through - there has been a long history of countries finding more ingenious methods of protecting national industries. This article provides some good examples of how China is frustrating world trade - it is interesting to note that they are using "environmental health" as a reason in some cases (my bold).

There is one thing that I cannot get my "environmental" head around. So China seizes 118 tonnes of Evian bottled water on health grounds. Fine. The reaction of Groupe Danone - not in the least concerned and will ship all the water back to France.

So in the first instance 118 tonnes of water are transported to China (at an environmental cost) and then shipped all the way back again at another environmental cost. Is it only me? This is just water we are talking about - that falls out of the sky even if it is then filtered through a rock or two? Something about this story is wrong.

Danone Says China Impounds 118 Tons of Evian Water (Update6)
By Tian Ying and Ladka Bauerova
May 30 (Bloomberg) -- Groupe Danone, the world's biggest yogurt maker, said Chinese officials seized about 118 tons of its Evian mineral water for breaching local safety rules.

The water, which arrived in China in February, failed quality inspections by Shanghai customs officials for having excessive amounts of bacteria, the Paris-based company said in an e-mailed statement today. The water is being kept in a warehouse and will be shipped back to France, it said.

Danone joins Yum! Brands Inc.'s KFC chain and retailers such as Procter & Gamble Co. and Wal-Mart Stores Inc. among international consumer goods companies to have fallen foul of Chinese health regulators in the past two years. China is also facing food scandals from domestic producers.

``It's not in the interest of the Chinese authorities to appear hostile towards international companies,'' said Jean-Marie L'Home, an analyst at Aurel-Leven SA in Paris who has a ``buy'' recommendation on the stock. ``This is a small problem that could have a short-term impact on the shares.''

Danone shares fell 1.52 euros, or 1.3 percent, to 115.13 euros at 10:57 a.m. in Paris.

China's government applies a bacteria standard ``different from that set by the World Health Organization,'' the company said in the statement. ``We need to reassure consumers that the microbial flora existing in our products is totally safe.''

Alpine Town

Evian, marketed as natural spring water, is named after the alpine town of Evian-les-Bains on Lake Geneva, according to Danone's Web site. The water filters through mineral-rich glacial sand formations and clay to the spring, where it is bottled.

Worldwide sales of Evian exceed 500 million euros ($672 million) a year, according to Danone.

``The Chinese criteria are not the same as those of the World Health Organization,'' said Danone spokesman Laurent Sacchi in a telephone interview in Paris. `` It will not affect our sales figures. This happens regularly to importers in China.''

Procter & Gamble, the largest U.S. consumer-products maker, in September halted sales of Japanese-made SK-II cosmetics in China after a health regulator said they contained dangerous and banned substances.

KFC suspended sales of a vegetable soup in China after allegations that it may contain harmful ingredients, the state- owned China Daily said in November 2005, citing the Food Safety Experts Committee in Guangdong. In March 2005, the company halted the sale of some items after it found they were tainted with Sudan 1, a dye that's been linked to cancer.

Wal-Mart, the world's largest retailer, removed some brands of children's clothing from its outlets across China after they were found to contain a cancer-causing dye in May last year.

`Banana SARS'

Food and consumer-product scandals in China have multiplied in recent months, with tainted pet food in the U.S. and poisonous toothpaste and drugs in Latin America linked to Chinese producers. Hundreds of pig deaths in southern China and an outbreak of avian influenza in Hunan province have fueled consumer fear.

The government last week quashed rumors that the nation's bananas contain a virus similar to the one that causes severe acute respiratory syndrome, or SARS, amid mounting public paranoia over food and consumer safety.

Domestic mobile phone users received text messages about a ``SARS-like'' virus infecting bananas, according to a statement on the Ministry of Agriculture Web site, which urged consumers not to believe or spread the story.

Danone this month started legal proceedings against Chinese partner Hangzhou Wahaha Group, claiming the company sold products from their five joint ventures illegally via other companies and refused to sell those competing businesses to its French partner.

Last week Danone requested a board meeting with Wahaha ``as soon as possible'' to discuss sales targets for the ventures.

``Danone will always find solutions in China,'' Aurel- Leven's L'Home said. ``Right now it is more important for Danone to settle its dispute with Wahaha.''

To contact the reporter on this story: Tian Ying in Beijing on Ladka Bauerova in Paris at .

Last Updated: May 30, 2007 05:18 EDT

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