In light of today's news that Mattel has taken responsibility for the majority of the toy recalls as being design flaws, I wonder if Lou Dobbs will take back his comments that this case shows why intense government regulation of imports is necessary (and that free marketers and libertarians are thus "idiotic"). For some reason, I'm not holding my breath.
Lead-tainted toys accounted for only a small percentage of all toys recalled, he said, adding that: "We understand and appreciate deeply the issues that this has caused for the reputation of Chinese manufacturers."
In a statement issued by the company, Mattel said its lead-related recalls were "overly inclusive, including toys that may not have had lead in paint in excess of the U.S. standards.
"The follow-up inspections also confirmed that part of the recalled toys complied with the U.S. standards," the statement said.
In other words, this was not a case where free international trade resulted in harm to US consumers. Instead, it was a case where a manufacturer had a poor product design that resulted in a marginally higher risk of injury from the product's use. As a result, Mattel pulled products with the potential for such a marginally higher risk off of the shelves. To the extent any injuries were caused as a result, Mattel will almost certainly be sued under the common law; as long as government regulations and protectionist laws don't get in the way, Mattel will then be forced to make the injured parties whole (to the extent possible of course). In other words, this is probably going to be a case that shows how the free market works - not how it failed.
Finally, it's worth pointing out that, had Mattel chosen to manufacture these toys in the US, the potential problems would have been even worse because of the higher labor costs. Higher labor costs would mean that Mattel would have to cut the cost of its raw materials in order to meet its price point- this means smaller parts made with more dangerous materials. Even if Mattel did not use smaller parts and more dangerous materials, it would have had less incentive to conduct the recall operation since the lower profit margins would increase the marginal cost of the recall.