| BEIJING/NEW YORK
BEIJING/NEW YORK Wal-Mart Stores Inc (WMT.N)
said it will enforce stricter quality and environmental
standards for its army of Chinese suppliers, a step likely to
shrink margins and raise prices as the world nears recession.
The move by the world's largest retailer comes after a slew
of recalls of Chinese-made goods raised fears about the safety
and oversight of goods produced under the "made in China"
"I firmly believe that a company that cheats on overtime
and on the age of its labour, that dumps its scraps and
chemicals in our rivers, that does not pay its taxes or honour
its contracts -- will ultimately cheat on the quality of its
products," Wal-Mart Chief Executive Officer Lee Scott said at a
company event in Beijing attended by hundreds of its suppliers.
"And cheating on the quality of products is just the same
as cheating on our customers. We will not tolerate that at
Profit margins for Wal-Mart and suppliers were likely to be
hit, Scott said, while customers could also pay higher prices.
"I would guess that all those things to be true in certain
categories," he said. "Somewhere down the road, there are hard
China has been swept by a series of food- and
product-safety scandals involving goods as diverse as toys,
tyres, toothpaste, pet food, fish, beans, dumplings and baby
cribs. It has been accused of turning a blind eye to child
labour in its factories and widespread pollution of its lakes
In the latest case, thousands of Chinese children fell ill
and at least four died from drinking milk formula contaminated
with melamine, which has since been found in a series of drinks
and foods and led to products being pulled from shops
Wal-Mart, with more than 60,000 suppliers worldwide,
procures roughly $9 billion worth of goods directly from China.
After millions of Chinese-made goods were recalled in 2007,
Scott said earlier this year that Wal-Mart would be tougher
Mike Duke, vice chairman of the international division,
said Wal-Mart suppliers would be responsible for their
subcontractors' work and products.
"We expect you to have the answers and to take ownership in
getting to the root of the problem," Duke said, describing
requirements he said would begin from next month.
This week, U.S.-based Delta Enterprises recalled almost 1.6
million cribs made in Asia after two babies died. The cribs
were sold at Wal-Mart as well as U.S. chains Target Corp
(TGT.N) and Kmart.
The United Nations said on Wednesday China needed a more
coherent food-safety system, with unified laws, one overarching
watchdog and faster sharing of information.
"We see that a disjointed system with dispersed authority
between different ministries and agencies resulted in poor
communication and maybe prolonged (the) outbreak with a late
response," said Jorgen Schlundt, the World Health
Organisation's food safety chief, refering to the melamine
"We need to have a coherent system that covers the full
farm-to-fork table," he told a news conference in Beijing at
the launch of a U.N. paper on improving food safety in China.
However, some Chinese suppliers attending the conference
voiced scepticism about Wal-Mart's ability to police
"Actually, except for the contracts we have with suppliers,
we can't control what they ship us," said Martin Wong, the
managing director of Jiangsu Shuangshuang Group, a textile
maker and Wal-Mart supplier.
Wal-Mart said it was creating a new supplier agreement that
will require factories to certify compliance with laws and
regulations where they operate, and to meet "rigorous" social
and environmental standards.
Wal-Mart says its goals are aligned with Chinese government
standards and that country officials would attend the summit.
It said its audits will look at a factory's air emissions,
management of toxic substances and disposal of hazardous waste.
The agreement will be phased in with Chinese suppliers over the
next few months, and will be expanded to suppliers globally by
The crackdown comes as worries over a global recession
mount. Wal-Mart argues the moves will save money by making
factories more efficient, stripping out excess costs, and
providing consumers with higher-quality goods.
(Editing by Nick Macfie and Lincoln Feast)