The Biofuel Mess

Biofuels, such as ethanol and biodiesel, have been a hot topic recently in political circles as a tool for combating climate change. They could create tons of agricultural/processing jobs while also doing a good thing for the environment...what's wrong with that?

Well, lots. First comes this article here, from the Financial Times, showing the ridiculous subsidies for biofuel production. Including as much as $1/litre in Europe for ethanol. The most fascinating chart, however, shows how much subsidized biofuel production has pushed the growth of corn consumption:

Theoretically, this focus on biofuel production has other effects, distorting food markets and driving up prices. Well...that world is a reality now. To the point that the UN independent food rights expert called for a 5-year freeze on biofuel production.

“It is a crime against humanity to convert agricultural productive soil into soil which produces food stuff that will be burned into biofuel.”

Even The Economist has weighed in, with an article on higher food prices. They too note the effect of biofuels, but also note the contribution of continued market liberalization, combined with an inordinate number of floods and droughts. It remains to be seen what will happen next, but reducing the distorting effect of biofuel subsidies would go a long way to helping everyone.

Mattel apologizes to China

...but not exactly for the reasons you think. See this Time article. In the words of the Mattel CEO:

"Our reputation has been damaged lately by these recalls, and Mattel takes full responsibility for these recalls and apologizes personally to you, the Chinese people, and all of our customers who received the toys."

The company took ownership of most of the toy recalls this year due to 'design flaws'. The message of a lot of observers is that Mattel needs China as much as China needs Mattel, and that the company is smoothing things over to maintain its manufacturing position in the country. I'm not so sure, and in fact, I think China called out Mattel for some shifty business, by trying to connect their magnet recall with the defects of Chinese manufacturing that has been so well documented this summer (see The Consumerist for thorough coverage on the 'Chinese Poison Train'). Check out these numbers here:

Of the 19.6 million toys that it has recalled this year globally, 2.2 million were due to lead paint; the remaining 17.4 million (11.7 million in the U.S.) were toys recalled not because of lead paint but because they were made with super-strong magnets. If they come loose and are swallowed in multiples, those magnets can come together with force enough to tear through the intestines of a young child. (Mattel's announcement noted three such serious injuries that required surgery.) The magnet recall was unusually large because it includes toys sold as far back as 2002, before Mattel changed its design to encase the magnets in plastic to make them more secure.

Hmmmmm. So there are two seperate, completely unrelated issues: lead paint and loose magnets. Lead paint was only 11% of the total recalls, and that was the China part, but the other 89% was all Mattel's fault. Let's go back to Mattel's original recall back on August 14 (can be found here):

First, Mattel has voluntarily recalled one toy from the CARS die-cast vehicle line, manufactured between May 2007 and July 2007, containing impermissible levels of lead. The recall of the “Sarge” toy results from Mattel’s ongoing testing procedures. In response to our recent issues with lead paint we have immediately implemented a strengthened three-point check system: First, we require that only paint from certified suppliers be used and we require that every single batch of paint at every single vendor to be tested. If it doesn’t pass, it doesn’t get used. Second, we are tightening controls throughout the production process at vendor facilities and increasing unannounced random inspections. Third, we’re testing every production run of finished toys to ensure compliance before they reach our customers. We’ve met with vendors to ensure they understand our tightened procedures and our absolute requirement of strict adherence to them.

Additionally, Mattel is voluntarily recalling certain toys with magnets manufactured between January 2002 and January 31, 2007 that may release small, powerful magnets. The recall expands upon Mattel’s voluntary recall of eight toys in November 2006 and is based on a thorough internal review of all of our brands that have toys with magnets, and analyzed the ways in which magnets come loose. Since January 2007, all magnets used in our toys have been “locked” into the toy with sturdy material holding in the edges around the exposed face of the magnet or completely covering the magnet. We now believe it is prudent to recall our older toys with magnets that do not meet our latest retention system requirements. The safety of children is our main concern, and we are confident that our new requirements work, based on our continued testing and consumer experience. The risk if magnets are swallowed is serious, and we believe all of our toys with magnets should have the safety benefit of our new standards. (my bolding)

WOAH. First of all, notice how the lead paint leads, and is followed by the magnets, even though Mattel recalled WAY more toys due to the magnet issue. Notice the careful wording around "voluntarily recalling certain toys" that "may release small magnets." Oh, so it's not that big a deal you think. I dunno...sounds like Mattel may have tried to cleverely pin the blame for the magnet-design flaw on Chinese manufactures...despite the fact that Mattel had already recalled 8 toys back in November of last year for the magnet issue, way before the 'Chinese Poison Train' got rolling. Check out the press release from August 14 (the stuff quoted above is from a different document from the same day)

Mattel is recalling 18.2 million magnetic toys globally (9.5 million in the U.S.); however, the majority of the toys are no longer at retail. Beginning in January 2007, Mattel implemented enhanced magnet retention systems in its toys across all brands.

So you NO LONGER SELL the toys with bad magnets, and implemented new standards EIGHT MONTHS AGO, AND YOU TELL US NOW!!!!! WHY DIDN'T YOU RECALL THEM BACK IN JANUARY? I wonder why? Maybe because the whole world is hysterical about Chinese manufacturing standards, and another recall will automatically cast the Chinese in a bad light, deflecting blame from your incompetent company?

I think the Chinese picked up on this, and said 'hey, you're trying to pull a fast one here by putting all the blame on us, when 90% of your recalls were your own fault! No way. We'll call you out on it if you don't apologize to us. And do it publicly.'

The World Changed Yesterday

By now most people know that yesterday, the Canadian dollar officially reached parity with the US dollar. While a nice little story, I'm not sure people appreciate the magnitude of this event. 20 years from now, I think we will look back on yesterday and mark it as the date that the euro offically overtook the US dollar as the world's reserve currency-of-choice. The UK's Daily Telegraph notes:

Saudi Arabia has refused to cut interest rates in lockstep with the US Federal
Reserve for the first time, signalling that the oil-rich Gulf kingdom is
preparing to break the dollar currency peg in a move that risks setting off a
stampede out of the dollar across the Middle East.

On an even more macro scale, however, it may be one of the first harbinger's of the end of American hegemony (RIP 1991-2007ish). See Krugman and The Big Picture.