The Multinational Monitor

DECEMBER 1984 / JANUARY 1985 - VOLUME 5. NO 12 / VOLUME 6, NO. 1

W A R   G A M E S

Dumping of Hazardous Products

The Australian Connection

by John Braithwaite

As a middle range economic power, Australia is often in the position of being both victim and perpetrator of transnational abuses of power. Such has been the case with the dumping of hazardous products.

Like many countries, Australia is an attractive target because it has no effective regulation of product safety at the national level. Most responsibility lies with eight state and territorial governments, none of which is well equipped to monitor the international trade in hazardous goods.

Drugs and medical devices are the only areas of consumer product safety where the primary responsibility rests with the national government. But recent revelations have shown the enormous risks of dumping in this market as well.

In the early 1980s baby pacifiers destined for rejection by the U.S. Consumer Product Safety Commission were dumped on the Australian market. Design faults in the pacifiers posed a risk of babies swallowing them and suffocating.

In 1983, at least five Australians died following cardiac surgery when defective heart valves cracked away and crumbled in patients' chests. As there is no obligation on surgeons or hospital authorities to report this sort of incident, the actual number of deaths will never be known.

The heart valves were dumped in Australia after the U.S. Food and Drug Administration forbade their sale because evidence was needed that changes in manufacture had not introduced new risks. For Australian cardiac patients, American FDA fears proved to be justified.

The manufacturer, Bjork Shiley, sold the valves in Australia through its importer Bio-Spectrum (Aust.) Pty. Limited. The Australian health department claims that Bio-Spectrum told them that he heart valves had investigative status in he U.S. This was untrue; they were not approved for any kind of use on the Amercan market. The Australian Federation of Consumer Organizations has asked the Health minister if he intends to prosecute either Bjork Shiley, Bio-Spectrum, or both, for causing at least five deaths by misrepresentations to his department.

Just as Australia has been victimized by discards unfit for sale in Europe and the United States, the country has in turn served as point of manufacture or transfer for hazardous goods destined for the Third World. Perhaps the most dramatic incident occurred in 1977.

The Swiss multinational Nestle was producing breast milk substitutes - marketed under the names Lactogen, Enfamil, Similac, and Sobee - at a plant in the Australian state of Victoria. After routine tests showed the facilities to be contaminated with salmonella, Nestle, rather than shutting down and notifying health authorities, continued production until the end of the processing season. For at least 11 and perhaps as long as 18 months, Nestle marketed contaminated formula in Australia and South East Asia.

Salmonella-induced gastroenteritis can be fatal for babies, particularly for poorly nourished infants such as would have received much of the formula dumped on the South East Asian market. In Australia, 134 cases of gastroenteritis were positively identified as caused by the Nestle product. Eighty of those babies were hospitalized.

We will never know the fate of countless babies in South East Asia who consumed the salmonella-infected breast milk substitute. We do know that some Pakistani infants were saved when Perth waterside workers refused to load one consignment of the Nestle product bound for that country.

During the course of interviews for my book, Corporate Crime in the Pharmaceutical Industry, some multinational executives admitted to using Third World countries as dumping grounds for drugs banned in their country of origin or batches of otherwise approved drugs that have passed their expiration date. Still more pervasive, however, are more complex tactics used to evade local quality controls and place drugs on Third World black markets.

An executive of the Australian subsidiary of one multinational admitted that batches of product would often be shipped from the United States to Australia before quality control checks were completed. Samples of the final product would simply be taken out and tested while the product was in transit. He claimed that "All drug companies or pharmaceutical companies in Australia import drugs in anticipation like this." The practice cuts down delivery delays. The problem arises when the foreign subsidiary is told that the batch has failed to pass quality control. Instead of destroying the batch, there might be a situational inducement to sell it to impatient customers who resent delays, or even to make some money on the side by sales on the black market.

Reputable pharmaceutical companies do engage in illegal drug smuggling. The corporation can deny responsibility for poor quality products when it is dumped through the black market. Indonesia, because of its strict requirements for establishing local manufacturing plants, is a victim of much smuggling past customs officials. Two senior Australian executives of one American transnational brazenly described how their Australian subsidiary mails its product to an agent in Singapore who then smuggles it into Indonesia for black market sales on a one-toone basis to Indonesian pharmacists. In this situation, any adverse reactions arising from poor product quality can easily be blamed on `counterfeiters.' It is estimated that 15 percent of the drugs sold in Indonesia are smuggled from Singapore.

In order for such abuses to occur, transnational corporations need not be full of men and women poised to make a fast buck by dumping dangerous goods. All that is required are people who, perhaps sitting in an office in the United States, know that it is possible that their below--standard products are being dumped via Australia in Indonesia. Knowing it is a possibility, the last thing these good people would want to do is institute an investigation to ascertain whether it is actually happening. Willful blindness is the name of the game in protecting the consciences of corporate executives in the command economies.

The great historic role of the international consumer movement is in pushing open those closed eyes and pointing them at some of the ugly practices perpetrated in the name of achieving sales targets set by corporate headquarters.

The Australian Consumers Association is a significant financial contributor to the International Organization of Consumers Unions (IOCU) Consumer Interpol project run out of Penang, in Malaysia. When a hazardous product is discovered in one country, consumer groups there notify Penang, who in turn notify groups around the world to watch out for this product being dumped on their doorstep.

In Australia, we send Consumer Interpol's alerts to over a hundred Product Monitors spread geographically across the country. Each checks five relevant retail outlets in their locality to ascertain whether the product is being sold.

Consumer Interpol and the Australian Product Monitor scheme are still in their early days. Various organizational difficulties and language barriers have yet to be ironed out, but a recent evaluation by Australian Mike Vernon suggests that the fledgling Interpol program is very much on target. It is one of the most important manifestations of the internationalization of consumerism as a countervailing force against the internationalization of capital.

Under the current Australian Trade Practices Act, goods intended for export are exempt from product safety standards. The Australian consumer movement has lobbied long and hard to amend the Act to make the export of unsafe or otherwise banned products a criminal offense. The Prime Minister, Mr. Robert Hawke, is on record as supporting this change. His government recently presented a green paper proposing to prohibit the export of hazardous products unless a special exemption is granted by the minister responsible.

Stigmatizing dumping as a corporate crime is an important step toward raising citizen consciousness and opening the eyes of corporate executives to this persistent and widespread evil.

John Braithwaite is a Senior Research Fellow in the Department of Sociology at Australian National University.

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