By Nayan Chanda

LAST week, health officials from Singapore to New Haven were busy pulling white rabbits from store shelves. But it was no magician's trick.

They wanted to ensure that children would not consume a popular brand of Chinese candy called White Rabbit.

The reason: The milk used to make the candy was adulterated with melamine, an industrial chemical that mimics protein.

The worldwide scare about Chinese milk tainted by melamine that has affected more than 54,000 children and killed four so far is the latest reminder of how closely bound together our lives are. The scare also offers valuable lessons for businesses on how to safely navigate this inextricably connected world.

In an earlier column, I had expressed concern about this kind of global safety issues and suggested that companies must accept greater responsibility for overseeing their supply chains. A globally integrated product, I noted, was 'only as good or bad as the weakest link in its supply chain'.

Now it seems that the tainted Chinese milk has turned out to be just such a weak link for a whole host of multinational companies - including some of the biggest in the world such as Unilever, Nestle and Nabisco - which have all sourced milk products from China. Unsuspecting customers have since discovered that their ice cream, yoghurt, cookies, candies and dozens of other foods and beverages, which may not have a 'Made in China' label, actually contain China-made milk products.

Melamine was earlier discovered in China-supplied pet food that killed many household pets and now has been found to cause kidney stones in babies. Many would never have heard of Shijiazhuang, or of the Chinese dairy company the Sanlu group, but for these crises. Yet, an ingredient from that place tens of thousands of kilometres away has caused global alarm.

Why and how the poison spread is a story of the dark underside of globalisation. Milk stations for the Sanlu Group in Shijiazhuang regularly pump milk from cows brought in by farmers before dispatching it to processing plants.

The Chinese authorities, who have arrested two dozen people and seized a quantity of melamine, suggest that the adulteration took place at the milk stations. The operatives sought to increase their profit margin by adding water to the milk, then making up for a lower protein content by adding melamine.

Some reports suggest that the Chinese government's attempt to curb inflation by lowering the procurement price of milk was the cause. Yet, the fact is that the farmers who were hurt by low procurement prices were not the ones who milked the cows. More likely it was the age-old motive, greed, that explains the fiasco.

It turns out that Sanlu knew about the problem last December. But instead of warning the public immediately and recalling the milk, it tried to cover up the problem. It came to light when the New Zealand company Fonterra, which owns 43 per cent of Sanlu, brought it to the attention of New Zealand Prime Minister Helen Clark, who then alerted Beijing.

As tens of thousands of citizens clutching their babies started rushing to clinics, the Chinese government was badly shaken. Fortunately, the fatalities so far have been limited. But the episode should serve as a serious warning to businesses all over the world engaged in the global supply chain, especially those producing ingredients for food, beverages and drugs.

Lesson one: However small a component might be, quality control of the products should be the first responsibility of the local manufacturer.

Lesson two: The company or the government of the country concerned must admit problems and address them promptly, for any attempts at cover-up in this interconnected world are futile.

The price of failure, as Sanlu and Fonterra have found, is not just a black eye for the brand name but serious human and financial losses. With country after country banning Chinese milk products, it might take years before these regain their credibility and market share.

Lesson three: The episode highlights the importance of effective governmental supervision of food and drug safety. As the Chinese government has learned from the series of scandals - from tainted toothpaste to pet food, from lead paint in toys to contaminated medicine - the blame for globally integrated products that cause harm frequently lands at the door of the country responsible for a single ingredient.

A product may be global but the responsibility remains local.

The writer is director of publications at the Yale Centre for the Study of Globalisation and editor of YaleGlobal Online.

This article was first published in The Straits Times on 14 Oct, 2008.

For more The Straits Times stories, click here.