Remarks as Prepared to the Target Corporation’s Worldwide Vendors Conference

Good afternoon. It's a pleasure to be here.

Just a moment ago I had the pleasure of meeting the new CEO of Target Corporation, Gregg Steinhafel. I am impressed with what a perfect choice he is to lead Target.

Some years ago, I heard an officer of Target use a phrase that resonated with me.

"Speed is life," he said. He explained, "It is one of Target's core values."

It is also a three word recipe for success in the global market. If speed is life, then there are two additional ingredients: trust and transparency. Trust produces speed and transparency is the seed of trust. That combination is not just a core value of Target, it is the foundation of a new strategy for import safety in the United States. It is on that subject I wish to speak today.

Last year, the United States imported more than $2 trillion worth of products. That's slightly larger than the entire economy of France. These products came from 825,000 different sources, through 300 points of entry.

Our import safety systems have worked well for us in the past. But they were not designed to handle today's immense volume of trade.

Things came to a head last summer when problems appeared in imports of toys and seafood. It is a matter of grave importance to American consumers.

So President Bush appointed a Working Group including ten members of his Cabinet.

I was appointed chairman. Our task was to rethink our nation's strategy on assuring safety of goods imported into the United States.

Over the next four months, we did the most complete review of our import practices ever undertaken. Teams were deployed into every relevant part of our government to analyze our capacity today and our needs into the future.

As part of this review, I crisscrossed our nation, talking and probing, working to see the totality of our import system. In more than 40 U.S. cities and several countries, I saw ports and post offices, railroads and airports, freight hubs and fruit stands. I inspected everything from imported tire irons to gingerbread houses.

It was a fascinating experience to see the totality of this system. Without seeing the system first-hand, it is not possible to comprehend the immensity of product flow into the United States.

When I reported back to President Bush, I told him I had reached two overriding conclusions:

First, our nation had to make a fundamental change in strategy.

In the past, our strategy has been to stand at our borders attempting to catch unsafe products. There is simply too much. We cannot inspect our way to product safety.

To inspect every shipment would bring the global economy to a crawl. In the future our new strategy must be to roll back the borders and to assure safety and quality are built into the products — every step of the way.

The second conclusion was that this problem is not unique to the United States.

Several months ago, I hosted a group of health ministers from around the world. The topic of import safety dominated our conversation.

The issue of product safety is not a passing worry or a reflection of a short-term consumer fixation. Product safety has become a worldwide issue because something fundamental has changed. The global market is maturing.

I then presented President Bush with a tactical plan. Our recommendation included 50 different recommendations in 14 categories, but among them were these two highly-important changes:

• Greater use of private-sector certification, and 
• Increased overseas presence of U.S. Government officials to work with producers and governments.

Our nation wishes to say with clarity to the world: We desire you to have access to our markets and we want to have access to yours. If you want access to American consumers, your products must meet the high standards of safety and quality that Americans expect.

We know that anything that slows the flow of goods down — including unnecessary inspections — damages competitiveness.

So here is our proposition: If a producer can demonstrate, through the independent certification of parties we trust, that they are meeting our standards, they will have speedy entry into the United States.

Those who cannot demonstrate certification, those who are not transparent can expect enhanced scrutiny at our borders.

We will concentrate our resources on where the greatest risk is, and we deem that to be producers who are not demonstrating quality and safety by voluntary transparency.

In other words, we know that speed is life. If you have earned our trust by being transparent, we will be your partner in speed.

We are working with governments around the world to jointly implement this new strategy. Our collaboration with the Government of China has been especially productive. In December, China and the United States signed binding agreements to improve product safety. One is on food and feed; the other is on drugs and medical devices.

These agreements will create a framework to help assure the safety and quality of products exported from China to the United States. The agreements also aim to strengthen China's regulatory process and increase cooperation between the regulators of both nations.

The implementation of both agreements is going very well.

Since December, we have held two high-level meetings with China's State Food and Drug Administration, or SFDA. Out of those meetings has come a draft two-year plan of work. 

We are also working with SFDA on a program to register all companies in China manufacturing and exporting designated products.

And we are making progress with China's General Administration for Quality Supervision, Inspection, and Quarantine, or AQSIQ, on a registration-certification program for aquaculture and low-acid canned foods

At the same time, we are working to establish an office of our own Food and Drug Administration in China. This office will help build closer working relationships with our Chinese counterparts. We still need to obtain the necessary diplomatic permissions and other credentials for our staff. But we are optimistic about resolving those matters very soon.

Getting this office up and running would be a significant step toward ensuring the safety and efficacy of FDA-regulated products produced for export in China and regulated by our FDA. We intend to open similar offices in India, and I will be going to Central America in June to hold a summit among nations in that region who sell products into the United States.

I don't want to give you the impression that product safety is all up to the government. The governments of the world certainly have a large responsibility for overseeing imports and protecting the public.

But the private sector has a responsibility just as large — if not larger; and, in many ways, is far more effective at implementing these strategies than government.

That is why I am here today. Target is a prime example of how major retailers and the United States Government can and should work together. We have a common interest.

Target, and our other major retailers in the United States have essentially said to their suppliers: if you want your products on our shelves, you must demonstrate to us that you meet our standards. In many cases, Target standards may be higher than the government's. Here's the reason why.

One retailer told me, “If I put a product on my shelf, it's my brand, and I have to be certain that it's safe.” 

One unsafe product can damage a company's brand in serious ways. We have seen examples of that in recent months. The global market punishes rapidly and severely anyone that does not produce safe, quality products.

And the market responds far more quickly than a government regulator. There is no due process — consumers just quit buying their products. The penalty is immediate.

In some cases a product failure can damage the brand of an entire industry or nation. The stakes are very high here.

Many industries are already taking the life-cycle approach to product safety.

I cite as an example the leafy-produce industry in the United States. We recently discovered quality problems in one producer of lettuce.  When the word got out, people became afraid and sales of lettuce from all sources dropped dramatically.

Recognizing this, the lettuce industry began to voluntarily develop standards and a certification processes. To assure quality, retailers are buying from producers who have the certification.

The manager of a lettuce processing plant in Texas told me their motto now is, “Know your grower.”

What he meant by that is, rather than just buying lettuce at the cheapest price, he must now know when and where the lettuce was picked, what nutrients went into the soil, the kind of water that was put on it, and anything else affecting the quality of the lettuce.

Many other industries are beginning to develop their own production standards, their own certification requirements, and their own inspection regimes.

I saw another example of this in my recent visit to India. I was in the Cochin region in the state of Kerala. It's been the center of the world's spice trade for hundreds of years.

At lunch, I met with a group of business owners who belong to the Spice Board. The Spice Board is an entity organized by the National Ministry of Commerce to facilitate and promote Indian spices. They have created a certification process that assures that spices leaving India, in a few categories, have met a high standard.

That afternoon, I visited a spice processing operation — a joint venture between an Indian firm and the Baltimore-based McCormick. McCormick has a large market share in the American spice business. Upon arriving, I noticed some large burlap bags of red chili peppers stacked outside, ready for shipment to the port of Cochin.

Each one of the bags had a yellow cloth message tag sewn onto it. The plant managers told me that the company requires all the farmers who sell to McCormick to put their names on the tags, where the chili peppers came from, and the date on which they were picked.

The McCormick people told me they had implemented this system the previous year as a result of a traceability requirement their customers in the United States and elsewhere had been asking for.

Many of the farmers who provide peppers and other crops to McCormick only have an acre or two of land each. Most have little formal education. But all of them are part of a powerful political constituency, so political officials have to be sensitive to their desires.

I realized that the Indian government could have never imposed a traceability requirement on these small farmers. But when customers made it a condition of doing business, the farmers either accepted it or had to sell their products elsewhere, probably at a lower price. And since McCormick is the most reliable partner in the spice market, almost all of them adapted.

I refer to this as the Red Pepper Principle of Product Safety. Markets — not government mandates —will drive improvements and innovations at the speed required by a global market.

This summer, 12 different trade associations will sponsor an inter-industry product safety summit in Washington, D.C. This summit will bring together a wide range of affected industry leaders — retailers, food and medical products producers, and toy companies to discuss important product safety issues.

It's my belief that these and other meetings represent a clear commitment on the part of the market to respond aggressively to these challenges.

The work of setting standards and building systems must be done collaboratively, involving all stakeholders.

Collaboration depends on openness and transparency. Speed is life. Trust brings speed. Transparency is the seed of Trust.

Government has an undeniable role. However, government will be dramatically more effective working collaboratively with industry.

Private-sector producers, wholesalers, exporters, importers, and retailers will be the designers, the builders, and the backbone of that system.

In a global market, all of us have three choices. We can fight change and fail. We can accept it and survive. Or we can lead and prosper. Let us lead.

Thank you for listening.

I now look forward to hearing from you and answering your questions.

Last revised: January 12, 2009