There have been a lot of calls [in the United States] for increased inspection, and I would agree that, especially in the short term, that’s probably the requirement. But the bigger issue facing Mattel and everybody doing business in China is that they are going to have to make investments in Western quality-management techniques in their suppliers. It will save them in the long term. They went to China to save a bunch of money, and now they are finding that they need to spend some money to save some money. Mattel has a lot of feet on the ground in China, which is one of the things you need to do a good job. But I worry about a lot of the smaller toy companies; many of them don’t have the resources in place.

FP: What’s the level of risk when these recalls are put into place? A Chinese official said shortly after the Mattel recall that the health risk from being exposed to the toys in question was extremely minor.

EJ: The toy industry always has to live to a higher standard in terms of safety. But the recalls themselves, if you look at what Mattel actually recalled, are pretty surgical. For example, one of the Mattel recalls last week was for particular toys that employed these curiously strong, small magnets. That doesn’t have anything to do with quality, and it’s not about China per se. These magnets became popular a few years ago, and in fact, there are a lot of really cool toys that use them. For age-appropriate purchases, they really aren’t a problem. But if they are ingested by little kids, then there is a huge problem.

It’s something the toy industry has every year. We have choking recalls and suffocation recalls all the time. When it gets out into the press, many times it gets exaggerated or blown up.

FP: So, how will these recalls—and the resulting consumer anxiety—affect the holiday shopping season?

EJ: There is very little that can change about this upcoming holiday season other than toy companies putting better inspection processes in place. But trying to shift production out of China is impossible at this point; many of the deals for this Christmas were made months ago. The major toy fair in the United States is in February and historically that is when a lot of deals between the retailers and the toy makers occur. September and October are the height of the shipping season in terms of products arriving into ports. Many of those toys are already in containers, sitting in docks in Hong Kong, and products for the holidays are already flowing into the United States. If consumers try to avoid buying Chinese toys this year, there will not be very much under the Christmas tree.

M. Eric Johnson is a professor of operations management at Dartmouth University’s Tuck School of Business.

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