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In this case, Chinese condoms.

That’s the dilemma for the folks at the U.S. Agency for International Development, which has distributed an estimated 10 billion U.S.-made AIDS-preventing condoms in poor countries around the world.

But not anymore.

In a move expected to cost 300 American jobs, the government is switching to cheaper off-shore condoms, including some made in China.

The switch comes despite implied assurances over the years that the agency would continue to buy American whenever possible.

“Of course, we considered how many U.S. jobs would be affected by this move,” said a USAID official who spoke on the condition that he would not be named. But he said the reasons for the change included lower prices (2 cents versus more than 5 cents for U.S.-made condoms) and the fact that Congress dropped “buy American language” in a recent appropriations bill.

Besides, he said, the sole U.S. supplier — an Alabama company called Alatech — had previous delivery problems under the program.

It’s clear that Alatech’s problems over the years, which apparently have been resolved, may have driven U.S. officials to seek much less expensive foreign-made condoms in the first place.

But that’s cold comfort to Fannie Thomas, who has been making AIDS-preventing condoms in southeastern Alabama for nearly 40 years in the small town of Eufaula.

“We pay taxes down here, too, and with all this stimulus money going to save jobs, it seems to me like they (the U.S. government) should share this contract so they can save jobs here in America,” Thomas said.

Thomas and others at the Alatech plant said there aren’t many alternatives for them if it closes down, which is a likely result of the contracting switch.

In fact, the government is close to accepting condoms from two offshore companies: Unidus Corp., which makes condoms in South Korea, and Qingdao Double Butterfly Group, which makes them in China

The Consumer Product Safety Improvement Act of 2008 requires consumer products intended for children 12 and younger to meet strict lead and phthalates requirements.

The Act, which was signed in August, is intended to decrease the amount of lead in children’s products, especially in the wake of the many lead-related toy recalls in the last few years.

However, the law was drafted broadly and has caused many manufacturers and retailers — as well as thrift store owners, crafters and everyone else making and selling children’s products — to face the daunting and sometimes impossible task of having their inventories tested for lead or face steep fines.

Manufacturers have said they would have to take millions of dollars worth of products off store shelves to comply with the law, and smaller retailers say they could be forced out of business.

As the deadline has drawn closer, the Consumer Product Safety Commission, which enforces and interprets the act, has been inundated with petitions and requests from affected businesses.

They have responded with many “clarifications” to the law, including:

• Reporting that sellers of used children’s products, such as thrift stores and consignment stores, are not required to certify products to meet the new limits and standards, but should avoid products likely to have lead content and can still be fined for selling items exceeding the lead limits.

• Approving a one-year-stay on testing and certifying for manufacturers and importers, but still requiring them to meet the limits and standards.

• Exempting children’s products made of certain natural materials, ordinary children’s books printed after 1985, or certain dyed or undyed textiles and nonmetallic thread and trim.

• Reaffirming that the act applies to products in inventory.

• Ruling that manufacturers would not have to pay for third parties to test their products for lead content (but not giving guidance on how to test for lead).

The clarifications likely will continue, as the CPSC said it will issue further guidance this week.

Until now, California with its tough anti-toxics law was the only state to take legal action against manufacturers and other businesses that sold lead-tainted toys. But beginning today, companies selling such goods face new penalties nationwide.

Even before the law took effect, two giant retail chains, Longs Drug Stores and Rite Aid, removed three styles of Valentine’s Day mechanical singing-and-dancing plush animals from their shelves after receiving calls from Attorney General Jerry Brown’s office.

The red plastic guitars attached to “Wild Thing Gorilla,” “Ain’t Too Proud to Beg Dog” and “Sing & Dance Puppy,” manufactured in China by Dan Dee International, contain levels of lead that may violate Proposition 65, the Safe Drinking Water and Toxic Enforcement Act of 1986.

Based on metal testing, the toys may also violate the new federal law, state officials said.

In a preview of what’s to come under the new law, the attorney general’s office notified the two retailers after it found that the problem toys were purchased there.

There are no known safe levels of lead, a metal that can damage the human nervous system even at very low concentrations. It remains in the body for many years. Children are especially vulnerable; adults also suffer harm.

Recalls led to law
Congress passed the Consumer Product Safety Improvement Act of 2008 after recalls of 20 million toys tainted with lead in paint, jewelry and clothing, which primarily came from China. The law is aimed at ridding children’s products of lead and some forms of phthalates, which are found in PVC plastic.

State attorneys general can enforce the federal law and remove dangerous products from the marketplace. Manufacturers and importers must test and certify that the toys have passed U.S. safety standards before they are sold.

The Toy Industry Association, National Association of Manufacturers and other trade groups had lobbied against the law. One argument was that it would go into effect too quickly, leaving them with the toys that they manufacture many months in advance of sales. Small businesses have complained that the testing requirements are burdensome.

In January, the Consumer Product Safety Commission extended the testing deadline by one year for most products. Environmental groups say the extension is illegal, and they are considering legal action. Last week, they won a ruling that halted toymakers from selling off phthalate-tainted stock after today.

Questions on testing
While businesses are barred from selling illegal products after today, it is not clear how retailers will know what’s in the products without industry testing.

Gary Holcomb, president of Dan Dee International, which has offices in Jersey City, N.J., and manufacturing operations in China, says lawmakers haven’t provided enough time to comply with the new law. The company sells seasonal holiday toys to Costco, Wal-Mart, Walgreens, Kmart and Sears, among others.

Holcomb said he learned of questions about the mechanical singing-and-dancing gorilla and dogs when Longs and Rite Aid advised his company that they had been notified by California and were removing the toys as a precaution.

“I have received no evidence that there is a problem with those toys,” Holcomb said last week. In September, laboratory analysis verified that Dan Dee’s plush toys met current standards that precede the stricter rules, he said.

Valentine’s Day toys
The presence of lead in the plastic guitars came to light when the Center for Environmental Health in Oakland tested two dozen toys in the lead-up to Valentine’s Day. Seven were made by Dan Dee, and three of those contained the only high levels of lead found in the two dozen products, said Caroline Cox, research director for the group.

Lead found in one of the toys was 15 times higher than the new federal limit, Cox said.

Such tests are paid for with a grant from California’s Toy Testing and Outreach Fund, which grew out of a lawsuit filed in 2007 by Brown and the Los Angeles city attorney against Mattel and its subsidiary Fisher-Price; RC2, which makes Thomas the Tank Engine; and other companies.

In a settlement of the suit in December, the companies agreed not to sell any toys they knew contained lead and paid $550,000 to set up the fund to identify problems soon enough to avoid recalls. They also paid more than $1 million in costs and penalties.

Getting lead out of kids’ products
The Consumer Product Safety Improvement Act of 2008 takes effect today, barring the sale of toys and other products containing lead and phthalates. The law:

– Is aimed at lead in products for children 12 and younger, and plastic softeners called phthalates in products for children younger than 3.

– Gives state attorneys general authority to enforce consumer product safety laws and act to remove dangerous products from shelves.

– Requires manufacturers and importers to test and certify that toys have passed U.S. safety standards before they are sold. The federal government granted manufacturers a one-year extension for testing of most products. But businesses will be barred immediately from selling products that violate the new law.

– Sets fines up to $100,000 per violation, $1.85 million to $15 million for repeated violations and up to five years in prison for knowingly violating the law.

At a small boutique’s recent marketing party, Carol Cheng and friends peruse racks of pricey goods by Hong Kong designers.

Like many consumers here, Cheng wears designer labels. This day, she is outfitted in high-end Japanese and U.S. brands.

Cheng says she thinks Hong Kong people will continue to buy luxury goods, even during the financial crisis.

“Yeah. Why not? If you come with the brand then why not? You know this brand. You want this brand,” she said. “You get whatever you want.”

Hong Kong’s main shopping districts are filled with luxury retailers. The city does not tax luxury items such as jewelry, clothes and leather goods, so for decades it has drawn tourists from around Asia looking for bargains.

Luxury retailers are hitting sales targets

This holiday season, some luxury retailers here say they are just hitting their sales targets. And the outlook is gloomy for the global market. A recent study by marketing firm Bain and Company says luxury sales are likely to contract next year.

In Asia, many luxury retailers hope newly rich consumers in China and India will keep buying, and help offset sales declines in markets such as the United States and Europe.

International business consulting firm KPMG says there is room for growth in China’s luxury market.

Nick Debnam studies China’s consumer markets for KPMG. He says in the past few years more luxury retailers have entered China. And that means more Chinese are becoming familiar with, and buying luxury goods.

“Because there are successful businessmen and successful businesswomen around the whole of China and these guys, once they’ve got some money to spend, the luxury product is a way of almost showing how successful you are,” said Debnam.

Demand for luxury goods is increasing in China

Thibaut Mathieu caters to the growing Chinese taste for fine wines. As marketing manager of ASC Fine Wines of Hong Kong and Macau, he held a champagne tasting recently in Hong Kong.

He said he expects people to keep buying fine foods and wines, even in an economic downturn. He says they did so in 2003, following the SARS outbreak in the city.

“Customers were not going out anymore but they were eating and drinking and entertaining a lot more at home,” said Mathieu. “So we might expect something like that. Apparently, in China, it’s already happening.”

Recently, China announced measures to boost Hong Kong’s economy, including allowing more mainlanders to visit. Many Chinese come here specifically to shop.

John Tsang is Hong Kong’s financial secretary. He says the rich will continue to buy luxury goods.

“There is a pretty large segment of people who have a pretty good income and they, a lot of them, are pretty good savers so they should be able to continue to spend money during a bad economic period,” said Tsang.

Will middle-class consumers offset decline in retail sales?

However, there are concerns that even if Asia’s wealthy and middle-class consumers keep their taste for high-end goods, there are not enough of them to offset the decline in sales in Japan, Europe and the U.S.

Japan’s luxury market, 12 percent of the global total, saw sales fall seven percent this year.

China’s economy also is in decline, after years of record growth. The stock market, consumer confidence and credit markets all have slumped. Businesses are laying off staff.

That may make Chinese consumers even more frugal. The country has no real social security program, and families must pay for schooling and healthcare themselves, plus save for retirement. That means Chinese workers, fearing job losses, are likely to increase savings despite government efforts to spur spending.

Carol Cheng and her friends took away shopping bags of gifts from the boutique’s party this holiday season. But that night most of them bought nothing. They said they came to enjoy the free drinks, snacks and entertainment. They did not come to shop.