Nov. 8 (Bloomberg) -- A Chinese-made toy containing a chemical linked to the so-called date-rape drug was recalled yesterday after two children fell ill.

The recall of Aqua Dots, distributed by Toronto-based Spin Master Ltd., follows the withdrawal of millions of consumer products made in China and Mexico over concerns about high- levels of lead and toxic chemicals. Consumer fears about harmful toys may affect holiday spending, with 35 percent of shoppers believing that products made outside the U.S. aren't safe, according to a Nov. 1 study by Deloitte & Touche LLP.

``Now that these recalls have stayed in the headlines for a period of time, it's pretty certain they will result in a change in holiday spending,'' said Frank Badillo, an economist with TNS Retail Forward, a Columbus, Ohio, consulting firm. ``I don't think we'll see a cutback in spending but a shift to other categories.''

Video games and game systems will be popular items and may replace toys, according to TNS surveys, Badillo said.

Aqua Dots, which features small beads that bond with water, are made with a chemical the body converts to gamma-hydroxy butyrate, commonly known as the date-rape drug. Two children in the U.S. who swallowed the beads became comatose, the U.S. Consumer Product Safety Commission said in a statement. The children recovered.

Also today, Marvel Entertainment Inc. said it was voluntarily recalling 110,000 Curious George dolls made in China after tests found lead levels exceeding federal limits. On Nov. 6, Mattel Inc. asked consumers to stop using 196,000 kitchen toys made in Mexico because small pieces may pose a choking hazard to children.

Recalls for Lead

Mattel, the world's largest toymaker, has issued several recalls this year, primarily because the products contained excessive lead in paint or had loose magnets that might detach and be swallowed.

Overall, 26 million toys and other products made in China have been recalled by companies in the U.S. since August, according to the Consumer Product Safety Commission's Web site.

Spin Master said in a statement last night that more than 60 percent of the 4.2 million Aqua Dots units covered by the recall hadn't reached consumers.

Aqua Dots contain 1,4-butanediol, an industrial solvent that the body converts to gamma-hydroxy butyrate, according to the U.S. Food and Drug Administration's Web site.

Swallowing Beads

The toys were produced by Melbourne-based Moose Enterprise Pty. through factories in China.

Moose Enterprise in Australia voluntarily recalled the products, labeled Bindeez outside the U.S., after a ``small number'' of children swallowed the beads and required medical attention, it said in a statement. Moose will introduce a ``foul- tasting ingredient'' into the product's formulation to ensure children don't eat multiple beads when the products return.

Phone calls to Moose Enterprise were unanswered.

Australian Family First Senator Steve Fielding yesterday called for national laws on dangerous toys. The current system, branded a ``joke'' by Fielding in an e-mailed statement, relies on each state in the country enforcing bans. The nation's Productivity Commission last year recommended a single body.

``We're calling for a national product safety council that can actually coordinate all of these matters concerning product safety,'' Christopher Zinn from consumer association Choice told ABC Radio yesterday. ``It's basically a hodgepodge of rules and regulations at state and federal level that do not work at the single purpose, and that is protecting people.''

Asia Recall

Toys `R' Us Asia Ltd., a unit of Hong Kong-based Li & Fung Group, removed all Bindeez items from its stores in Hong Kong, Singapore and Malaysia in response to the sale ban in New South Wales, according to a Nov. 6 statement.

Safety has become a political issue in the U.S. after Nancy Nord, acting chairwoman of the Consumer Product Safety Commission, said she objected to provisions in legislation that would increase fines and toughen rules for companies that sell dangerous products. Democrats in Congress demanded she resign, calling her out of touch with the concerns of consumers.

Nord says the measure, which passed the Senate Commerce Committee last week, would divert scarce resources from tracking unsafe products.

President George W. Bush earlier this week called for increased penalties for companies that sell dangerous products and establishing a certification program for producers that meet safety standards.

To contact the reporter on this story: Ryan Flinn in San Francisco at rflinn@bloomberg.net.

Last Updated: November 8, 2007 20:41 EST