The European Union’s trade chief proposed protective duties of up to almost 20% on imports of leather shoes from China and Vietnam today after finding “compelling” evidence that the nations are unfairly dumping footwear on European markets.
Trade Commissioner Peter Mandelson recommended phasing in 19.4% antidumping duties on Chinese shoes and 16.8% on Vietnamese footwear over six months.
If approved by a majority of EU nations, the tariffs will start at 4% in April and increase to the highest levels over six months. Children’s shoes and high-tech sports shoes will be exempted.
“There is compelling evidence of serious state intervention on a large and strategic industrial scale,” Mandelson told a news conference. “This state-supported dumping is causing serious injury to European industry.”
EU governments are split over the measures.
“It is very old fashioned to hit them with duties, and it is nothing other than protectionism,” Sweden’s Minister for Industry and Trade Thomas Ostros told the newspaper Dagens Nyheter.
“The problem is that it affects consumers through higher prices.”
The tariffs also divided Europe’s industry. Italy’s footwear association said the tariffs were too low to protect 850,000 shoemakers but retailers and importers warned they will jeopardise jobs and push up prices for consumers.
Mandelson said he had initiated talks with China and Vietnam to resolve the dispute, which comes after a major trade tussle last year over cheap Chinese clothing imports into the EU.
He stressed EU antidumping measures as a whole affected just 2% of the EU’s €180bn two-way trade with China.
“Considering China’s rapid export growth and its quite dramatic advent into the global economy, the weight it now has in the international trading system, our relations are remarkably stable and good,” Mandelson insisted.
However the EU has about 50 investigations into Chinese goods ongoing – from frozen strawberries to recordable DVDs. One of the most high-profile – and most likely to affect European retailers and shoppers next – is into cheap plastic bags.
Vietnam strongly denied that it has unfairly dumped shoes.
“Vietnamese leather shoe manufacturers are functioning according to the rules of the market economy and they are enjoying free and fair competition,” said Foreign Ministry spokesman Le Dung in Hanoi.
“The Vietnamese government does not intervene and does not subsidise business activities of enterprises.”
Mandelson stood by the EU’s nine-month investigation found “clear evidence of non-commercial loans or capital grants, from the state to footwear producers, improper evaluation of assets, non-commercial rates for land use and important tax breaks and holidays for footwear exporters.”
The EU said this week that its imports of leather shoes from China soared 320% in the 12 months up to March 2005 to 950 million pairs. Vietnamese imports grew 700% to 120 million over the same period, the EU said.
Mandelson rejected allegations of protectionism and said World Trade Organisation rules allow the EU to introduce counter-measures against dumping.
“I don’t believe that standing up for fair trade is protectionism,” he said. “We’re not targeting China’s or Vietnam’s natural advantage, we are targeting their uncompetitive behaviour.”
But he came under fire from retailers.
“Footwear brands and the retail sector are forced to reflect the cost of the duties in their sales prices,” said Horst Widmann, president of the Federation of the European Sporting Goods Industry.
“There is no doubt that consumer prices will rise by up to 20% if antidumping duties of such magnitude as proposed by the European Commission are imposed.”
Mandelson called such claims “totally fanciful.”
He said the higher duties would affect just 9% of shoes sold in Europe and would lead to an increase on average wholesale prices of just €1.50.
“There is plenty of margin for them to absorb this antidumping duty without detriment to their consumers,” Mandelson said.
EU nations were expected to discuss the issue March 9. If approved, provisional measures coud be come into force on April 7 for six months while the EU continues its investigations. They could then be extended for five years if the situation does not improve.
Italy is leading European shoe manufactures in seeking greater protection, but Denmark and Sweden have expressed concern.
“These measures are ineffective and offensive,” said Rossano Soldini, president of the Italian Footwear Manufacturers Association.
“He (Mandelson) is defending lobbies of importers, which are very powerful, and not shoemaking companies across Europe.”
In contrast, Mikael Thinghuus, chief operating officer of Danish shoe maker ECCO, complained that the EU’s duties would force them to freeze €33.5m of investment in China.
“It is totally unfair,” he said.