EU-Asia shoe spat: One size doesn't
fit all By Duncan Freeman
BRUSSELS - The anti-dumping duties imposed
by the European Commission in late March on
imports of leather shoes from China and Vietnam
mark the latest stage in a battle over trade
policy that increasingly looks like part of a
longer war.
The war is not just setting
the European Union against China and other
exporters in Asia; it is increasingly exposing
divisions within Europe itself over the
fundamental question of its response to increased
global competition.
The EU provisional
anti-dumping duties on leather shoes from China
and Vietnam will be imposed from April 7. The
measures are more refined than with most
anti-dumping actions: normally, a
straightforward duty is
imposed on the offending imports, but in this case
they will be phased in over five months.
The initial duty will start at 4.8% and
rise to 19.4% for Chinese shoes and will go from
4.2% to 16.8% for those from Vietnam. The
provisional duties will later be replaced by
definitive anti-dumping duties, which normally
last for five years, if they are confirmed by the
EU member governments.
The duties are in
response to a rapid increase in imports of shoes
from China and Vietnam to the EU in recent years.
Between 2001 and 2005, imports from China
increased by over 1,000%, while from Vietnam the
increase was 95%.
A large part of the
increase in imports from China occurred last year,
when they rose by 450% compared with 2004,
although purchases from Vietnam actually fell by
1% in 2005. The EU maintains that the increase in
exports is the result of dumping, because the
exporting firms have been aided by state
intervention such as tax breaks or incentives, and
even land cost reductions, that depend on export
performance.
In effect, the incentives are
a form of export subsidy. The result of the
increased imports has been that EU footwear
production has fallen by about 30%, and 40,000
jobs have disappeared.
The gradual
introduction of the duties is intended to provide
a transition for importers, avoid disruption to
supply chains, and to buy time to learn the
lessons of last year's notorious "bra wars"
episode, when the European Commission botched its
imposition of quotas on Chinese textile imports.
In that case, shipments already ordered in
anticipation of the introduction of the import
restrictions ended up being blocked in ports in
Europe when the quotas were almost immediately
exceeded. Although there will be no quotas on
shoes, the gradual introduction will avoid charges
that the new duties will create similar
disruption.
In addition to the phased
introduction, there will be other measures
intended to demonstrate that the commission is not
simply wielding a blunt instrument of trade
protection at the behest of European shoe
manufacturers. Children's leather shoes will be
exempted, to avoid forcing up prices for poor
families.
At the same time, special
technology athletic footwear, ie sports shoes, are
exempt on the grounds that there is no significant
domestic production of this type of footwear. In
fact, European sports shoes manufacturers shifted
their production offshore, mostly to Asia, years
ago. However, the commission has proposed setting
up a monitoring mechanism to ensure that importers
do not use the exemptions to evade the duties.
Naturally, both China and Vietnam have
expressed their opposition to the European
measures. The governments of both countries and
their domestic industry associations have attacked
the duties and the process by which they are
decided as flawed and unfair. However, the
criticism from China has been relatively
restrained. This is in line with the policy that
China has adopted of avoiding allowing any single
dispute to undermine its relationship with Europe,
which Beijing wishes to
enhance, and from which it benefits enormously.
Of course, this may mean that when it
comes to trade disputes, certain sectors in China
may lose out. But Beijing has generally adopted
the view that even if the anti-dumping action on
shoes will negatively impact an industry that
generates significant exports and employs tens of
thousands of workers, this is only a small
fraction of total Chinese exports to Europe.
There are also wider diplomatic
considerations, as Beijing considers is
relationship with Europe to be of vital strategic
importance, and one that it wishes to cultivate
carefully. For Vietnam, without the same broad
base of export industries, the measures may be
harder to accept, but Vietnam's options are also
more limited, apart from continuing to make
representations to have the decision overturned
before definitive duties are imposed.
In
fact, the rifts within Europe that this issue has
once again exposed are in some respects far more
important than the face-off between the EU and the
exporters. There have been the divisions between
the domestic shoe industry, which supports the
anti-dumping duties, and European importers and
retailers of Asian shoes, who are opposed to them.
Indeed, the attacks on the duties from within
Europe have if anything been even stronger than
those from China and Vietnam.
The line
taken by organizations representing importers,
retailers and producers of sport shoes has been
that the duties would bring only higher prices and
lost jobs in Europe. The European shoe producers
entirely rejected these claims, and their
arguments have generally been taken on board by
the commission. The only major area where the
European producers failed to win their case was in
the argument for the inclusion of sports shoes in
the anti-dumping measures.
The battle has
also been fought between European governments. In
this case Italy and Portugal, both of which still
have relatively large shoe industries, have been
strongly in favor of anti-dumping measures. Most
other governments have been indifferent, or
actively opposed to the measures, especially some
of the northern European countries like Denmark.
At a meeting this month of EU trade
officials which voted on the duties, it was
reported that only three countries actually
supported them, while 11 abstained and none or 10
voted against. Trade Commissioner Peter Mandelson
took this as a signal to go ahead on the curious
logic that there was "no majority against" the
proposed duties.
Although claiming that
the duties represented a reasonable action in the
face of unfair competition, the commission has
been curiously defensive in its presentation of
them. Mandelson has insisted that they are not
intended to target the natural competitive
advantages of China or Vietnam, only to stop their
unfair trade practices. It has also been at pains
to reject claims that the duties will increase
prices in Europe.
They will only affect
about nine out of every 100 pairs of shoes sold in
Europe and will add 1.5 euros (US$1.80) to the
average import price of 8.5 euros for a pair of
leather shoes that retail for 30-100 euros. The
commission has also insisted that there is no
relation between the measures against shoe and the
restrictions on textiles imports that began last
year.
The efforts to stop imports of shoes
from China and Vietnam is part of a wider battle
for the future of economic policy that is
increasingly turning from an argument over how
Europe should face the outside world to one over
how it should conduct its own internal affairs.
The French government has been arguing for
a policy of "economic patriotism", and has sought
to protect its companies from being acquired even
by other European companies. The French are not
the only offenders, as other European governments
have recently attempted to block acquisitions of
major companies by buyers from within the EU.
The European Commission, which has the
authority to oversee the workings of the internal
market, generally adopts a pro-market stance.
Several leading officials from the commission have
attacked the idea of economic patriotism. So far,
it has not taken any action on any of the current
takeover disputes, but it is looking at the issues
they have raised.
Mandelson insists that
European industries should not look to
anti-dumping measures as a shield to protect them
from legitimate competition. Mandelson has said
that it is not his intention to provide a carte
blanche to protectionists in Europe who seek to
avoid the effects of competition. Nevertheless, in
some quarters in Europe protection is increasingly
becoming the policy of first choice. There are
other industries lining up to seek anti-dumping
duties on imports from China and other parts of
Asia, including producers of plastic bags and
furniture makers. Several other products from
China have already been subject to anti-dumping
duties this year.
Whatever the EU's
official position may be, there is little doubt
that there will be trade frictions between the EU
and China for the foreseeable future as European
industries seek to protect themselves. These
frictions will be part of a battle to determine
the economic direction of Europe, as it struggles
to adapt to global competition, but also to
maintain faith in benefits of the free flow of
goods, labor and capital across borders, which was
an essential element in the vision of the founding
fathers of the EU.
Duncan
Freeman is a writer and consultant based in
Brussels. He can be contacted at
duncanfreeman@skynet.be.
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2006 Asia Times Online Ltd. All rights reserved.
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