EU Proposes Progressive Duty On Chinese, Vietnamese Leather Shoes

European trade commissioner Peter Mandelson confirmed that the European Commission's investigation into complaints of dumping of leather shoes from China and Vietnam has found compelling evidence of state intervention, dumping and injury. The Commissioner has recommended a progressive duty imposed over five months.

This seeks to ensure that retailers with goods in transit are not suddenly faced with an unexpected full tariff at the border. It nevertheless means that after five months a full duty will be in place and the damaging effects of dumping will be counteracted. This solution corrects injury, Mandelson said, but allows maximum predictability for importers. There would be no quantitative limit on import of leather shoes from Vietnam and China.

The EU investigation discovered "compelling evidence of serious state intervention in the leather footwear sector in China and Vietnam ? cheap finance, tax holidays, non-market land rents, improper asset valuation. This state intervention is leading to dumping unacceptable under WTO rules. Significant comparative advantage in China and Vietnam is being compounded uncompetitive behavior, the report said.

There is evidence of injury to EU producers, it is alleged. Since '01, closely tracking the rise in dumped imports, European footwear production has contracted by about 30%, domestic prices have fallen by 30%. Some 40,000 jobs in the sector have been lost. This is not related solely to dumped goods. But state-intervention and dumping in China and Vietnam have exacerbated intense competition.

Mandelson has recommended provisional duties of 19.4% for China and 16.8% for Vietnam. He will recommend that this duty be phased in over a period of five months, beginning at about 4%.

The Commission will seek to work with the Chinese and Vietnamese to address the concerns raised by the EU investigation. The Commission welcomes signals from China and Vietnam that they are ready to engage to address the problem.

This case concerns about nine pairs of shoes from every 100 pairs bought by Europeans. There was clear evidence to the Commission that although leather footwear import prices to the EU over the past five years have fallen by more than 20% consumer prices have remained stable and even risen slightly. A duty would add just over EUR 1.5 on average wholesale prices of EUR 8.5 for leather shoes that retail at EUR 30-100. There is margin within the supply chain to absorb a small duty on import costs by spreading it across product ranges and the distribution chain. The Commission believes.

On grounds of Community Interest, the Trade Commissioner will recommend that children's shoes and high-tech sports shoes be excluded from provisional measures because its investigation suggests that there is not sufficient European production of these shoes for injury to have been caused.

State intervention of this kind in a highly competitive industry is contrary to any notion of fair trade. The EU will not target low costs and comparative advantage, but it will target uncompetitive behavior. Because of our lesser duty principle Europe's anti-dumping rules clearly ensure that anti-dumping measures cannot be used to make imports more expensive than the equivalent EU product ? and they can and often do leave the competing export much cheaper than the European equivalent. This is not true of the rules used by India, the US and China itself, nor do any of these countries apply a Community interest rule.