Compelling evidence of state intervention in the leather footwear sector
Through the EU investigation undertaken in factories jointly agreed with the Vietnamese and Chinese governments, European Trade Commissioner Peter Mandelson has recently 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, cheap finance, tax holidays, non-market land rents and improper asset valuation. This state intervention is leading to dumping unacceptable under WTO rules. Significant comparative advantage in China and Vietnam is being topped up with uncompetitive behaviour.
There is evidence of injury to EU producers. Since 2001, closely tracking the rise in dumped imports, European footwear production has contracted by about 30 per cent. 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.
The Trade Commissioner has recommended provisional duties of 19.4 per cent for China and 16.8 per cent for Vietnam. He will recommend that this duty be phased in over a period of six months, beginning at about 4 per cent. This will ensure that retailers with goods in transit are not suddenly faced with an unexpected full tariff at the border. It nevertheless means that after six months a full duty will be in place and the damaging effects of dumping will be counteracted. This balanced solution corrects injury, but allows maximum predictability for importers. There would be no quantative limit on import of leather shoes from Vietnam and China.
Retailer and consumer interests have been weighed carefully
This case concerns about nine pairs of shoes from every 100 pairs bought by Europeans. There is clear evidence that although leather footwear import prices to the EU over the last five years have fallen by more than 20 per cent, consumer prices have remained stable and even risen slightly. A duty would add just over 1.5 euro on average wholesale prices of 8.5 euro for leather shoes that retail between 30-100 euros. 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.
On grounds of Community Interest the Trade Commissioner will recommend that children’s shoes be excluded from duties. High-tech sports shoes have been excluded from provisional measures because its investigation suggests that there is not sufficient European production of these shoes for injury to have been caused.
Key data on Chinese and Vietnamese leather shoes:
Overall EU shoe market 2005: 2.5 billion pairs
Leather Shoes as per cent of total EU shoe market: 35 per cent
Products covered by measures as per cent of total EU shoe market: 9 per cent
Overall China shoe imports to EU 2005: 1.25 billion pairs
China exports 2005, shoes subject to investigation: 206 million pairs
China exports 2005, shoes covered by measures: 145 million pairs
Overall Vietnam shoe imports to EU 2005: 265 million pairs
Vietnam exports 2005, shoes subject to investigation: 119 million pairs.
Vietnam exports 2005, shoes covered by measures: 80 million pairs
Increase in Chinese leather shoe exports to EU 2001-2005:+1000 per cent
Increase in Vietnamese leather shoe 2001-2005: +95 per cent
Fall in average unit price for Chinese/Vietnamese leather shoes 2001-2005: China: -32 per cent; Vietnam -20 per cent; average -28 per cent
Consumer prices for Chinese/Vietnamese leather shoes have remained stable or risen slightly 2001-2005
(Source: Eurostat and Commission data)
Giang Tu
Vietnamese
