A waiting game

20 March 2006

So far this year, there has been a feeling of waiting for things to happen. Firstly, there was the conjecture over whether or not China would proceed with their threatened import taxes on raw materials. When they did, on January 1, everyone began waiting to see what effect this would have. The traditional quiet time at the beginnng of each year as westerners return to work after their seasonal holidays is further protracted by the Lunar New Year in Asia. Thus, it is still too soon to judge the real effects of the legislation. Many of the bigger tanners in China still have time left under the handbook system of import/export taxes so it will be some time yet. However, towards the end of February the European Commission announced that they would put in place anti-dumping taxes on footwear from China and Vietnam saying they had found compelling evidence of serious state intervention in the leather footwear sector which is contrary to WTO rules. The plan is for duties to be phased in over five months, beginning at about 4%, but the proposal has first to be approved by the EU's council of ministers which will vote on it on March 21. Any imposition of provisional duties will be followed up by another round of consultations and investigations that could lead to permanent 'definitive' anti-dumping duties being imposed. Investigations at thirteen leather shoe factories were initiated by a proposal by the European Union (EU) trade commissioner Peter Mandelson to impose provisional anti-dumping duties of 19.4% on imported leather shoes from China and 16.8% on those from Vietnam. Ironically, it is not just the Chinese and Vietnamese who are upset by the outcome of the EU investigations into the anti-dumping claim initiated by the European Footwear Manufacturers' Association. In June and July, 2005, two anti-dumping actions relating to footwear were lodged by the European Footwear Manufacturers' Association with regard to 'footwear with protective toe caps' from China and India and 'footwear with uppers of leather' from China and Vietnam. Some of the world's largest footwear companies such as Nike, Reebok, Adidas and Puma banded together to urge EU authorities not to impose limits on China's shoe exports to Europe. Nike said if the anti-dumping measures are imposed on footwear, the impact will be much larger than that felt in the textile industry. However, no matter what measures the EU may take, they are unlikely to create new jobs in Europe as a result. On the other hand, European shoe companies, as well as Asian factories, are likely to end up paying a heavy price. Representatives of shoe brands such as Timberland and Wolverine have met with EU Commission officials to express concern that anti-dumping duties would help local manufacturers at the expense of consumers and retailers. 'What would happen is that European industries that have adapted to the new world would be penalised', said Gerd Rahbek-Clemmensen, vice-president of Danish ECCO. Currently, 70% of sports shoes sold in Europe come from China and Asia. As the proposal stands, children's shoes and high-tech sports shoes would be exempted from the duties, because the Commission's investigations 'suggests that there is not sufficient European production of these shoes' to make this industry worth protecting. Brussels said that as none of the companies in China and Vietnam it had investigated were operating in market economy conditions, it had selected Brazil in order to make a comparison in its anti-dumping calculations. This has further upset the Chinese. Su Chaoying, vice-director of the CLIA, said that to take a country like Brazil as a substitute country 'could be a vital blow to Chinese companies as China has cheaper labour, material resources and a mature industrial chain.' Shelagh Davy

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