European trade protectionism revives

The European Commission has recently formally approved to impose anti-dumping duties on the leather shoes imported from China and Vietnam starting from April 7. The duty, valid for half a year, will start in April 2006 at a certain rate, rising, by October, to a higher rate for China and Vietnam, triggering a more severe shoes trade war between China and the Europe.

The EU has gone too far from the so-called "fairness" that they have claimed. Footwear industry, the same with the textile industry, has been recognized as one of the most market-oriented industries in China. Compared with the EU counterparts, the Chinese shoe industry in many ways even shows a tendency of excessive marketization.

On January 12, the EU anti-dumping committee rejected to grant the 13 surveyed Chinese enterprises market economy status and turned down the requests of Chinese footwear enterprises' for separate ruling. The initial ruling imposes the same rate of duty against the entire Chinese footwear enterprises. Given the fact that it even acknowledges the market economy status of Chinese enterprises in some other anti-dumping cases, the EU indicates a kind of retrogression this time.

Although the EU claims that they have found sufficient evidence to demonstrate that Chinese and Vietnamese shoe-making industry have got severe state intervention in low-price financing, tax exemption, non-market-oriented rent, and unreasonable evaluation of assets, most of these accusations turn out to be sheer fiction. Some are even calling white black.

In recent years, Chinese enterprises have voiced many complaints against the commercial banks on their "reluctance to lend" that the authorities had to open a special column in the fourth quarter's "China's Monetary Policy Annual Report" in 2005. The column calls on people to "correctly understand" the financial institutions' "deposit gap". According to the column, the competitive advantages of China's footwear industry lie in its low labor costs, sustained technological progress and the effects of unbeatable economic scale, but nothing in the so-called "unfair state intervention".

Chinese footwear enterprises enjoy the freedom of footwear exports to the EU in accordance with the right defined in the "Protocol on the Accession of the People's Republic of China". According to the "Protocol" (Annex VII), viz., "Reservations by WTO Members", the EU promises from 2005 onwards lifting the import quotas on the China-made shoes. Moreover, as a matter of fact, the EU footwear production has declined from 1.1 billion pairs to 700 million pairs between 1998 and 2004, right before the elimination of quotas. According to the "Protocol" (Annex VII), the EU only allocated 5%-15% growth rate of the annual import quotas to China from 2001 to 2004. Therefore, there is no ground at all for the EU industry to attribute the decline of its footwear industry to unfair competition of the Chinese counterparts.

Both premise and conclusion on the Chinese shoes anti-dumping case are so fragile that fierce arguments arise within the EU concerning the hot issue. The same with the situation occurred in 2005 of the special insurance disputes for textiles, the disputes within the European Union once again exist between the manufacturer and importers/retailers, and, the more developed members in North European countries and the fewer developed member nations in the South. Importers and retailers widely oppose the restrictions on Chinese shoes. Research shows that the implementation of the EU anti-dumping tariff on Chinese shoes will lead to 3% of price rise in the EU footwear market, as a result, threatening approximately 10,000 jobs in the EU.

As an effort to join the WTO, China has made many concessions and put its heart into the corresponding industrial adjustment, all of which have been targeting to establish a stable environment for the development of trade underneath the WTO. If China's trade partners do not abide by the WTO rules and grant the Chinese enterprises and goods a fair treatment, the Chinese enterprises also have the right to respond in accordance with the international rules.

The EU decision for the anti-dumping duties is only the first round ruling. On the same day of the EU announcement on the tariff on Chinese and Vietnamese shoes, EU Trade commissioner Peter Mandelson also emphasized that the EU-China trade is of significant importance to Europe. The EU will continue to negotiate with China, seeking an effective method to settle the footwear trade friction. China hopes that the EU can return to the correct track of the WTO rules so as to avoid further intensification of trade friction.

The author is professor of the Research Institute of Ministry of Commerce; translated by People's Daily Online.