While asking for higher import duties on footwear from all sources, Brazilian shoe manufacturers are proposing to exempt the European Union through a bilateral trade agreement calling for zero duties on shoes for both sides. Officials of Abicalçados, the Brazilian footwear industry association, made these views public at a press conference during the Francal shoe fair in Sao Paulo a few days ago, but they outlined some hurdles in their quest for this kind of tariff treatment.
Stressing that they were mainly seeking tariff protection from China, they claimed that trade officials of the European Commission have shown reluctance to negotiate and sign such a bilateral deal because they wanted concessions in return in the area of agricultural policy. They still hope that the European Union will consider this proposal after the conclusion of the present Doha round of multi-lateral trade negotiations, particularly in view of the help that Brazilian officials have recently provided to European investigators, using Brazil as reference country for their anti-dumping case against China and Vietnam.
Italian producers have been claiming that Brazil’s high import tariffs have been hindering their exports to Brazil. Noting that shoe imports from Italy have been growing, reaching about 80,000 pairs in the first five months of this year, officials of Abicalçados stressed that they were not afraid of competition from European producers. They said they have been asking for higher tariffs because they are suffering from unfair competition from China.
The Brazilian government has accepted in principle the industry’s request to increase the country’s import tariffs on all kinds of footwear to 35 percent, following a major surge in imports over the last four years that has led to the loss of some 120,000 jobs in the sector. The government had lowered the duty from 35 to 20 percent four years ago, but decided to raise it back to 35 percent in August 2005 for six clearly defined types of footwear products that represented 92 percent of all imports at the time. The result has been that imports of the remaining types of products have escalated, representing 45 percent of the total import flow.
However, Brazil needs the approval of its three trading partners in Mercosul to get this measure passed. Argentina, a highly protectionist country that has quotas on footwear from all sources, has already agreed to the higher duties on all footwear products. The government of Paraguay gave its assent just before the Francal fair last July 9. Uruguay stated at a meeting last Tuesday that it was still uncertain, but the country could make a final decision within the next few weeks.
The higher duties may be granted in a couple of months, according to Abicalçados officials. They say they are being requested because imports are growing rapidly and it would take more than one year to conclude an anti-dumping investigation against China. The Brazilian industry is getting support from the national government for these measures and for its export promotion program because its competitiveness is being eroded by the artificially high value of the Brazilian real and by the high interest rates and social charges that Brazilian employers must pay.
Milton Cardoso, who was elected as Abicalçados’ new president last July 2, said the Brazilian government was in effect «subsidizing» the country’s shoe imports by keeping the real at an estimated 28-30 percent above its normal value against the U.S. dollar, while the Chinese yuan is said to be 15 percent too low. He noted that Brazilian shoe workers in the poor Northeast area of the country get paid 400 reais per month, or one-third less than their Argentinian colleagues, but social security charges are 50 percent higher.
Cardoso, 51, has been running for the last ten years Vulcabras, the Brazilian shoe company that took over Calçados Azaleia a few days ago (see article in the attached regular issue of Shoe Intelligence from today). Well educated and fluent in English, he takes over the place of Elcio Jacometti, an expert in public relations who has been in charge for six years.
One of Cardoso’s pet projects is the conclusion of an in-depth audit of the Brazilian shoe industry that should provide a more precise picture of the country’s shoe production and apparent consumption. While cheap beach sandals represent a large part of the production, Abicalçados officials feel that it is close to 800 million pairs than the official number of 725 million pairs given for 2005. Exports of 189 million pairs in 2005 stood against imports of 17 million pairs, up from 9 million in 2004. Apparent consumption was estimated at 552 million pairs.
Cardoso says he wants the association’s 7-year-old Brazilian Footwear program of export promotion to continue with the help of Apex, the country’s export promotion agency. As part of the program, a dozen importers and retailers from Greece, Russia, South Africa and other countries were invited to visit the Francal show, which featured more than 1,000 firms. The program is also helping more than 60 Brazilian companies to exhibit at GDS, MICAM and 20 other shoe shows all over the world.
The high value of the real continues to depress Brazil’s shoe imports, particularly in the USA which remained the country’s biggest market in 2006, representing 45.9 percent of the total export value. A steady decline in exports to that country is being partly offset by increases in other markets, especially in the Southern Hemisphere and around the Mediterranean Sea where climatic conditions are similar.
Last year, Brazil’s shoe exports to Italy grew by 39 percent to 4.1 million pairs worth $53 million, pulling the country into 4th place among its major export destinations, compared with the 15th place it still held in 2004. Higher shipments were also recorded in the UK, Germany, the Netherlands and Australia, among others. Total shoe exports declined last year by 9 million pairs to 180 million pairs, but their average price went up to $10.30, resulting in a decline of only 2 percent in their total value to $1,854 million.
Average prices continued to increase by 7 percent in the first five months of this year, reaching $9.86 per pair during the period and allowing the sector to record a 1 percent increase in shoe exports to $767.5 million for the period in spite of a 6 percent drop in volume to 77.86 million pairs. While they are still relatively negligible, Brazil’s footwear imports surged by about 50 percent in the first four months of this year.