Three moves on the international trade front that have taken place in the last few days have given the shoe industry and the world economy positive signals in the direction of free trade.

While the U.S. decided not to go ahead with a new set of punitive tariffs on imports from China, the European Union signed important trade agreements with Vietnam and Mercosur.

As it will mainly benefit of importers of shoes from Vietnam in the EU, European shoemakers had no particular comment on the signature on June 30 of a long-awaited free trade and investment agreement (EVFTA) with Vietnam by the local government and the European Commission.

The agreement is set to gradually eliminate more than 99 percent of customs duties on both sides, while encouraging and protecting European investments in the fast-growing Asian country.

The pact is particularly relevant for the athletic footwear sector where Vietnam is becoming a major alternative to China as a sourcing hub. Fesi, the European sporting goods industry association, pointed out that it had been able to secure a shorter timeframe for the full liberalization of imports of certain types of athletic footwear products that feature a non-slip synthetic outsole, an impact absorption system and a lacing system with at least five eyelet holes (more in Sporting Goods Intelligence Europe).

The agreement with Vietnam is almost certain to pass the scrutiny of the European Parliament before its final ratification by the European Council, which is expected to take place during the first half of 2020. Fesi said the Parliament will take into account the encouraging progress made by Vietnam in the last few months in the areas of human rights, labor rights and environmental protection.

Vietnam has become a major alternative to China as a manufacturing hub. In the first six months of this year, Vietnam's total shoe exports grew by 14.2 percent to $8.8 billion.

European shoemakers had more to say about the FTA signed on June 28 by the European Commission and Mercosur, the free trade area comprising Brazil, Argentina, Uruguay and Paraguay. The European confederation of the shoe industry, CEC, and the Italian shoe industry association, Assocalzaturifici, were more vocat about the pact, which will give European companies easier access to a market of 780 million people, much larger than that of Vietnam (see the related article in this issue).

Meanwhile, during the June 28-29 G20 summit conference in Osaka, U.S. President Donald Trump and China's Xi Jinping announced that the two governments had decided to resume their trade negotiations. The U.S. said that it will delay the planned imposition on Aug. 1 of additional duties on a range of products imported from China, including many types of footwear made there by U.S. and non-U.S. companies.

The U.S. government had threatened to raise tariffs from 10 percent to 20 percent on $200 billion worth of Chinese products unless Beijing changes its unfair trade practices. If that had happened, duties paid on shoe imports into the U.S. annually would have jumped from about $3 billion to $3.5 billion.

The U.S. already imposed new import duties on Chinese products last September, and Beijing responded by imposing duties on $60 billion worth of American products.

Washington lobbyists said that the trade war with China was causing disruption in their industries ‘sourcing strategies and that any new duties would have to be ultimately reflected in higher prices for American consumers.

Many U.S. companies had accelerated their imports of shoes from China in the expectation of higher duties, resorting to expensive air freight. Many also indicated that they will speed up a process of diversification in the sourcing of footwear from China to Vietnam and other low-cost countries.

Among them, Crocs said that it is planning to reduce the share of the production coming into the U.S. from China from 30 percent to 10 percent by 2020, as the new duties would raise its annual costs by $5 million.

European companies are looking at the debacle with interest. Higher duties on imports from China could make some of their lower-priced products more competitive in the U.S. On the other hand, European shoemakers would get an indirect benefit if President Trump wins his fight in favor of intellectual property protection and against state support for Chinese manufacturers.

However, observers noted that the Chinese government gave no indications that it intends to take action in the area of intellectual property protection, which has been the issue raised by the U.S. from the start. Pre-electoral considerations may have led the two parties to call a truce. President Xi probably feels that President Trump cannot risk the deterioration of the U.S. economy that would stem from a trade war with China, which would likely affect his re-election in 2020.

President Trump has already shown on various occasions a hard-line attitude designed to obtain concessions from another government. These tactics worked out in a recent diplomatic conflict with Mexico.

Leaders of the Apparel and Footwear Association (AAFA) and Footwear Distributors and Retailers of America (FDRA) expressed relief last month after Trump tweeted that the Mexican government had accepted his demands, subject to parliamentary endorsement. Last year, U.S. imports of footwear from Mexico went up by 20 percent to $500.2 million.

Imports from Mexico are duty-free, but Trump warned that they would all be taxed at 5 percent unless the country's government would deploy its National Guard to stem the flow of immigrants from Central America seeking asylum.