The final 2003 figures compiled by the Confederation of the European Shoe Industry (CEC) indicate an acceleration in the rate of decline for the 15 member countries of the European Union, and its recent enlargement to 20 members doesn’t change the picture. Overall, the 15 EU member countries saw their shoe production fall by 12 percent to 694.5 million pairs last year. Imports from outside the EU increased by 17 percent to 1,296 million pairs, while exports from the EU to the rest of the world dropped by 14 percent to 192.6 million pairs. In 2002, the production had declined by only 9.1 percent and exports by 7.4 percent, while imports had increased by 7.0 percent.

Details by country are published on page 3. Italy and Spain, the two largest producers in the continent, suffered output declines of 9 and 14 percent, respectively. Double-digit declines occurred in Germany, France, Holland, Belgium, Ireland, Denmark and Austria. The figures that we have published for the first part of this year are not much better, but Portugal, which saw its production decline by 7 percent in 2003, has been reporting a softening of the downward trend recently.

Portugal’s exports dropped by only 1.3 percent to 49 million pairs in the first 7 months of this year, in contrast with declines of 9.7 percent for Spain and 4.3 percent for Italy during the first six months. However, Portuguese shoe exports fell by 4.4 percent in value to €799 million. Conversely, Portugal’s shoe imports grew by 32 percent in volume due to increased subcontracting in Brazil, China, Cape Verde and Vietnam, but with a 17.2 percent drop in value to €6.84 per pair.

In neighboring Spain, producers are particularly concerned by the strong increase in footwear imports, which now represent half of domestic consumption. FICE, the Spanish shoe industry association, is putting together a big program to help its members to regain market shares in the country by passing on to consumers the message about the good price-quality ratio of national production. The program also involves intensified import surveillance by customs authorities and action to improve personnel training and brand-building.

Low consumption rates and the gradual lifting of the EU’s import quotas on Chinese shoes were largely responsible for last year’s double-digit decrease in European production. The EU’s total apparent consumption increased by 7 percent last year based on the its standard definition (production – exports + imports), but that was largely due to an increased amount of offshore processing by European-based firms. In reality, European consumers didn’t buy many more shoes than they did in 2002, and they tended to pay less for them.

In fact, the average price of shoes imported from China declined by 21.5 percent to €3.10 a pair in the first five months of the year. While the volume of shoes imported from that country jumped by 43.2 percent to 329.0 million, the value of these imports increased by 12.4 percent to €1,018 million. Vietnam remains the second-largest source of imported shoes in the EU, but with the liberalization of Chinese shoe imports, the volume of imported Vietnamese shoes rose by only 5.5 percent to 132.9 million pairs during that period. It actually fell in value by 3.3 percent to €885.5 million.

European producers are determined to find ways to put the brakes on imports from China, which are finding their way into Europe more easily thanks to the lifting of import quotas, increased quality levels and the protracted weakness of the US dollar. The G20 meeting of finance ministers and central bank governors in Berlin last weekend failed to reassure monetary experts about the future course of the dollar. Chinese authorities indicated willingness to consider a certain “flexibility” in the rate of the yuan, which is pegged on the dollar, but said they need to restructure their financial system first to make that possible. In a positive sign of flexibility, China has raised its interest rates for the first time in ten years.

Meanwhile, our sources in China indicate that rising oil prices and increasing shortages of electricity and labor are pushing local manufacturers to raise their prices by between 4 and 10 percent. Several factories have increased their wages this year, particularly in Guangdong Province where the high turnover of labor has led to a shortage of about 2 million workers across all sectors. The province manufacture nearly half of the 6.5 billion shoes made in China. Furthermore, the breakneck speed of China’s economy has outstripped the country’s capacity to generate enough electricity, leading to systematic blackouts on Fridays and other days of the week and forcing plants to work harder on weekends or to use air freight to allow them to meet delivery deadlines.