European trade authorities in Brussels keep on postponing a decision on anti-dumping duties against leather shoes from China and Vietnam. They were expected to take a decision on the thorny issue of dumping at the end of this month, but generally well-informed sources in Brussels are now predicting no duties until at least the beginning of March, or even later. There is no way to determine yet whether sports shoes will be exempted from any protective action, although the Commission seems to be in favor of excluding them for the moment.
The European Council of Ministers was expected to act on mandatory labels of origin for shoes imported from outside the European Union before the end of this month (see Shoe Intelligence of Dec. 22). A committee in Brussels was going to endorse the proposed measure last Friday, but the issue will be debated again at a committee meeting next Jan. 20, and one other additional step will then be necessary before the Council’s final approval. Implementation will follow 12 months later.
The European Commission must do something about the outstanding anti-dumping complaints on leather shoes by next April 7. It also has to rule by March 31 on the tricky issue of safety shoes from China and India, where the current complaint covers footwear with all kinds of protective toes in all kinds of materials, including street and outdoor shoes.
The EU’s advisory intergovernmental anti-dumping committee met last Thursday to decide on a request for lower duties made by 13 Chinese firms, which asked to be treated differently from the others based on claims that they follow market economy criteria (meaning that they are not subsidized). Like those previously made by Vietnamese firms, their claims were basically rejected, making them more vulnerable to anti-dumping action.
The committee was going to meet again on Jan. 24, but it has instead decided to do it only on Feb. 14. Another meeting may or may not be necessary before the end of February to lead the European Commission to impose provisional anti-dumping duties. They would only become final after a more political decision by the Council. Because of the complexity of the case and its political overtones, the Commission may even decide not to take any action, leaving it up to the Council to act by next September at the latest.
Meanwhile, the EU’s trade commissioner, Peter Mandelson, is conducting a series of high-level meetings with all the parties involved in the dispute. He is due to meet again today Rossano Soldini, chairman of the Italian shoe industry association (ANCI), in Milan today. While waiting for Brussels’ decisions, the Italian government has decided to bloc certain containers coming from the Far East at the ports of Naples and Gioia Tauro to check whether their shoes contain any hazardous substances banned by the EU. Such procedures can take several days, ANCI officials point out, noting that Chinese customs officials tend to do the same with incoming Italian products.
Gao Hucheng, China’s vice minister of commerce, threw all his weight behind the case last week by staging a series of meetings with Mandelson and numerous other officials dealing with the footwear issue in Brussels. He reportedly indicated that he would consider retaliation against European products if the threatened measures would pass, and that China was prepared to take the footwear case all the way up to the WTO, as it could set a precedent for plastic bags, TV sets and many other items made in China. Le Van Bang, deputy foreign minister of Vietnam, told EU officials yesterday that the proposed duties would throw millions of people into poverty.
Anti-protection lobbyists have shown figures indicating that 10,000 jobs, especially in the retail sector, may be directly affected by anti-dumping measures in the EU. The UK’s Retail Consortium, which had previously indicated that consumers will be damaged as shoe prices may increase by about £5 per pair, says now that prices may go up by £10 per pair now that Chinese firms are being denied market economy status. CEDDEC, the confederation of shoe retailers’ associations, which fovors closer relations with European producers, is instead backing duties if dumping is proven.
Given the intense speculation and horse-trading around the issue, it was interesting to see the reactions of European footwear importers and retailers at the Expo Riva Schuh show in Northern Italy over the past few days. A wait-and-see attitude could be spotted among big importers, such as Cortina and Kidderminister, which have been using their Chinese quotas heavily in the past, but many others are already taking concrete steps to change their sourcing habits.
Kidderminster said it would not consider working more with other Asian countries because they lack stability, but Cortina and others indicated that they might switch back to India or other cheap extra-European sources in case of new measures. Eegim said it would transfer Chinese production of leather shoes to Cambodia, where it has been working already for 11 years for synthetics, following Japan’s previous restrictions on Chinese shoes. Because of the threatened new European import duties, a large French importer, Dresco, was showing and quoting prices only for synthetic products from China and leather products from India at the fair.
Other relatively new entrants to the European market, including several American traders, appeared to be even more prepared to make the switch from China and Vietnam to other countries such as Brazil, Thailand or Indonesia as they have been working already with them lately for certain categories of leather products because they had no European quotas.
Chinese producers said their material and labor costs were rising, and predicted that anti-dumping duties will accelerate the industry’s migration to more rural sites located in the country’s interior, where workers are less sophisticated and less demanding, in order to keep costs down. Some companies hinted at the possibility of false invoicing schemes and increased trans-shipments, which were already common during the quota system, to avoid the threatened duties.
More than one trader confirmed that Chinese companies are becoming less demanding in terms of minimum orders in order to secure future business, despite the duties. Several Indian companies at the fair said they were not particularly affected by the uncertainty over the EU’s future action on China and Vietnam, particularly because they tend to handle smaller orders and because they are trying to raise their average prices. Many others, however, predicted a stronger inflow of orders from Europe if the anti-dumping duties on leather shoes are enforced. Indicating many inquiries from new European clients since the anti-dumping investigations began, RAM Fashion predicted that its exports to the EU would then rise by 20 percent immediately and by another 30 percent if the duties are confirmed, before seeing a possible stabilization.
In fact India is generally seen as the major new alternative source of footwear for the European market, with or without its own leather, in spite of some persistent quality problems with certain factories. There was only one Indonesian exhibitor at the fair, Magafoot, and its stand was packed all the time. Several traders and buyers indicated that Indonesia would likely be an alternative source for athletic, casual or children’s shoes, but not for dressy women’s footwear.
A Malaysian company, Zimex, said European buyers had shown no greater interest in its production since the anti-dumping investigations began. Duties on Chinese and Vietnamese products would probably help to regain some business, company officials said, but their impact would then probably be insignificant as compared to the loss suffered after the lifting of the EU quotas.
New quotas are still a possibility as a way to deal with the recent surge in imports from China and Vietnam. Rafael Calvo, the new chairman of the European shoe industry confederation (CEC) who runs the Spanish industry association, FICE, told an industry forum in Beijing recently that China should set out a moderate growth strategy over a specific period of time in order to restore harmony to the market.
According to several observers, European producers are trying to win some more time before they close down their factories. They are simply delaying important outsourcing decisions. For example, Carmens, a big Italian company with facilities in Romania and the Ukraine, has already invested in a new factory in Vietnam, but is waiting for the final outcome of the anti-dumping investigation before ramping up the production there. Rieker started up a new a factory in Vietnam one year ago, with a capacity of 20,000 uppers per day, and it will continue to make only uppers there until the trade situation clears up.
Meanwhile the post-quota surge in imports of leather shoes from China previously covered by the quotas seems to be subsiding. For the first ten months of 2005, the statistics show an increase of 300 percent, although some categories grew by as much as 700 percent. The average price fell by 25 percent.