MEMO/06/315
Brussels, 30 August 2006
Commission proposal for anti-dumping duties on certain leather shoes from China and Vietnam: questions and answers Text in this document can be quoted as ‘a statement from the European Commission’. Text in italics in quotation marks can be quoted as a statement from ‘European Commission Spokesman for Trade Peter Power’. 1. Why is the Commission proposing measures that Member States have already rejected?
2. What happens if Member States reject the proposal in Council?
3. Why are the definitive duties proposed lower than the provisional duties?
4. Why are children’s shoes included in the proposal for definitive measures?
5. Are STAF shoes still excluded from measures? Why?
6. What is the EU’s charge of dumping based on?
7. How will these measures affect consumers, importers and retailers?
8. Why act to correct the effects of dumping?
9. Are anti-dumping measures protectionism?
10. Is dumping just part of a globalised economy that we have to accept?
11. Is anti-dumping anti-consumer?
12. Is Europe a big user of anti-dumping?
13. Why is the Commission conducting a review of anti-dumping instruments?
1. Why is the Commission proposing measures that Member States have already rejected?
The Commission is legally obliged to make a proposal and remains confident in the legal merits of the current proposal. The current proposal was rejected by a narrow margin by Member States at advisory level. It will now return to Member States for a legally binding vote. Member States may be asked to explain the legal rationale for their votes.
2. What happens if Member States reject the proposal in Council?
If there is not a simple majority in Council in favour of measures or abstaining then measures will lapse when the provisional measures expire on October 6. This is a decision for Member States.
Member States who reject the measures could in theory be challenged in court to legally defend their decision – something they have not been required to do up to this point. This is what happened in the cotton fabrics case back in 1998, when the Council was judged by the ECJ to have not provided legal justification for its rejection of measures.
3. Why are the definitive duties proposed lower than the provisional duties?
The provisional duties were based on the provisional results of the investigation. The completed investigation allows for a more detailed analysis that has allowed the Commission to revise its provisional estimates. In this case the duties have been revised downwards.
4. Why are children’s shoes included in the definitive measures proposed when they were excluded from the provisional measures?
Childrens’ shoes were excluded from provisional measures on community interest grounds to prevent even small additional costs being passed on to parents of young families. However, there is considerable evidence of very serious fraud by importers importing women’s shoes as children’s shoes. This makes the exclusion very difficult to implement in practice. Import prices are in any event much lower for children’s shoes and the duty involved thus proportionately much smaller.
5. Are STAF shoes still excluded from measures? Why?
Yes. STAF shoes are excluded because they are no longer produced in Europe and therefore no injury from dumped goods can be shown.
6. What is the EU’s charge of dumping based on?
The EU has conducted a 15-month investigation into claims of dumping of certain leather shoes by China and Vietnam. There is clear evidence of serious state intervention in the leather footwear sector in China and Vietnam – cheap finance, tax holidays, non-market land rents, improper asset valuation. There is dumping flowing from this state intervention. The EU investigation was undertaken in factories jointly agreed with the Vietnamese and Chinese governments.
The European Commission's investigation concluded that there is clear evidence of injury to EU producers. Since 2001, closely tracking the rise in dumped imports, European footwear production has contracted by about 30%. Some 40000 jobs in the sector have been lost. This is not related solely to dumped goods. But state-intervention and dumping in China and Vietnam exacerbate intense competition.
7. How will these measures affect consumers, importers and retailers?
This case concerns about eleven pairs of shoes from every 100 pairs bought by Europeans.
This is an anti-dumping case not a safeguard case. It concerns not volumes of imports, ‘low-priced’ imports, or quality of imports but price distortions caused by anti-competitive behaviour unacceptable under WTO rules. There is no limit at all on the number of leather shoes from China or Vietnam that could be imported to the EU under these proposed measures.
The average import price for shoes subject to this investigation is about 8.5 euros. The average retail price of those shoes subject to this investigation is about 35 euros, although many branded shoes of this kind import for slightly more and retail for as much as 120 euros depending on the brand. A duty would be added to the import cost of the product – so in the case of China 1.4 euros on a product that retails for 35 euros or more. The full duty would be attached the final retail price only if importers passed the full duty cost down the supply chain to retailers and if retailers chose not spread the duty across their full product range.
8. Why act to correct the effects of dumping?
Dumping results from a lack of competition in international trade. Dumping is the sale of a product for export at less than its normal value in the market where it is produced. Dumping can be a short-term predatory pricing strategy by exporters designed to put competitors in an export market out of business. Or it can be the result of market intervention, for instance a state subsidy of a company’s production that enables it to artificially lower the export price.
Unfair pricing of this kind is not permitted under WTO rules if it harms producers in the export market. Of course, dumping also harms exporters in third countries, who are unable to compete with artificially cheap exports from the dumping country.
Dumping is not about ‘low cost’ exports: these are a legitimate comparative advantage for many exporting countries, especially in the developing world, and a genuine benefit of globalisation. Dumped goods are cheap because they are produced or traded contrary to international rules about what is fair trade.
“If we tolerate dumping, we send the signal that Europe tolerates unfair competition and unfair trade.”
9. Are anti-dumping measures protectionism?
Acting to limit the damaging effects of dumping is not protectionism – dumping is contrary to any understanding of what constitutes fair trade. Anti-dumping measures typically consist of an additional duty that offsets either the extent to which the product is being exported below real value or the injury caused to domestic producers, whichever is lower.
EU rules ensure that anti-dumping measures cannot be used to make imports more expensive than the equivalent EU product. So while anti-dumping measures can eliminate the effects of unfair trade they cannot shield European producers from tough but legitimate competition.
Anti-dumping measures do not take the form of quantitative restrictions or import quotas, there is no ban on the goods in question and no limit to their export to Europe.
“Anti-dumping measures will not save uncompetitive European producers – but they will create a market in which comparative advantage is exercised fairly.”
10. Is dumping just part of a globalised economy that we have to accept?
Globalisation has created global supply chains. Consumers have benefited through greater choice and cheaper goods. Exporters in Europe and elsewhere have benefited from new markets. Dumping undermines a competitive and fair global economy by deliberately distorting trade flows because of distorted costs and prices.
Dumping is often a result of unacceptable state intervention that privileges certain companies or subsidises exports, which is contrary to what most people believe constitutes fair competition. If a European government gave tax-breaks or other financial benefits to a local firm we would regard it as distorting market-based competition. Dumping is often the same problem on an international level. And because there are no globally agreed rules on competition, and no global competition authorities, anti-dumping is often the only effective way to act against these kind of distortions.
“If globalisation is about a free and fair global market, anti- dumping is supporting globalisation. Acting to limit the damaging effects of dumping is acting to ensure that globalisation is open, fair and competitive.”
11. Is anti-dumping anti-consumer?
Dumped goods are cheap – and consumers benefit from cheap goods. But dumped goods can also have devastating consequences for the industry in the importing country, ultimately reducing competition – so while consumers may benefit in the short term, they can lose in the long run.
Many developing countries are using their advantage of cheaper labour and production costs to spur economic growth. Europe does not and will not challenge that. But when uncompetitive behaviour is used to top up that natural advantage consumers are benefiting at the price of injury to domestic producers and exporters in third countries. And if genuine competition is distorted or even eliminated through dumping, the European economy as a whole and consumers will lose in the long run.
European rules on anti-dumping require that the Commission must weigh the potential costs to consumers, users, importers and retailers in acting to address dumping. If the costs imposed elsewhere in the European economy by raising the price of under-priced imports are disproportionate when compared to the loss to the European economy through unfair pricing, the Commission has the option of not acting.
When they are used, anti-dumping tariffs are added to the import cost of the product that is being dumped, not to the retail price. Although these tariffs are sufficiently high to eliminate the economic damage to the European competitors, they rarely if ever raise consumer prices by more than the smallest amount.
“Anti-dumping doesn’t challenge the consumer benefits of globalisation and low-cost exports- where they result from fair competition.”
12. Is Europe a big user of anti-dumping?
The European Commission has a legal obligation to investigate claims of dumping and a legal obligation to propose measures to remedy it when it is identified by an EU investigation. Definitive anti-dumping duties are imposed by the European Council.
“Proportionate to the size of its economy, the European Union is a very moderate user of anti-dumping measures, initiating less cases, and imposing less measures, than most other major economies including the US and India.”
13. Why is the Commission conducting a review of anti-dumping instruments?
Trade defence instruments are a vital way of ensuring fair trade, where goods are being produced in conditions of subsidy or price distortion is taking place. The EU already has the most rigorous and transparent AD rules of any economy. A periodic review allows us to ensuring public confidence in these instruments, and to make sure they are able to change if necessary to reflect a changing world. Many European companies now have global supply chains and invest and produce outside of the EU market. The EU’s economic interests are global and highly complex.
“To be able to respond to these changing circumstances, we need to be sure that our trade defence instruments and our use of them take account of the new realities of globalisation. There is no question of removing Europe’s right of recourse to anti-dumping measures”.
Import data: leather shoes from China and Vietnam Overall EU shoe market 2005: 2.5 billion pairs
Leather shoes as % of total EU shoe market: 35% Products covered by proposed definitive measures as % of total EU shoe market: 11%
Overall China shoe imports to EU 2005: 1.25 billion pairs China exports 2005, shoes subject to investigation: 206 million pairs China exports 2005, shoes covered by definitive measures: 174 million pairs
Overall Vietnam shoe imports to EU 2005: 265 million pairs Vietnam exports 2005, shoes subject to investigation: 119 million pairs. Vietnam exports 2005, shoes covered by definitive measures: 103 million pairs
Increase in Chinese leather shoe exports to EU 2004-2005: +450%, Increase in Chinese leather shoe exports to EU 2001-2005:+1000%
Increase in Vietnamese leather shoe imports to EU 2004-2005: 0% (largely due to competition from China)
Increase in Vietnamese leather shoe 2001-2005: +100%
Fall in average unit price for Chinese/Vietnamese leather shoes 2001-2005: China: -31%; Vietnam -20%; average -27%
Consumer prices for Chinese/Vietnamese leather shoes have remained stable or risen slightly 2001-2005
SOURCE: Eurostat and Commission data
