A trade row waged with heart and sole

EU Trade Commissioner Peter Mandelson recently expressed ambition to develop a clear strategy for Europe’s fast-developing economic relationship with China. Unfortunately, the reality is that the substance of the relationship can be messy and uncertain, as the saga of the proposal to impose anti-dumping duties on leather shoe imports from China and Vietnam has demonstrated.

The attempt to impose anti-dumping duties has provoked violent differences of opinion, aggressive rhetoric and failed negotiations to find a compromise position: and that is only within Europe.

Ever since the dumping complaint was made by European shoe manufacturers, the issue has been a political hotcake.

When the European Commission found that dumping had taken place, strong opposition by the governments and producers in China and Vietnam could be taken as given. But in the final outcome, their complaints will have been less influential than the differing positions adopted by European governments and businesses.

As it was, provisional anti-dumping duties were imposed on leather footwear from China and Vietnam in March this year. This was a preliminary step prior to a final decision on whether to impose anti-dumping duty.

The producers who stand accused will mount their defense but the transition from preliminary imposition to a final determination is normally a relatively straightforward and uncontroversial procedure. In almost all cases the final decision to impose duties follows the provisional measures.

Searching for compromise

However, the shoe case has not developed along the lines of other dumping complaints. Sustained opposition within Europe has left the Commission looking for a compromise position that satisfies both supporters and opponents of the measures.

At one stage it proposed the introduction of a quota system, with duties imposed on above-quota imports. This was rejected by shoe producers in Europe, mainly on the grounds that it provided for levels of duty free imports that were too high.

The Commission then suggested anti-dumping duties of 16.5% on shoes from China and 10% on shoes from Vietnam, lower than the original provisional duties.

This offer was rejected in early August by a majority of member states who were opposed to the imposition of any duties on shoe imports.

At the end of August the Commission made its proposal for the final duty, which was in fact identical to the levels that had been rejected by most member states just a few weeks earlier. It then effectively washed its hands of the affair, leaving the member states to fight it out.

"The Commission has fulfilled its obligations and its responsibilities and has brought forward a sound proposal," the body’s trade spokesman said. "It is now for the member states to debate their position among themselves."
That the Commission, which is the policy-making body of the EU in this area, should make a proposal, and then in effect express indifference as to whether it is accepted or not is highly unusual. It no doubt reflects the Commission’s view that its influence over the outcome will be limited.

Having seen the same proposal rejected once, it has little to gain by putting a serious effort behind the cause.

Mandelson has consistently said that while the Commission will act where unfair trade is involved, it will not support protectionism. Even if the imposition of anti-dumping duties is not actually protectionism but legitimate trade defense, given the apparent depth of the divisions, in this case he would prefer the countries seeking protection to fight their own battles.

Interestingly enough, at the end of August, the Commission also said it was dropping an anti-dumping investigation of reinforced shoes from China and India after the European manufacturers withdrew their complaint.

A union divided

All this hardly gives the impression of a coherent European response to the challenges of globalization.

On a positive note, even if the duties do come into force, the controversy belies the notion of a fortress Europe, united behind a strategy to maintain impenetrable protectionist walls. The divisions revealed are based on principles as well as interest.

Rather than being a simple distinction between countries that have shoe industries and those that don’t, it has become a battle between those that lean towards trade and the market, and those that steer towards industrial policy and protection.

It is also a division between those who give greater weight to the consumer and those who seek first to protect producers.
Even though the Commission insists that the percentage of European shoe imports affected by the duties will be small, and price rises for consumers will not be large, it is undeniable that many consumers would be affected.

Regardless of the result, it is difficult to read too much into one or even two anti-dumping cases involving China. The ramifications of the shoe case, like textiles before it, are very broad, which is why it has excited such divided opinions. Other cases, affecting products with a much narrower impact, attract much less attention.

Failure to implement the duties will not mean that Europe has become the standard-bearer of unrestrained free trade; nor will their implementation mean that Europe is irrevocably protectionist.