Following in textiles

If 2005 was the year of textiles, footwear is shaping up to be the focus of Europe-China economic tensions in 2006 as the European Union looks set to impose anti-dumping duties of nearly 20% on a broad range of Chinese exports in this category. While many other anti-dumping actions affect goods the public has little knowledge of, the ruling on leather shoes and also certain types of protective footwear will directly affect virtually every consumer in the EU, as well as an industry employing millions in Europe and China.

With the ink barely dry on the textile agreement, the imposition of duties on footwear slated for April 7 could open up a new front in this still-simmering trade dispute. It will also throw light on the size of the role anti-dumping actions can expect to play in the future of European protectionism.

Already this year, definitive anti-dumping duties were imposed on tartaric acid, and provisional anti-dumping duties on lever arch mechanisms originating from China. The Commission also extended anti-dumping duties on ring-binder mechanisms produced in China to those that are consigned from Laos. The move is intended to Chinese manufacturers selling through Laos in order to evade duty.

Under scrutiny
Investigations launched against Chinese exports last year but not yet concluded indicate the type of products threatened with anti-dumping duties in the near future. They include chamois leather, recordable compact disks (CD-Rs), recordable digital versatile discs (DVD+/-R) and tungsten electrodes.

China continues to be the leading target of anti-dumping measures by the EU. In 2005 it was the subject of eight new anti-dumping investigations, out of a total of 26 that were launched by the Commission. The number and proportion remain roughly the same as in 2004, when China accounted for nine out of 29 new investigations. But these figures do represent a sharp increase on the level that existed in the preceding years. In 2001 only one case was initiated against China, out of a total of 33, in 2002 there were four, and in 2003 three, although that was out of a total of only eight investigations.

The figures for initiation of investigations may actually downplay the importance of China as a target. During 2005, anti-dumping investigations concerning nine products resulted in the imposition of provisional anti-dumping duties, and in eight of those cases China was a source country, though not always the only one.

Similarly, of 11 products where definitive anti-dumping duties were imposed, nine involved China as a source country. Furthermore, it seems that China's success rate in defending anti-dumping investigations is poor. In 2005, of 10 investigations that were terminated without imposition of anti-dumping measures, not one involved China. Nor was China successful in defending any of the complaints against its exporters in 2004.

Although these figures might indicate otherwise, China has not suddenly become the focus of EU concern over unfair trade practices. During the 1980s and 1990s the EU resorted much more frequently to anti-dumping measures than it has in recent years, and China was often the target. Still, given the trends currently in evidence, the preponderance of China in EU anti-dumping actions is likely to grow.

The limits on textile imports imposed last year were not the result of anti-dumping action, and may be considered an exceptional case, but efforts by European industries to protect themselves by limiting imports from China will go on. Even if there is no possibility that this issue will disappear any time soon, it is important to keep the problem in perspective. It is generally reckoned that anti-dumping actions affect roughly 0.5% of total EU imports from China.

In the past they have often been against relatively minor categories of goods, many of them industrial inputs unknown to the general public. Footwear will be different, since any duties imposed by the Commission will affect goods that are directly consumed by everyone in Europe.

Perhaps because of its wide impact, the footwear investigation is proving as divisive as the textile dispute, and not just between Europe and China. Countries such as Italy, where there remains a large footwear industry, are strong in calling for protection from Chinese dumping, but in other countries there is much less enthusiasm.

Vocal opposition
As in the case of textiles, retailers and importers have been loud in their opposition to any move to impose anti-dumping duty. Even among manufacturers there are divisions. Some of the largest European sports shoe companies point out that they moved production to China and other parts of Asia long ago. Any blanket action against imports of shoes from China will destroy their business, but will not bring any jobs back to Europe.

Whether the increase in the number of cases against China reflects a real growth in the amount of dumping may be questionable. The merits of anti-dumping legislation are contested among economists, and there are also many neutral observers who criticize the system. What is certain is that in recent years there has been a great increase in the level of European imports from China, and also a growing perception in many industrial sectors in Europe of a threat from Chinese producers.

EU Trade Commissioner Peter Mandelson has insisted that anti-dumping actions cannot be relied on as a protectionist barrier to keep out competitors. But all the evidence suggests that this kind of action has become a primary means of commercial defense for some beleaguered industries in Europe unable to cope with competition from China.

Duncan Freeman, a writer and consultant in Brussels, specializes in China business