Chinese exporters lose out.

European manufacturers in China lose out.

European exporters lose out.

And European consumers lose out.

The provisional tariffs slapped on Chinese leather shoes by the European Union (EU) is a lose-lose situation which must be turned around, a top Commerce Ministry official said Thursday.

A woman walks past a poster advertising shoes in Guangzhou, southern China February 21, 2006. [Reuters]

The EU was not justified in imposing the anti-dumping penalties because there was no credible evidence for denying market economy status to Chinese shoemakers, Vice-Minister of Commerce Gao Hucheng told China Daily.

He was referring to the EU decision to levy provisional tariffs on imports of Chinese leather shoes. The measures come into force today and gradually rise from 4.8 per cent to 19.4 per cent by October, when a final decision is expected.

"The EU declined to grant market economy status to 13 firms it investigated on the spot. But all of them are privately-owned or foreign-invested, and comply with the criteria for market economy treatment," said Gao, also the ministry's international trade negotiation representative.

"It also denied market economy treatment to non-sampled companies, about 150 or 90 per cent of the total respondents, without giving any explanation," he added.

The EU began to give market economy status to some Chinese firms in anti-dumping cases in 1998. As China has not yet been recognized as a full market economy by the EU, the status helps individual companies gain access to the European market.

The EU violated not only World Trade Organization anti-dumping rules but also its own laws and anti-dumping procedures, Gao said, because none of the 160 respondents had received disclosure from the EU on their claim for individual treatment.

The EU's determination on dumping and injury in the case lacks enough evidence, he said.

Shoemaking is a labour-intensive industry in which China enjoys comparative advantages in terms of labour and resources; and the EU should not arbitrarily regard the price advantage of Chinese leather shoes as amounting to dumping, he said.

"Most Chinese shoemakers are small- and medium-sized companies that are not able to dump goods in the EU market," he added.

He noted that the European petitioner listed only 6 of 15 injury evaluation indicators required by the WTO Anti-dumping Agreement.

"So the EU lacks adequate evidence to file the case," Gao said. Since no harm has been done to the EU industry, there is no reason for the case, he said.

The penalties were also against EU companies' interests, Gao pointed out.

According to Chinese statistics, footwear producers from the original 15 EU member states have set up 478 plants in China with an actual direct investment of US$737 million; and they also export to the European market.

"Anti-dumping measures against Chinese footwear exporters will surely impair the profits of EU footwear producers and investors in China," Gao said.

Chinese footwear exports are basically low- and middle-end products, while the EU produces mostly high-end goods, he said.

"Meeting different needs of consumers, the two kinds of products are not in direct competition; and have obvious differences in sales channels and market segmentation. The anti-dumping measures are not only unnecessary but also harmful to the interests of EU middle- and low-end consumers," he explained.

Gao said footwear exports from China generate lucrative returns for EU importers and retailers and provide a large number of jobs in the economic bloc.

The development of the Chinese footwear industry also ensures EU exports of shoe-making machinery, leather and other raw materials every year.

According to Chinese customs statistics, in the first 11 months of 2005, leather imports from the EU reached US$570 million, a year-on-year increase of 27 per cent. China imported US$54.04 million worth of shoe-making machines from the EU in 2004, up 26 per cent year-on-year.

Gao urged the EU to treat Chinese firms fairly and re-evaluate the whole case to ensure the development of shoe trade.

Last July, the EU initiated anti-dumping investigations into leather shoes worth US$730 million from China the largest single anti-dumping case between the two economies.

According to statistics from the Ministry of Commerce, the EU is not only China's largest trade partner but also a major source of dumping charges against China.

(China Daily 04/07/2006 page1)