EU Tells China Not to Step on its Toes

1.2 billion pairs of shoes. That is the number of pieces of footwear that China annually imports to Europe. They are predominantly low-end models, providing an option for consumers with little spending power. In Germany, for example, Chinese shoes make up 49 percent of imports on the market.

Brussels has had its eyes on shoe imports from China and other low-cost places of production in Asia, and has taken action on behalf of European shoe manufacturers to throttle the increasing dominance of the competition from the Far East. Over the course of the next five months, tariffs will be raised to 19.4 percent on Chinese leather shoes. Vietnam will also be subjected to tariffs.

"It is important that we act against unfair trade while encouraging legitimate and competitive trade from emerging economies," said EU Trade Commissioner Peter Mandelson in March. "We do not target China and Vietnam’s natural competitive advantages, only unfair distortions of trade."

The EU believes that the two countries provide low-cost loans, partial tax exemptions and below-market rents to shoe manufacturers, which in turn leads to dumping abroad. This has harmed European competitors, said Mandelson.

European shoe industry displeased

The reactions to the new tariffs from the European shoe industry have hardly been ones of enthusiasm. Mandelson has asked shoe retailers not to pass on the surcharges to the consumers, having said that the shoe margins in Europe are high enough as is.

It is quite clear to German shoe retailers that this will not be possible.

"The ones who will be footing the bill for this bit of regulatory madness from Brussels are the consumers. The tariffs will cause shoe prices to rise," said Winfried Toubartz’, head of the Association of German Shoe Retailers.

The shoe manufacturers of Europe, who it might be thought would be celebrating the small victory, are also up in arms. The European Confederation of the Footwear Industry (CEC) said in a press release that although the measures were correct in principle, they were unsatisfactory.

The reasons varied from insufficient tariffs to the failure to penalize athletic shoes.

When approached this week to answer more questions about the tariffs, the CEC’s senior advisor Jean-Luc Tanghe was reluctant to answer. When asked just what the EU measure meant for the European shoe industry, he responded that the confederation was not satisfied "since the burden of tricks, copies and lies (of the Chinese) are a plague for European Cartesian minds."

China not to take this fight lying down

The European shoemakers may be worried about pirated footwear from China and Vietnam, but the competition in China is determined not to accept Mandelson’s decision.

The shoe industry provides work for some four million people in China. One of the largest Chinese companies alone has 200,000 employees putting shoes together, primarily for foreign markets. 150 private Chinese shoe manufacturers have banded together to contest the EU tariff, and are going before the European Court of Justice in Luxembourg.

"Most of the pressure against us is coming from Italy, Spain and Portugal, but the European companies will suffer under these tariffs. After all, we use Italian machines," Yu Shengxian, the lawyer representing the 150 Chinese companies, told Deutsche Welle.

The shoe industry has been a boon to China. The profit margins are biggest in the EU, hence, more jobs are being created especially to cater to that market.

"We are building a plant bigger than the main just to make shoes for Europe. But the tariffs, they could ruin our plans. We currently have 3,000 employees. The new plant will employ 4,000," Liao Haijun, marketing director of shoe manufacturer Fuguinao, told Deutsche Welle.

The booming economy of China is boosted by such business. China’s profits are coming at the cost of Europe, however, according to Trade Commissioner Mandelson. It is hard to believe that either side will sacrifice jobs, either protecting or creating more of them, just to reach a compromise.

The association of 150 Chinese shoemakers has suggested that if no proper agreement is achieved, then they will go to the World Trade Organization with their case.