Trade Wars Over Shoes

According to Bloomberg the EU will Impose 20% Duties on Shoes From China, Vietnam.

The European Union will impose import duties as high as 20 percent on some leather shoes from China and Vietnam starting in April, to prevent the footwear from being sold below cost on the bloc's markets.

The EU, which in the last year imported 120 million pairs of shoes from Vietnam and 95 million pairs from China worth 5 billion euros ($6 billion), said it will impose rising tariffs over six months, to a maximum of almost 20 percent of their value. China has threatened to retaliate if the European Trade Commissioner Peter Mandelson levies the additional duties.

"This is a very consumer-hostile measure and would be particularly burdensome to low-income families as well as traders, importers and retailers," said Ralph Kamphoener, senior trade adviser at EuroCommerce, which represents European companies that employ more than 22 million people in the EU.

The EU's proposal adds to a series of disputes with China over textile and apparel imports and piracy of copyrights, trademarks and patents. China's emergence as an industrial economy has also provoked tensions in the U.S., prompting calls from lawmakers and the administration of President George W. Bush for a revaluation of the yuan.

By phasing in the penalties from April 7, the European Commission, the bloc's executive agency, hopes to avoid the kind of distribution blockages that occurred when the EU limited imports of Chinese textiles last year. The categories under investigation range from tennis shoes to stiletto boots covering 8 percent of all shoes sold in Europe.

Commission spokesman Peter Power said there is "compelling evidence of serious state intervention in the leather footwear sector" in both China and Vietnam. That intervention takes the form of "cheap finance, non-market land rent, tax breaks and improper asset valuation leading to dumping," he told journalists in Brussels today, adding that "there's evidence of both dumping and injury."

Mandelson will propose the punitive duties to the EU's anti-dumping committee on March 9.

The duties would "have a serious impact on the export of Vietnamese shoes to the EU," said Do Thanh Hong, a vice chairman of the Vietnam Leather and Footwear Association. "Importers will buy shoes from countries that have lower prices, for example, Indonesia."

If ever there was a violation of free trade it would be the EU with its agricultural subsidies. That aside, the EU is now attempting to protect a bunch of inefficient Italian shoemakers at the expense of all of Europe's consumers.

This line says it all:
The duties would "have a serious impact on the export of Vietnamese shoes to the EU," said Do Thanh Hong, a vice chairman of the Vietnam Leather and Footwear Association. "Importers will buy shoes from countries that have lower prices, for example, Indonesia."

This measure simply will not stop importers from looking for the cheapest shoes they can get. In the meantime, consumers in all of Europe will be hurt in order to please a handful of Italian shoemakers. The plain truth of the matter is that importation and distribution of shoes from Asia is a far bigger business in Europe than Italian shoemaking. The tariffs will do immediate harm to business and consumers as well.

No one can win with the actions taken by the EU. Consumers will look elsewhere, Italian shoemakers will not recapture lost market share, and supply channels will be disrupted (at expense) to places like Indonesia. In short, it is a lose lose situation.

Expect to see more actions like this.
Trade wars and tariffs are one of the hallmarks of deflationary times.

Mike Shedlock / Mish
http://globaleconomicanalysis.blogspot.com/