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Yesterday he formally opened the “shoe wars” between the EU and China and Vietnam by publishing a list of the quotas he recommends on imports of their footwear. He is doing exactly what Italian shoemakers want him to do (and the quotas may take effect two days before Italy’s elections).
But shoes on the high street will immediately be more expensive. He will do nothing for Italian shoemakers by shielding them briefly from the competition they have failed to match. With this one move he has given Europe’s trade policy a powerfully protectionist tone that may influence future decisions for the worse and undermine Europe in the Doha world trade talks. Under Mandelson’s plan a four-stage tariff would be slapped on Chinese leather shoes. The levy would begin at nearly 5 per cent from April 7 and rise to almost 20 per cent in September. Vietnamese imports will suffer slightly lower levies. The EU’s 25 members will decide next month whether to adopt the plan.
This is a perfect echo of the “bra wars”. The EU lifted quotas on Chinese imports of clothes and shoes in January 2005 and they flooded in. Chinese shoe imports rose by more than three times in the first nine months of last year compared with the same period in 2004 before the quotas were lifted.
The small leatherworkers of Italy and France believe this torrent means annihilation even though they had a decade’s warning of the end of quotas last year. About 30 manufacturers have complained to the Commission.
Mandelson certainly does not want a repeat of the humiliation of the bra wars. Clothes, already ordered by European shops, piled up at the docks because the quotas had been filled. This time he has chosen levies, not quotas, to avoid that problem.
But his reasoning appears to owe more to politics than to economics. The report does offer some economic claims. It argues that there is evidence of “dumping” and subsidies by China and Vietnam which amount to unfair competition.
Peter Power, his spokesman, said this week that support included “cheap finance, non-market land rent, tax breaks and improper asset valuation”.
Perhaps. But this is murky territory. The Commission cannot be faulted on ambition for declaring that it can find financial details of the Chinese economy with enough solidity to make this judgment. But China and Vietnam can easily challenge the analysis — and at great length, and expense. They say that lower labour costs, above all, let them make shoes so cheaply.
Many think that if Europe’s producers are to save themselves they will have to concentrate on making designer shoes or on marketing shoes made elsewhere. But they cannot hold back the wave.
Mandelson might think his plan a good compromise between the shoemakers’ clamour for much higher tariffs and the need for lower prices.
But the question is whether, as Trade Commissioner, he should be engaged in this bartering at all. In the interests of competitiveness he should be heavily favouring consumers.
As a further political gesture he has exempted children’s shoes (and sports shoes) from the tariffs. So he will be spared declarations that he has deformed the toes of Europe’s children when their parents could not afford new shoes.
But that only weakens the economic claims that are supposed to justify these quotas. If Europe’s consumers deserve cheaper children’s shoes, then they deserve cheaper adult ones too. He is doing Europe no favours by ignoring its stark problems in competing with the giants of the developing world.
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