Feb 4, 2010
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China launches dispute at WTO over EU shoe duties

Feb 4, 2010

By Jonathan Lynn and Lucy Hornby

GENEVA/BEIJING, Feb 4 (Reuters) - China launched a dispute at the World Trade Organisation on Thursday 4 February against EU duties on shoes, but the European Union insisted its measures were in line with WTO rules and denied they were protectionist.

China's protest against anti-dumping duties extended in December was further evidence of its increasing assertiveness in the WTO.

It also indicated that despite mounting commercial tensions around the world between the United States, China, the European Union and other states, the rules-based global trading system is still working and the WTO remains the preferred forum for countries to work out their trade differences.

The dispute will be closely watched by major shoe industry players such as Germany's Adidas (ADSG.DE) and Puma (PUMG.DE), and Nike (NKE.N) of the United States, as well as smaller European players such as Italy's Geox (GEO.MI), Denmark's Ecco and Spain's Camper.

China said in a filing to the WTO on Thursday 4 February that it was seeking consultations with the European Union over the duties, the first step in a formal dispute at the global trade arbiter.

WTO rules allow members to impose extra duties on imports that are "dumped" or sold for less than they cost at home, if they cause damage to business in the importing country.

It is the second case China has taken to the WTO against the European Union and only its seventh since joining in 2001.

EU ministers voted on Dec. 22 to extend duties on shoes from China and Vietnam, the two biggest exporters to the European Union, by 15 months.

China had lobbied hard against the decision, which extended duties first levied in 2006.

"The European Union anti-dumping investigation and finding contravenes relevant WTO regulations, and hurts the legitimate interests of Chinese companies," Ministry of Commerce spokesman Yao Jian said in a statement on the ministry's website.


But the EU said its move had followed WTO rules on dumping.

"The decision to impose measures was taken on the basis of clear evidence that dumping of Chinese products has taken place and that this is harming the otherwise competitive EU industry," acting EU commission trade spokesman John Clancy said in a statement.

The decision was controversial even within the EU. The bloc's anti-dumping committee had rejected an extension in November, responding to fears of retailers and consumer groups that it would push up prices.

Chinese- and Vietnamese-made shoes are estimated to make up 30 percent of the EU market.

But Prime Minister Silvio Berlusconi of Italy, home to many small shoe manufacturers, mobilised support within the EU for an extension, persuading Germany and other opponents to abstain.

The economics of the shoe industry are complicated, as manufacturing, often outsourced, makes up a relatively small part of the value of the product against components like design and development, still handled at home.

A recent Swedish study found that a shoe manufactured in China could still be regarded as a "European shoe", with EU added value accounting for typically over 50 percent of a low-price show, and over 80 percent for upmarket footwear with high design and marketing costs.

If the two sides do not resolve their differences within 60 days, China can ask the WTO to rule on the case.

The extended duties took effect from Jan. 3 and amount to a 16.5 percent tariff on imports of Chinese leather shoes and 10 percent on those made in Vietnam.

An official at Vietnam's mission to the WTO said he was aware of Beijing's move but had not received any instructions from the government in Hanoi and so was unable to comment further. Vietnam was following the case closely, he said. (Additional reporting by Zhou Xin in Beijing; Editing by Louise Ireland)

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