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China takes EU shoe complaint to WTO
Published on: 2010-02-05
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China filed a World Trade Organisation complaint against the European Union on Thursday over its treatment of imported footwear, escalating a long-running dispute between the trading partners.

The move follows the EU’s decision in December to extend anti-dumping duties against Chinese and Vietnamese footwear for 15 months. It comes at a time of rising tension between China and its western trading partners – a situation that has been exacerbated by the economic recession.

China’s ministry of commerce said the EU tariffs “damage the legitimate rights and interests of Chinese enterprises”.

The duties amount to 16.5 per cent for Chinese imports and 10 per cent for Vietnamese. They were originally rejected by EU member states in a non-binding vote in November. But Germany, Austria and Malta later changed their positions amid heavy lobbying by the Commission.

Many European retailers and global shoe brands, which source numerous products from China, also opposed the opposed the move.

In what was seen as retaliation, China quickly slapped duties on imported carbon-steel fasteners from Europe.

In its filing, China is requesting consultations with the EU to try to resolve the matter. If the two sides cannot agree a settlement within 60 days, then China would request a ruling from the WTO.

It is only the second time Beijing has taken the EU to the WTO’s formal dispute resolution process and comes as Beijing is becoming more assertive on the world stage on issues ranging from climate change to US arms sales to Taiwan.

The European Commission said on Thursday that it had “taken note” of China’s action, and that it had “scrupulously followed” WTO rules in reaching its decision.

The complaint comes at an awkward moment for Brussels, with the new trade commissioner, Belgium’s Karel De Gucht, recently appointed but not yet confirmed by the parliament. That is expected to occur next week.

During a confirmation hearing last month, Mr De Gucht pledged to apply anti-dumping measures based on rules – not politics – and to deepen the dialogue with China, which has quickly become one of the EU’s largest but most contentious trading relationships.

The row has emerged as a closely watched test of the EU’s commitment to free trade in the middle of an economic recession. It has pitted small shoemakers in Italy and Spain against large retailers from the UK and elsewhere that have increasingly outsourced production to Asia.

The EU first imposed the duties for two years in 2006 after a surge of low-cost imports eroded the market share of domestic footwear manufacturers. European market share has since stabilised.

Lord Mandelson, who imposed the original duties in his previous role as European trade commissioner, lobbied heavily against their renewal. Lord Mandelson, the UK business secretary, warned that such a move could damage trade relations with China and Vietnam.

In a statement on Thursday, the European Footwear Alliance, whose hundreds of members includes retailer Adidas and Clarks, said it shared China’s view that the EU decision had been based on “a very questionable investigation and a flawed analysis”.

“The extension of the footwear duties opens the door to retaliatory measures on EU exports to China and puts paid to European leaders’ repeated pledges to defend free trade,” the group added. “The EFA calls on the European Commission to take immediate action to prevent relations between the EU and China from degenerating further.”

Concerns over the potential for a trade war involving China and the west have been growing in the aftermath of the financial crisis.

Beijing has refused to allow its currency to appreciate since the onset of the crisis despite complaints from many of its trading partners that it is pursuing a mercantilist policy that puts other countries at a disadvantage.

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