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EU Duties Will Not Help Its Shoe Industry
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The decision of the European Union to impose anti-dumping duties on Chinese shoes will not save local shoemakers from increasingly fierce competition but will rather hurt Chinese counterparts unfairly.

By yielding to protectionism at home, the EU has given up an opportunity to sharpen its own competitiveness. The unjust punitive measures against Chinese shoes, which come into effect early next month, will only compromise the EU's commitment to free and fair trade.

Ever since the proposed anti-dumping measures were unveiled last month, Chinese shoemakers and trade officials have expressed strong opposition not about the exact margin of the tariffs, but about the reasons why the penalties are being instigated in the first place.

EU trade officials claimed that China is selling leather shoes at below-cost prices and violating world trade rules. Even though their representatives were sent to visit China recently, the correct practices observed in Chinese shoe-making companies were obviously not taken seriously during the EU's decision making. Private firms and joint ventures have already rendered shoe making into one of the most competitive businesses in China.

It is well known that China, as the most populated country in the world, currently enjoys a great advantage of low labor costs.

Even though the country has not been universally accepted as a market economy 53 countries have so far fully recognized the country's market economy status this will not change the fact that Chinese manufacturers, especially in those labor-intensive sectors, have to be very competitive in pricing. Cutthroat domestic competition and the ample supply of the cheap labor force will naturally make cost-effectiveness a precondition for their survival.

However, this basic logic of comparative advantages that underpin rapid growth of international trade and the accelerated economic globalization do not seem to sell well in the EU nowadays.

Protectionist pressure from some of its member countries has persuaded the EU to endorse short-sighted sanctions on Chinese shoes.

Yet, the benefit for those few EU shoemakers will be limited, if there is any at all.

The curbs on China shoe imports will not sharpen EU shoemakers' competitive edge and hence secure their market share.

The cost EU consumers have to pay by buying more expensive shoes will prove unnecessary and fruitless.

Painful but inevitable industrial restructuring would be the better option. The quota system that only ended at the beginning of 2005 shows that protection will not goad local shoemakers to slash costs aggressively.

And the hurt such unfair trade penalties exert on Chinese shoemakers is unfair and detrimental to bilateral trade relations.

It is absurd that Chinese shoemakers will be punished simply for producing more efficiently than their rivals in developed countries and other developing economies.

As the largest trade partner of China, the EU is admittedly quite exposed to the so-called "China factor," while benefiting tremendously from cheap Chinese imports.

China is competent at producing labor-intensive goods, but not all goods. The shock that imports from China make on local industries can serve as a needed stimulus for them to upgrade or move into production of what the EU, not China, is good at.

It is predictable that as fair trade helps boost economic growth, an ever-expanding Chinese market will not only benefit domestic companies but also trade partners. Those capable of providing alternative products will undoubtedly benefit.

Unfortunately, EU trade officials lose sight of such a win-win solution overall, when escalating protectionism.

To make bilateral trade and global trade at large a sustainable growth engine for all, the EU should not continue to avoid the price of industrial restructuring, that every country has to pay in its own way.

(China Daily March 24, 2006)


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