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Unfair Protectionism
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The anti-dumping duty imposed on China's shoe-making industry by the European Union (EU) is turning out to be a force helping to reshape the industry's competitiveness, however, the EU decision is still unwise.

The protectionist measure will add little to local employment in Europe and is unfair for both Chinese shoe-makers and European consumers and businesses in general.

The EU agreed last Wednesday to impose tariffs on Chinese and Vietnamese shoe imports for two years "to prevent cheap imports from flooding local markets."

For Chinese shoe-makers, the new tariff has only caused disappointment rather than panic.

Since April when the EU imposed six-month tariffs of 19.4 percent on leather shoes from China, Chinese shoe-producers have reacted by diversifying their overseas market or shifting its growth focus from quantity to quality. Some are set to build overseas factories to address the tariff issue. All are painful and risky adjustments, but Chinese shoe-makers have recognized the need to take them.

The calm response from Chinese shoe-makers to the EU's two-year duty does not mean the new protectionist measure is acceptable in any way.

The Chinese Government has already expressed its dissatisfaction, noting that the filing, the investigation and the ruling of the case has legal defects that run contrary to World Trade Organization rules and the EU's own anti-dumping laws.

However, what makes this protective measure particularly unwelcome is not only its violation of the prevailing principle of free and fair trade, it also draws vehement criticism from home for ostensibly causing more damage than good to local economies.

The European Commission estimated that the ruling could add € 1.40 (US$1.80) to the price of Chinese shoes, which average retail price is € 35  (US$44.80), if importers and retailers pass the increase on to customers.

Reduction of shoe imports from China will more than likely lead to job losses to EU's retailers and importers as well as trigger a rise in consumer prices.

While risking so many negative consequences, the only group that seems to benefit from this protectionist measure is shoe-producers in some EU member countries. But even that supposed gain to some local producers is far from secured. In the era of accelerated globalization, the prosperity of an economy or an industry increasingly hinges more on its flexibility to adapt to changes than anything else.

China's rise as a manufacturing centre is a phenomenon of this time.

In the world's industrial shoe chain, the EU enjoys superiority in the design, technology, equipment and sales network while China is good at processing with a huge and low-cost labor force.

The expansion of China's market shares in shoe-making will be simply market competition in practice.

Meanwhile, the EU can also concentrate on doing the things it does best. That will require the EU to adopt measures to facilitate employment in sectors where its superiority is the greatest.

Protectionist measures, such as the anti-dumping duty on China-made shoes, are definitely not an option.

(China Daily October 9, 2006)


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