Will Brussels never learn? Only a few short months after the debacle over blocking imports of Chinese textile and clothing (the so-called 'bra wars'), press reports indicate that the European Union will impose import duties as high as 20% on tens of millions of cheap leather shoes from China and Vietnam. David Gow's report in the Guardian, Chinese shoes draw Mandelson into new tariff tussle, claims that EU Trade Commisioner Peter Mandelson "reluctantly" agreed the move, ostensibly because:
A nine-month investigation by EU trade officials has found "clear-cut" evidence that Chinese - and Vietnamese - firms have been dumping shoes with leather uppers in Europe at below the cost of production since all quotas were lifted on January 1 last year.
But maybe this was the real reason:
Mr Mandelson ..has come under pressure from European shoe producers in Italy, France and the Czech Republic to impose duties. A similar coalition forced him to declare temporary quotas on Chinese clothing last year.
He was reluctant about that those measures too. But that didn't stop Britain's voice in Brussels from opting for protectionism on both occasions. Wherever a lousy trade policy is to be found, one can expect to find Mr Mandelson ever so reluctantly signing up to it. His must be a life of perpetual regret.
Whether or not the dumping is real or imagined, it does not make much economic sense to curb cheap imports. As Bendt Bendtsen, the Danish economics minister, wrote in a letter to today's Financial Times, the cost to European consumers of more expensive Asian shoes could be almost 10 times greater than the economic benefit for European shoe producers:
Our studies show that ...the total gain for the EU producers is just above €100m a year if an anti-dumping duty of 40 per cent is being levied on leather shoes from China and Vietnam. For the consumers and the user industries in the EC the total loss can be estimated to approximately €975m per year. In other words, for each €1 gained by the EU producers from trade protection, EU consumers and user industries have to pay almost €10.
Philip Thornton in The Independent writes that tariffs would start at 4% on 7 April and be raised to a maximum somewhere below 20%.
Yesterday retailers condemned the decision, saying it would add an average of £5 to the price of a pair of shoes on UK high streets and open the door for similar demands for tariffs from other manufacturing groups.
The European Commission has clearly learnt from last year's import debacle, by raising prices rather than restricting import numbers - and by pre-announcing and phasing in the tarrifs, leaving room for negotiation.
This approach will be less visible to consumers, and help avoid embarrassing news stories about millions of items being held up at ports. But if it does come to fruition, plenty of low income consumers in Europe - not to mention even lower income workers in China and Vietnam - will suffer.
I leave the final word to Tim Worstall's column in tomorrow's Times: A cheap load of cobblers
This is “unfair” competition that leads to dumping: apparently some 215 million pairs of such shoes are being sold at less than the cost of the raw materials.
Leave aside for a moment every economist’s suspicion of such tales of dumping; on close examination they almost never turn out to be true. Think, instead, of what is happening if it actually is true. The taxpayers of Vietnam and China are being gouged by their governments. This money is then — via the subsidy to manufacturers — being offered to us, the shoe buyers of Europe. We get a pair of shoes plus whatever the subsidy was to spend on whatever else it is we wish.
It is near insane that the peasant in the rice paddy be taxed to make us Europeans even richer. But if our rulers actually looked out for us, they wouldn’t slap a tariff on the shoes. No, the only rational response to such an offer of free money is that (attributed to) Calvin Coolidge. When offered his first pay cheque as US President he said to the Treasury messenger who brought it: “Thank you. Please come again.”
But here's one thing I've never quite understood. OK, the shoes and leather are being subsidized by other countries so we can buy 'em more cheaply -- cool. But what if the effects of this goodie-shower are unappealing? What if some of our fellow countrymen -- shoemakers, leather-makers, shoe retailers -- are going to suffer? What if the domestic industry collapses? And what if this prospect is simply unappealing? It might make economic sense to let ourselves be swamped by cheap subsidized imports, but why should economic sense be allowed to triumph over any other kind of sense?
Posted by: Michael Blowhard | Thursday, February 23, 2006 at 04:49 PM