Duties on leather shoes

Louis Cauchi Savona writes:
The Maltese government has imposed an extra duty, termed "anti-dumping duty", on shoes partly made of leather. We are importing these items from outside the EU and we are paying hundreds of liri in "anti-dumping duty".

It has come to our attention that "under WTO rules, anti-dumping measures may only be imposed if, in addition to the price differential, material injury is caused to domestic industry producing like products in the importing country".

Anti-dumping measures are imposed when a firm is assessed as having sold a product in the importing market at prices below the one it charges for the same product in its home market (hence termed dumping). Yet, there are no such manufacturing firms producing the same products in Malta.

Thus, it is our opinion that the "anti-dumping duty" imposed on such part-leather shoes is not in line with EU rules. Could you kindly inform us whether the anti-dumping duty applied in our case is legally recognised under EU law.

The duties imposed on leather shoes are perfectly in conformity with EU law since they were agreed at EU level. So there is no question on their compatibility with EU law.

Readers will recall that the European market, including Malta, was opened up to Chinese clothing and shoe products as from last year. This has had a massive impact because it is clear that China has a clear competitive advantage over European products.

The impact was obviously positive for us as consumers as we benefited from cheaper goods. But it was negative for European industry, which has shed thousands of jobs as a result. Job losses affected our country too.

In order to weather this impact, last year the EU imposed quotas on Chinese clothing, not least on women's underwear - hence, last's year notorious "bra war".

Yet, in the case of Chinese and Vietnamese leather shoes, the situation has been exacerbated by a European Commission investigation that found that, over and above their natural competitive advantage, China and Vietnam are also giving their leather shoe industries significant fiscal advantages, ranging from cheap finance, tax breaks, non-commercial charges for land rents to export incentives. All these incentives are severely restricted in Europe and, therefore, put Chinese and Vietnamese companies at an unfair competitive advantage over their European counterparts.

It is this unfair advantage that the duties imposed on leather shoes earlier this month, known as anti-dumping duties, sought to curtail. It is in such cases of "dumping" of products that "anti-dumping duties" are used. Indeed, the European Commission has been keen to stress that these duties are not intended as "protectionism" of EU industry, nor even to wipe out the inherent competitive advantage of Chinese and Vietnamese products, but simply to remove the unfair advantage resulting from the incentives I mentioned.

Products are considered to have been wrongly "dumped" in a market when the export price is shown to be lower than the price on the producer's home market and when this causes a material injury to EU industry. This was established following a long investigation undertaken by the European Commission that led to the imposition of "anti-dumping duties" on these products.

Now, as the reader rightly points out, there is no industry in Malta that manufactures these products. So no damage could have been caused to local industry.

Why, then, should we apply these duties?

The answer is that EU trade rules seek to protect EU industry from unfair competition coming from outside the EU regardless of how many or which EU countries actually manufacture the products in question.

This time round we may be paying higher duties on some leather shoes to prevent a manufacturing plant, say, in neighbouring Italy, from being wiped out. But tomorrow, it could be us.

Of course, there are other EU policies that come into play, not least the new European Globalisation Fund that is precisely intended to act when massive job losses hit European industries.

EU Structural Funds also help EU countries adapt their industry from relatively uncompetitive sectors, such as textiles, to high value-added and better-performing sectors, such as pharmaceuticals and high tech.

This is precisely the difficult transformation that we have seen in our local industry over the past few years.

Back to anti-dumping duties. Once imposed, they apply in all EU countries, thereby creating a formidable full circle around the EU market. Duties are imposed regardless of which EU country the products enter. Having entered in one EU country, goods acquire full free circulation throughout the EU without any further taxation.

As to the actual rates of the duties, earlier this year provisional duties were applied until a final decision was taken. These were progressively imposed on some categories of leather shoes over a period of five months from April this year, reaching 16.8 per cent in the case of Vietnam and 19.4 per cent in the case of China.

Earlier this month, the EU Council of Ministers confirmed these duties but reduced them to 16.5 per cent on China and 10 per cent on Vietnam. Malta abstained. But for the purposes of this vote, an abstention indicates a non-opposition to the duties.

So like all other EU countries, Malta is now imposing anti-dumping duties on some categories of leather shoes imported from China and Vietnam. A total of Lm200,000 worth of shoes from these two countries was imported into Malta last year. But the duties only affect some categories of this total, not all.

Last year, in the EU as a whole, out of a market of 2.5 billion pairs of shoes, Chinese shoes accounted for around one half. Leather shoes account for 35 per cent of the EU market whereas the duties affect nine per cent of the market.

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