As the deadline for a decision by the EU on whether or not to impose tariffs or quotas on leather footwear imports from China and Vietnam draws nearer, trade groups from Europe and the US are warning that any duties could lead to economic chaos, rising prices and shoe shortages.

The footwear row has been rumbling since July 2005, when a group of European footwear companies filed a complaint with the European Commission in Brussels seeking the imposition of anti-dumping duties against leather footwear originating in China and Vietnam.

Not surprisingly, it has provoked a sharp division between big European retailers who have moved most of their production to low-cost producing countries, and Europe's remaining manufacturers who are struggling to compete with low-priced imports.

European politicians are due to meet in Brussels in mid-February and are expected to decide in early March whether or not to impose tariffs or quotas on leather footwear. If they give the green light then measures would take effect from 23-24 March.

Provisional duties would then be imposed for a six- to nine-month period, and in October the member states would meet again to vote on definitive five-year duties.

Retailers fear shoe prices could shoot up if the EC places additional duties on imports from China and Vietnam, with the move potentially adding up to GBP10 (US$17.6) onto a pair of high street shoes.

Alisdair Gray, director of the British Retail Consortium in Brussels, told just-style that so much momentum has now been built up that he fears the EC's decision to impose anti-dumping duties is "unstoppable."

"We just hope it takes the most sensible route and exempts the most vulnerable shoes, such as children's shoes," he says.

"The actual duties are up for discussion, but we hope the EC will impose a single digit ad valorem duty to all forms of shoe." 

Gray adds: "China specialises in mass-produced, cheap shoes, which European producers cannot match. The EU thinks this is protection for its industry, protection against job losses," he said. "But you just can't buy the same sort of goods in Europe."

His views are echoed by Kevin M Burke, president and CEO of the American Apparel & Footwear Association (AAFA), who says: "Anti-dumping duties will result in absolute chaos throughout Europe's economy. Prices will double, if not triple - if consumers are able to find the shoes and brands they want on the store shelves at all." 

Burke continues: "The time has come to face the realities of today's economic situation. Imposing duties on European shoe imports, which already account for 80% of the footwear sold in Europe, would prove to be absolutely devastating to European consumers and workers alike."

But European shoe makers - particularly from Italy - disagree, arguing that surging competition from low-cost countries such as China and Vietnam could badly damage their industries and lead to hundreds of thousands of job losses.

While the British Retail Consortium has conceded that an 8% duty would be acceptable, for example, the Italians are clamouring for duties as high as 50%.

EC investigations
The European Commission began its investigations last year after some EU member countries complained they were being unfairly hit when shoes from China and Vietnam were 'dumped' on the European market. Under EU rules, 'dumping' takes place when products are sold at a price that is less than the cost of the raw materials or cause damage to the industry within Europe.

Pressure is mounting after EU member states backed an EC proposal on 12 January to reject market economy status for 13 shoe producing companies in China, which makes it easier for the EC to impose large anti-dumping duties.

This latest trade spat echoes tensions between the EU and China in 2005 over soaring imports and falling prices of certain apparel and textile items from China after quotas on trade between members of the World Trade Organisation were abolished at the beginning of the year.

On 10 June 2005 this dispute was partially resolved when the EU and China agreed to introduce a phased quota system limiting annual growth in Chinese textile and apparel imports to the EU to between 8.5% and 12.5% until the end of 2007.

A delay in application by the EC, however, resulted in 87m garments getting stuck in customs posts around the world - the so-called Bra Wars shambles - which was only resolved by new regulations on 14 September to release the blocked products.

Similarly, EU monitoring showed that exports in six categories of shoes from China to Europe jumped by 681% in the first four months of 2005, with prices plummeting by 28%.

"If the Europeans liked the embarrassing debacle that was last summer's apparel crisis, they will love the nightmare they will create if they do the same thing with shoes," AAFA's Burke cautions.

European market strength
AAFA has stepped into the fray because it represents US footwear brands that sell millions of pairs of shoes to European consumers and employ tens of thousands of European workers through their European subsidiaries, distributors, retail stores and distribution centres. Europe represents the second largest market, after the United States, for many US footwear brands.
 
Burke continues: "EU imports from China and Vietnam alone supply over half of the shoes sold in the European market - well over 1 billion pairs. European manufacturers today don't even produce half that amount.

"Do EU manufacturers really think they could make up for the loss of a billion pairs of shoes overnight? At what price? Can European consumers and the tens of thousands of European workers whose jobs are threatened afford to pay that price?"
 
The reality is that Europe's footwear companies now source most of their products and components from China, Vietnam and other countries where labour costs are low.

While factory jobs have been lost, they have been replaced with much higher paying skilled positions in the areas of design, technical development, logistics, marketing and retail.

"If duties are imposed," Burke explains, "many of these workers will lose their jobs."

The US story
If the US footwear experience is anything to go by, then protectionism will not help European manufacturers.

The number of US footwear manufacturers has fallen from 1,100 in 1968, to just 80 factories today. Last year, those companies produced only 35m pairs of shoes worth about $1.2bn at wholesale, or $3bn at retail - compared with a peak of more than 700m pairs of shoes per year turned out nearly 40 years ago.
 
Today, 98% of shoes sold in the United States are imported, compared to only 50% in 1980, the year the US government ended a temporary period of quotas. Since then, US footwear imports have grown at an exponential rate, exceeding 2bn pairs a year with a customs value of over $16bn.
 
Even so, the US footwear market is booming. Last year US consumers purchased a record 2bn pairs of shoes at a cost of $53bn. With a population of 295m people, this means that every man, woman and child in the United States spent more than $180 on an average of seven pairs of shoes.
           
Why? As in Europe, the US consumer continues to demand a greater variety of higher-quality shoes at lower prices.
 
And US footwear manufacturers have been the biggest winners, registering record profits in the last few years.

Further, while these companies no longer manufacture in the United States, they still employ thousands of US workers - but in research and development, marketing and sales, distribution and warehousing, sourcing and retail, rather than on factory assembly lines.
           
"Protectionism will not help European manufacturers," Burke declares. "Despite restrictive quotas on European footwear imports from China, European footwear manufacturer employment has fallen by half just since 1998 - which should indicate that setting artificial restraints against market forces simply does not work."
 
In the end, European consumers will bear the brunt of any punitive duties. Ultimately, they will either have to pay a much higher price for their favourite brands or lose access to their favourite brands altogether as steep punitive duties could leave some store shelves empty.

 "The reality is that the footwear industry is sourcing its products from Asia and elsewhere, not Europe, and it will continue to do so in order to meet the demands of the European consumer," Burke says. "That trend is irreversible."

By Leonie Barrie.