EU Trade News: Further Evidence that Anti-dumping Makes No Sense

2009-10-15

The European Union’s executive is proposing to extend anti-dumping duties on Chinese and Vietnamese shoe exports for a minimum of 15 months, a compromise that aims to satisfy shoemakers and retailers alike in Europe.

The European Commission, under pressure from shoemaking countries like Italy, first imposed duties on imports in 2006 for two years, amid accusations that the two governments were unfairly subsidizing their low-cost shoemakers. (New York Times)

Gotta love anti-dumping, the policy of choice for protectionists. The best part is that since it is entirely legal, anti-dumping allows you to be a protectionist out in the open, unlike other protectionist trade policies that masquerade as something else.

The commission reimposed the tariffs on a temporary basis last October pending a review, despite opposition from the majority of member states and the threat of legal action by Beijing at the World Trade Organization.

Also gotta love EU politics. Some commissioner from Italy gets yelled at by shoemakers, and despite widespread disagreement, the AD action gets rammed through the commission anyway. Yay!

Interesting words from the commission:

“As regards consumers, there was no noticeable price-increase following the imposition of the anti-dumping duties,” the commission wrote, and “there are no indications that consumer prices will increase disproportionately in the future.”

Right. No price increase. Meaning that just because a distributor or producer can slash their margins, and therefore consumers face no price increase, it's OK to blatantly protect Italian shoe firms in a desperate attempt to maintain market position.

Here's my favorite bit. You can't make this stuff up.

The commission could have proposed an extension of up to five years, but limited it to 15 months — for now. It said the European footwear industry needed that protection in the “short/medium term” while it adjusted to competitive pressure from Asia.

“There is no legal or economic justification,” said Lourdes Catrain, legal adviser to the European Footwear Alliance, which says it represents small producers, including some in Italy, as well as large global brands which want the duties lifted. “The commission have still to justify what kind of adjustment process the European industry could complete within the 15 month period they propose.”

Ha ha. Just give us another 15 months, they say. Everything will be different then, we promise! Sure, we didn't do much in the last two years, but trust us, this time will be different. Really.

Note: someone said to me the other day that I've written about anti-dumping several times, yet hadn't actually explained what the hell it is. Fair enough.

Let me know if the following is sufficient, which I found (of course) on Wikipedia. The page has a lot of stuff, but the core idea is this:

. . . dumping is defined as the act of a manufacturer in one country exporting a product to another country at a price which is either below the price it charges in its home market or is below its costs of production . . .

Keep in mind that anti-dumping (AD) is dealt with by domestic law, so the U.S. has its AD rules and procedures, China has its own, etc. Europe deals with AD at the EU level.

Basically the way it works is that a complaint is made to a government (or a government acts on its own) alleging dumping, an investigation may follow, and if dumping and injury to domestic industry are found, tariffs may be raised.

The fact that the WTO system essentially condones the use of AD says a lot about how sincere some industrialized countries are when it comes to the concept of "free trade."

Tags: International Trade, European Union