EU Consumers to Foot Bill for Protectionism
IPN Opinion article
LONDON — The European Union imposed 89 new trade barriers in 2009 and rounded off the year by prolonging tariffs on shoes from China and Vietnam, originally due to expire in 2008. The EU needs to understand that trade barriers limit growth and economic recovery — as well as harming its own companies and consumers.
The new barriers, listed by the independent Global Trade Alert, include specific duties such as a 58.9 percent "antidumping" duty on iron or steel fittings from Thailand, even higher than China's 58.6 percent.
Most barriers concerned products from any country. These self-destructive responses to the recession are in addition to the long-standing, massive Common Agricultural Policy, which subsidizes inefficiency and blocks cheaper imports.
On Dec. 22 the EU prolonged tariffs of up to 16.5 percent — begun in 2006 and due to expire in 2008 — on Vietnamese and Chinese leather shoes. Some European shoe producers and trade associations claim that without the tariffs they are vulnerable to cheap imports that cost jobs in Europe. Vietnamese and Chinese producers say the tariffs prevent competitive producers from providing employment for some of the poorest people on Earth.
Both sides are right, but EU ministers should support competitive EU businesses, the lifeblood of future growth. Only shoe companies that have refused to adapt to modern globalized production want these tariffs.
"The EU prefers to follow its protectionist course at the expense of successful European footwear businesses and consumers," said Manfred Junkert, director of the Federation of the German Footwear Industry, after the Dec. 22 ruling by EU ministers.
For many years some of Europe's top labels have been cutting costs to remain competitive in the cutthroat fashion industry, including outsourcing to China and Vietnam. Denmark's Ecco has invested heavily in production there since 2003 and has had investments in Indonesia and Thailand since the 1990s.
"The tariffs do nothing but harm consumers, retailers and Europe's modern footwear industry," Ecco Vice President Gerd Rahbek-Clemmensen said after the ruling.
Globally competitive EU footwear companies such as Geox and Clarks, not to mention big players such as Adidas and Puma, have all invested in cost-cutting production chains around the world. Footwear jobs are still plentiful across Europe as a result.
Indeed, Ecco employs 20 percent of its workforce in Europe, mainly in sales, quality-control and high-end manufacture that requires skilled — and expensive — labor. The same is true for many competitors. Trade barriers only stifle development of these valuable EU jobs.
Even with the tariffs, the market share of EU-made footwear will continue to shrink. The 2006 tariffs simply diverted footwear imports from one lower-cost production center to another. Vietnam's and China's losses have been a gain for other Asian producers: Indonesian footwear exports to the EU have jumped by 36 percent since 2006.
Recognizing the futility of the tariffs and the potential for retaliation, Peter Mandelson, who implemented the tariffs as EU trade commissioner in 2006, admitted recently that they would "not help our long-term trade interests."
The complicated maze of EU procedures have given industry lobbyists plenty of time to ply their craft. Despite a November recommendation from the Anti- Dumping Committee to repeal the tariffs, three EU countries flip-flopped, leaving a majority in favor of extending the tariffs Dec. 22.
On issues ranging from human rights to conflict, EU leaders see themselves as holding the world's moral compass for moving forward. But when it comes to trade policy — where the EU has a chance to help both its own economies and those of the rest of the world — Brussels is heading backward.
These trade barriers hamper trade and recovery. The EU must stop hurting the most-competitive EU companies, damaging business partners and inviting retaliation. By punishing the more efficient producers, it is forcing European consumers to foot the bill for protectionism.
Alec van Gelder is a project director and Timothy Cox a research fellow at International Policy Network, an independent economic- development think tank in London.