International trade

Introduction•The European Union had been investigating the shoe industry in China and Vietnam over allegations that they have been involved in something called dumping. (Selling goods below cost in foreign markets)

•This can affect the shoe industry in the EU because more and more people are finding it easier to access cheaper shoes of a similar styles and fabric, which in some cases, result in some shoe manufactures in the EU going out of business.

•To help solve this problem, the EU trade commission is imposing a 20% duty on some shoes imported into the EU from these countries.

Imports

• EU goods exports to China 2009: €81.7 billion

• EU goods imports from China 2009: €214.7 billion

• China is now the EU's 2nd trading partner behind the USA and the biggest source of imports. The EU is China's biggest trading partner.

• China's shoe exports to Europe have already dropped by 20%, or 40m pairs, and pushed 20,000 workers out of work, since the duties were implemented in 2006

• China has annually produced more than 10 billion pairs of shoes to account for 66% of the world’s total, making the country the world’s biggest shoe making centre as well as the largest shoe exporter.

Trade

• The EU imports from Vietnam concentrated on labour intensive products including footwear

• Vietnamese exports to the EU benefit from the EU's Generalised System of Preferences (GSP), a factor which has contributed to Vietnam's impressive export performance.

• The GSP grants tariff reductions to developing countries such as Vietnam. Vietnam’s growth suffers considerably as a result

Cost of production

• This year, freight costs have gone up by about 300%, raw material prices increased by 10% -20%, labour costs than in previous years by 10% -15% higher, plus the U.S. dollar against the RMB exchange rate this year will continue to decline about 3%. All of these factors increased the overall cost will add up to 5-10%.

• To seek lower labour costs, the industry is trying to facilitate the production line equipped from the traffic to the inland coastal areas of China outside of China or even to move.

• Vietnamese workers make $l.60 a day 1,300 workers at the Sam Yang factory went on strike to demand a one cent per hour raise in wages

• Chinese workers make $1.75 a daythere is no minimum wage in China and when abuses are discovered, the whole factory disappear

• You pay over $100 for shoes that cost less than five dollars to make!

Under Cutting

• Between 2002 and 2006 china share in worldwide low cost exports increased by 3.7% points to 65% in 2006, this is bad for EU shoe designers

• EU government on Thursday refused to recognise that 13 Chinese shoe makers operate in market economy conditions, a move that will make it more difficult for them to prove that they are not selling footwear below cost

• The EU is investingating claims that imports of below cost leather and sports shoes from China and Vietname are undercutting European shoe makers, and could introduce extra charges on imports to protect the European group.

Dumping

-In economics, dumping can refer to any kind of predatory pricing. However, the word is now generally used only in the context of international trade law, where 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 it’s home market or is below it’s costs of production.