Mandelson Cautious On Extra Taxes On Asian Imports

by Ulrika Lomas, Tax-News.com, Brussels

05 September 2007

The European Union's trade chief, Peter Mandelson, has said that imposing more taxes and tariffs on cheap imports from Asia, particularly China, may not always be the best way to redress the competitive balance between Europe and Asia.

Addressing a conference in the Netherlands, Mandelson stated, according to the Financial Times, that while anti-dumping levies and quotas may be a legitimate course of action in many cases, such a policy could have the unintended consequence of hurting the many European companies which have outsourced production to locations such as China.

"Imposing punitive measures...is often both justified and right. But if it is inhibiting companies from pursuing rational production strategies...it can also be counter-productive," he reportedly told the attendees.

This, said Mandelson, poses a dilemma to European governments when considering how to remedy unfair trade practices, and means that Europe cannot always resort to the blunt instrument of taxes.

"If producing cheaply in China helps generate profits and jobs in Europe, how should we treat these companies when disputes over unfair trading arise?" the Trade Commissioner asked.

The FT revealed that Mandelson pointed to the dispute between Europe and China over cheap footwear imports into the EU. In March 2006, provisional duties were imposed on imports of shoes from China and Vietnam, and these were extended in October last year at 16.5% on Chinese shoes and 10% on Vietnamese shoes (applicable to shoes with leather uppers). Initially, Mandelson had pushed for 5-year tariff as requested by Italy, the country most at risk from cheap imports, but finally accepted a 2-year period as proposed by France. However, the EU was not in complete agreement, with the UK voting against the measure, and abstentions from Malta, Cyprus, Austria and Slovenia (which count as votes in favour) swinging the result in favour of the duties.

Last December, four mainland Chinese shoe manufacturers launched an action at the EU's Court of First Instance, complaining that the EU had used flawed logic in arriving at anti-dumping duties imposed on their products in October.

The four companies, including Aokang Group, the biggest private producer in the country, claimed that the EU had failed to examine their prices properly before the anti-dumping tariffs were introduced.

Chinese sources said that 1,200 Chinese manufacturers and traders were being hit by the tariffs.

The EU imported more than 1.2 billion pairs of shoes from China last year.

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