Ktetaichinh’s Blog

December 30, 2009

Shoemakers shoot themselves in the foot- VNBusinessNews

Filed under: Uncategorized — ktetaichinh @ 3:30 pm
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VNBusinessNews.com – Vietnamese footwear exporters may have harmed themselves by not cooperating with EU inspectors, Alain Cany, chairman of the European Chamber of Commerce in Vietnam, tells Thanh Nien Weekly.

With a majority of the European Union’s member states approving a proposal by the European Commission to extend antidumping duties on footwear imported from Vietnam and China last week, the bloc formalized the proposal into law on December 22.

What is your opinion about the EU decision? Is it fair on Vietnamese shoe exporters?

We are against the measure. I believe it is a wrong decision by the European governments and the commission. The measure is not good for Vietnamese footwear exporters and workers who are suffering and facing difficulties caused by the global economic crisis. I cannot imagine how some countries like Germany, Austria and Malta changed their minds to abstain. They used to be against it. (But) I fully respect their decision. They probably did it because they had some cooperation with other European countries, Eastern Europe and there was pressure from these partners. They don’t want to do something against Vietnam, so they tried a neutral position.

It (the decision) is not neutral. We are in free trade and we have no reason to take protective measures. However, we have hundreds of thousands of people, mostly women working in Europe making shoes. In Europe, we have a high unemployment rate of 10 percent. I can imagine that some countries supported the proposal as they thought Vietnam was doing something wrong in providing some subsidies to footwear industry. We do not accept (subsidies in the EU) as it is unfair.

What do you think the extension will affect Vietnamese exporters and European consumers?

Even if we do not support the measure we believe the extension would not impact much on Vietnamese footwear and European consumers. When you can buy a pair of shoes in Vietnam you pay US$5 FOB (freight on board) before duties. The price of leather shoes is about $7 for export. It is very cheap. But, it is likely the same shoes are sold at 30 to 40 euros at retail prices or $50 in the European market. The 10 percent tax means 70 cents added to the retail price. If you compare the export and retail prices, the 70 cents is a small sum. Furthermore, the European currency has appreciated against the dollar and even more against the dong. I think there is more room for importers and intermediaries to absorb the tax. This is due to market situation for last year and for a year or two years more. The market is in a good situation, the euro remains strong against the dollar. I believe it will be not difficult for each sector to absorb the 10 percent tax. This situation also holds true for Vietnam’s main competitor for exporting footwear to Europe, China, which is suffering 16.5 percent anti-dumping duty. Retail prices are going down in Europe due to the crisis. In principle, the tax has affected the prices. But due to the crisis, a strong euro and a weak dollar and dong, the prices of shoes were not high in 2009. So, European consumers have not suffered much due to the additional tax.

There are some facts for sure if you look at statistics provided by Vietnam’s General Statistic Office. Vietnam’s leather and footwear exports to the EU are increasing every year. It is a fantastic job done by Vietnamese footwear sector despite the global economic crisis and the anti-dumping measure. It means Vietnamese footwear businesses are very good in fixing their problems when they can manage flexibly and do better. I am very pleased to read that the total footwear industry has grown by almost 17 percent over the same period last year.

Do you think Vietnamese footwear firms were really dumping their products?

I had opportunities to join European investigations into Vietnamese businesses. Unfortunately some Vietnamese businesses have not provided information for European investigators about prices that were said to be subsidized by the government. I believe that they had miscalculated their prices. They did not cooperate enough with European officers. There is evidence that there is some lack of price transparency in Vietnam. Some businesses have done a good job (in cooperating) with the European officials. Vietnam should have done more lobbying among large states in Europe to protect its footwear exporters.

As chairman of Eurocham in Vietnam, what would you advise Vietnamese businesses and government to do so as to avoid such punitive measures in the future?

As a representative of Eurocham in Vietnam, we have written to the government and also European Commission that we are not supporting the tax as the measure is against the rules of the World Trade Organization. We will continue trying our best to convince the commission to remove the tax and ask them to come back to Vietnam to re-investigate the situation. Vietnamese footwear exporters should cooperate with European officers and demonstrate they are not dumping. The commission will review this case by case and remove the tax for the exporters. Another 15 months are not so long if Vietnamese businesses and government do their jobs well. Two years has gone by fast. I want to say sorry for the tax again. Let us understand what went wrong and correct them. I think Vietnamese businesses are victims as they were footwear subcontractors. However, it is not late for Vietnamese government and businesses to demonstrate (their willingness to cooperate with EU officials). The government should give transparent support and encourage local businesses, in particular state-owned enterprises, to be more transparent in their business activities.

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