Vietnam set to join WTO but shoe-dumping case pinches
HO CHI MINH CITY - Vietnam aspires to join the World Trade Organisation (WTO) this year but finds two consecutive anti-dumping cases lodged by European manufacturers not too encouraging.
On Jul. 12, the European Commission (EC) concluded that Vietnam had dumped bicycles into the European Union (EU) market, and thus imposed an import tariff of 34.5 percent on bicycles from Vietnam as of Jul. 15.
Earlier this year, the EC accused Vietnam (together with China) of doing the same thing with leather shoes and this pinches because Europe is Vietnam's most important market for footwear and accounts for 70 percent of exports.
Last year, the United States, which supports Vietnam's entry into WTO, imposed anti-dumping tariffs on Vietnam's catfish and shrimp exports.
The EU has also promised to support Vietnam's entry into WTO. Vietnam, on its part, has been revising a series of laws to meet requirements in order to join the world body by the end of this year.
But some say that the new developments with the EC could only act as hurdles in meeting that goal.
The EC set the dumping investigation against Vietnamese and Chinese leather shoes underway on Jul. 7 following a petition from the 814 members of the European Confederation of the Footwear Industry (CEC), which makes 40 percent of the leather shoes sold in the EU.
Although a former director of Vietnam's Institute of Economy, Le Dang Doang believes the lawsuits would not affect Vietnam's smooth entry into the WTO, many observers think that the bad example set by China after entering the organisation could create more difficulties for Vietnam.
The EC said Vietnam dumped the price of its leather shoes at 130 percent, while China did the same at 400 percent.
''We are preparing financial and legal work for the lawsuit,'' said Nguyen Quang Thuan, Vice Chairman of the Vietnam Leather and Footwear Association (LEFASO).
The EU is one of Vietnam's most important markets for leather shoes, and represents 70 percent of the country's total footwear exports.
Thuan proposed that the EU choose Indonesia as the ''comparable country'' in the case against Vietnam after reaffirming that Vietnamese manufacturers had not dumped shoes in the EU market.
CEC claimed that a sudden surge in quality alongside a sharp reduction in the value of Vietnamese products had put EU producers in a difficult situation.
Since Vietnam has not yet been recognised as a 'market economy' by the EU, the EC suggested Brazil as the surrogate economy for determining whether shoe prices offered by Vietnam are more competitive or not.
Compared with Brazilian products of the same quality, Vietnamese products are 130 percent cheaper, the CEC said.
This prompted LEFASO officials to call for more consideration.
''It was unreasonable to benchmark Vietnamese shoe prices against their Brazilian counterparts since labour, materials and other costs were much higher in Brazil,'' Thuan argued. ''Since Vietnamese input costs and prices closely matched those in Indonesia, it would be fairer to choose Indonesia as the surrogate nation.''
''Besides, the average per capita income in Brazil was about 2,700 US dollars while it was just 400 dollars in Vietnam,'' Thuan stressed.
The CEC claims that a sharp increase of cheap shoes made in Vietnam (and China) has curtailed sales from EU leather shoes. It shows that Vietnam exported 78.1 million pairs of leather shoes to the European market in 2002, and plans to raise that figure to 139.6 million for 2005.
EU figures also show that from 2002 to 2004, the average price of Vietnamese shoes sold in its market dropped 30 percent while their volume increased 79 percent. The market share of Vietnamese products also increased sharply, from 11 percent to 15 percent.
Consequently, shoe production in the EU has dropped while importation increased significantly. In 2000, the industry produced around one billion pairs, but in 2004 it could only churn out 704 million. In the meantime, imports increased from 836 million in 1998 to 1.62 billion in 2004.
However, LEFASO refuses to accept price dumping as the reason for the failure experienced by European shoe manufacturers. - They are no longer competitive because their technology is not up-to-date and their management costs are too high," Diep Thanh Kiet, another top LEFASO official told IPS in an interview.
''If they claim that Vietnam's dumping prices have such an impact on their production, why is it their exports kept on falling during the last seven years?'' Kiet demand to know.
In 1998, the EU exported 234.2 million pairs of shoes. In 2004, it exported only 166.7 million.
''EU's exports to its biggest markets - the US, Canada, Japan û have decreased sharply in the past few years,'' Kiet said. ''EU's own figures show that from 2002 to 2004 exports to the US decreased by 22 percent, to Canada 31 percent, to Japan 15 percent. Overall, EU's exports to the world market have decreased by 14 percent.''
Kiet also stressed that due to the case, Vietnam's exports to the EU in the first half of this year have been cutback 8 percent -- in which Germany accounted for 28 percent, Britain 7 percent, and France 24.82 percent.
Kiet said of the 62 Vietnamese shoes makers involved in the trial, the majority were generally medium and small size companies and thus could hardly contribute the 10,000 dollars each needed to hire law firms to put up a defence.
Industry insiders say the catfish lawsuit costs Vietnam one million dollars and the shrimp lawsuit another three million dollars.
LEFASO has thus drawn up a plan under which shoe export enterprises would closely cooperate with each other to prepare for the lawsuit.
''We have called on enterprises with big resources in terms of production as well as finance to join the case,'' Kiet said, explaining that if the case was lost high tariffs would be applied to not only the 60 sued companies but also to every Vietnamese shoe exporter.
Director General Dinh Thi My from the Department of Competition Administration under the Trade Ministry, said that Vietnamese leather shoes makers, including those who have not been selected for probes by the EC, should publicise information to prove they are operating under market economy.
This is a big challenge as most Vietnamese shoes makers have rarely kept their books accurate, or conformed to international standards of accounting to avoid tax.
''They must try their best (to put accounts in order) if they want to survive the coming WTO,'' Thuan said.
By Tran Dinh Thanh Lam - Inter Press Service News Agency - August 04, 2005.
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