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EU Trade Commissioner Peter Mandelson asked last week if producing cheaply in China helps generate profits and jobs in Europe, how should we treat these companies when disputes over unfair trading arise? Peter Mandelson used a speech in The Hague last week to:
Speaking alongside Dutch Trade Minister Frank Heemskerk at a conference on The Challenges of Globalisation organised by the Dutch Social and Economic Council. Mandelson said: "On both left and right and in the opportunistic centre - people are too often being told… that an open economy is the starting line in a race to the bottom - a race that Europeans can no longer win because others do not play fair or abide by the rules. Nationalism and populism and protectionism feed on these arguments". Mandelson argued that in Europe: "we still haven't really worked out how to be political about globalisation - except, in most cases, by opposing it. And that's our problem". Mandelson offered his assessment of the recent debate on anti-dumping duties on energy-saving light bulbs as an example of the complex problems thrown up by globalisation in Europe. As the Commission approaches the publication of recommendation in its review of Trade Defence Instruments. "If producing cheaply in China helps generate profits and jobs in Europe, how should we treat these companies when disputes over unfair trading arise?" Mandelson asked. The Trade Commissioner said that the light bulbs debate has emphasised the issues that need to be addressed. Mandelson said: "Imposing punitive measures raises a cheer for politicians. It may provide some temporary relief. It is often both justified and right. But if it is inhibiting European companies from pursuing rational production strategies - or as in the lightbulbs case, flying in the face of our stated policy on energy conservation and the realities of production in Europe - it can also be counterproductive…. How do we define what is a European company in a world of global supply chains and multi-national assembly lines? The Commission's proposal in the energy-saving light bulb case was to build a consensus that accepted the duties were no longer warranted and should be scrapped, but that they should be removed over the course of a year to allow time for adjustment to new patterns of trade and production. We will probably not please anyone fully - which is the sign that we struck the right balance. In the coming weeks the Commission will be considering a review of its trade defence instruments… All the arguments should be aired. Through the proposals I shall be putting forward for the review of trade defence instruments, I want to give the lead to a constructive debate, not a divisive one. A debate that strengthens our unity in pursuit of modern, strong and effective trade policy." Read the full speech. The debate over the imposition of anti-dumping duties on shoes from Vietnam and China in 2004, is another example of conflicting interests. Shoe manufacturers in Italy (responsible for 50% of EU production) and Spain were pitted against countries such as Sweden and the UK who did not favour a tax on consumers. A margin of one vote vote supported the levying of duties of 16 per cent on Chinese shoe exports and 10 per cent for Vietnam. The Financial Times says that a Swedish government report, seen by it, says the duties have resulted in heavy losses among shoe importers, even though these companies may be generating as much as 80 per cent of each shoe's value in the EU through product design. Surveying five typical mid-sized EU shoemakers, the Swedish government's National Board of Trade says the companies have become "globalised", creating jobs and investment in the EU by taking advantage of worldwide supply chains. The FT says that even a €20 ($27, £13.50) pair of women's shoes adds value to the European economy, it says. Intermedium, a Dutch company, pays €4.40 to bring the shoes to Europe, then sells them to retailers for €6.65. By that point, €2.45 of the total cost is classified as European value-added. Intermedium and its Chinese supplier make margins of less than 10 per cent each. At the higher end, the study cites DC, a company in the Italian shoemaking heartland around Milan, which uses factories in Vietnam, China, Portugal and Romania. For a €150 pair of shoes, DC charges retailers €77.80, of which leather accounts for a third. But €40 out of €50 value-added is classed as European, mostly going to research and development, the study estimates. "The European value-added is 79 per cent," says the report. "Is this a European or Vietnamese shoe?" RELATED Apple's shares surge after tear-down analysis estimated gross margin of 55% on iPhone © Copyright 2007 by Finfacts.com |
