Despite protests from Nike and Adidas, Vietnam shoemakers will have to pay higher duties on footwear exported to Europe.
The European Union is removing Vietnam’s footwear industry from a preferential tariff program for exports to the bloc after deciding the sector had become one of the most competitive in the world, officials said Friday.
European Commission Ambassador Sean Doyle told a news conference in Hanoi that graduating out of the program that helps poor countries export their products “confirmed Vietnam’s success in diversifying its exports to the EU and reducing over-dependency on single commodities.”
He said the EU was willing to offer Vietnam a long-term tariff regime for all sectors, including footwear, in talks on a free trade agreement between the EU and the Association of Southeast Asian Nations, of which Vietnam is one of 10 members.
Leading sports shoe makers Adidas and Nike, which both have factories in Vietnam, have opposed the EU move, saying it would damage the industry on top of anti-dumping duties imposed on leather shoes from Vietnam and China in 2006.
Footwear is Vietnam’s third-biggest export by value, after crude oil and garments.
With its economy still considered “developing,” the government is also struggling to deal with a large trade imbalance and inflation running at 25 percent, the third highest inflation rate in Asia.
Doyle said the EU decision, which had been expected for months, was not intended to penalize Vietnam, where the government’s market reforms focused on opening up trade and joining the World Trade Organization last year.
“We would be in trouble with the WTO and some of Vietnam’s biggest competitors if we tried to extend the present arrangement,” the envoy said.
A Vietnam trade official said the Generalized System of Preferences (GSP), as it is known, would be changed to Most Favored Nations status, meaning the tariffs would be raised to about 5 to 10 percent from 3 to 5 percent.
Other exports that benefit from GSP were not affected.
“It is very difficult to change the EU’s ruling on the treatment and some footwear businesses will have a hard time ahead,” said Dinh Van Hoi, deputy director of the Europe Department of the Trade and Industry Ministry.
The footwear industry accounts for 1.25 percent of employment in Vietnam, representing about half a million workers, 80 percent of them women.
Ninety percent of production is exported, with the EU the largest market – it earned 1.7 billion euros in export turnover in 2007.
In April Adidas and Nike urged the EU not to remove Vietnam’s shoe industry from the preferential tariffs program that helps developing countries export to the bloc.
“Removing GSP preferences for footwear would deal a blow to one of Vietnam’s key industries and undermine the country’s position as a competitive source of supply,” said Horst Widmann, president of the Federation of the European Sporting Goods Industry (FESI), in a statement.
“The EU is punishing Vietnam twice,” Widmann said, saying the change in status on top of the anti-dumping duties was a blow for Vietnamese footwear sector.
“This is absurd and clearly irresponsible given the country’s vulnerable position,” Widmann said.
The Vietnam Leather and Footwear Association said it forecast leather and footwear exports to all countries would rise nearly 13 percent this year from last year to about $4.5 billion.
Exports of the products in the first five months rose 13.4 percent from a year ago to $1.75 billion, accounting for 7.4 percent of Vietnam’s total exports.
The Southeast Asian country’s major export markets include the US, the EU, Japan, Canada and Australia.
The EU is Vietnam’s second largest export destination, absorbing 19
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