» Biz Commentary
Shoemaker gives EU duties the boot
DISPUTES between China and its trading partners have become so commonplace that they hardly make the headlines anymore.
But news last week that Chinese shoemaker Aokang Group Co won a lawsuit over anti-dumping tariffs imposed by the European Union provided a breath of fresh air in the fusty world of competitive trade.
The decision by the European Court of Justice was hailed here as a great victory for Wenzhou-based Aokang after a battle spanning six years. Some analysts said it will encourage other Chinese companies hit by foreign anti-dumping charges to fight the claims.
Aokang President Wang Zhentao said the case gave his company valuable insight into international trade as it pursues a strategy of globalization.
The case involved an anti-dumping tax of 16.5 percent levied against Chinese shoemakers in 2006. Aokang, based in the eastern province of Zhejiang, pursued the case alone after lower court rulings went against the shoemakers.
On final appeal, the European Union's high court ordered the European Commission to pay all of Aokang's litigation expenses and to refund an estimated 5 million yuan (US$801,000) in anti-dumping duties paid by Aokang importers.
The outcome was not only vindication for Aokang but also a sign that the European justice system is committed to an unbiased stance on free trade.
That's important to the Chinese, who have been bombarded for years with news about the EU, the United States and other countries or regions accusing China of unfair trade practices in punitive actions cloaking national protectionism.
Aokang becomes a hero for its unrelenting fight against unfairness. It was forced to spend considerable sums pursuing its rights – money that could have gone into production or research. The company has never revealed the actual costs of the case.
Fortunately for Aokang, its owner is a billionaire who could afford the court battle. The company has nearly 500 directly managed retail stores in China along with another 4,000 outlets that provide it steady sales in the domestic market. A smaller company couldn't have afforded such a costly fight.
Indeed, many companies faced by anti-dumping charges simply give up and shift their sales focus elsewhere.
Xie Rongfang, secretary-general of the Wenzhou Shoe and Leather Industry Association, said companies facing unfair trade policies need to band together to file lawsuits in order to minimize expenses and legal preparatory work.
"Not many enterprises have the money of Aokang to appeal twice and wage battle over such a long time," Xie said.
In union, there is strength, he said.
Earlier this month, the Committee of Chinese Companies in the United States, founded by the non-profit US China Business Association, opened its doors in Shanghai to try to unite Chinese investors facing trading disputes in commerce with the US.
The group is trying to convince Chinese companies that there are times to set aside rivalries for the common good.
Aokang, as a leader in the shoemaking industry, has set a precedent that will benefit the whole industry.
Six years is a long battle. In that time, a child turns into a teenager and a small company can evolve into a large one. One can only wonder where Aokang would be today as a company if it had not spent so much time and money battling the EU.
Trade protectionism in the guise of anti-dumping charges has already affected many sectors of Chinese industry, including auto parts, poultry, solar panels, cotton, steel rollers, water sinks, coated paper and kitchenware.
According to the Ministry of Commerce, EU anti-dumping duties resulted in a 20 percent reduction in Chinese footwear exports in the five years through 2010, eliminating 20,000 jobs.
For EU shoemakers like Geox and Girza, which had partnerships with Chinese manufacturers, the imposition of punitive tariffs also brought considerable grief.
Trade disputes are inevitable where people and countries exchange goods. What we need are less costly tribunals to resolve those disputes in a more timely fashion.
We need a more specialized legal system to cope with the exploding number of trade rows. That would benefit not only the Chinese but all global traders.
Aokang may be a hero in this battle but the greater war is not yet won.