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Last Updated: Friday, 6 October 2006, 09:57 GMT 10:57 UK
China threatens shoe retaliation
Shoppers look at leather shoes on sale in a Beijing market
The shoe penalties have divided European opinion
China has threatened to retaliate after the European Union agreed to impose financial penalties on Chinese shoe exports to Europe.

The EU is placing a tariff of 16.5% on leather shoes imported from China over the next two years.

Under pressure from manufacturers, the EU has accused China of "dumping" shoes in Europe at less than market prices.

Beijing said the tariff, approved by one vote, was legally "defective" and not in accord with global trade rules.

'Flawed process'

China argues that its trade practices are above board and that the EU's investigation into the issue - which saw provisional tariffs come into force in April - was flawed.

Vietnamese shoe producers have also criticised the EU's move, arguing that up to 70,000 jobs in the sector could be affected.

China thinks the EU's investigation and decision-making process in this case had many legal defects
Chong Quan, Commerce Ministry spokesman

"The European anti-dumping measures on Chinese leather shoes lack any legal or factual basis and damage the Chinese companies' legitimate rights," Chong Quan, spokesman for China's Commerce Ministry, said.

"China thinks that the EU's investigation and decision-making process in this case had many legal defects that do not accord with World Trade Organization (WTO) or EU law."

Mr Chong said Beijing would review the situation but warned that it reserved the right to take "corresponding measures".

Close call

EU members voted by 13 to 12 to sanction tariffs on a permanent basis after a long-running and fractious debate over the issue.

Italy led the calls for action, claiming that unreasonably cheap imports were hurting its own footwear industry and threatening jobs.

Beijing has hinted in the past that it could ask the WTO to intervene in the dispute, one of several trade disagreements between China and the European Union in recent years.

China exports more than one billion shoes to EU countries.

Provisional tariffs of 19.4% on Chinese leather shoes agreed in April have already affected 145 million worth of goods.

Ironically, the EU revealed recently that it may review the use of trade sanctions such as anti-dumping penalties and would announce a new strategy for trade co-operation with China next month.


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