The European Commission's plans to regulate imports of leather shoes from China and Vietnam are in disarray, after EU member states rejected its latest proposals.
The Commission wants to introduce a formal system of import duties, to replace emergency measures introduced in April.
The temporary system was introduced following allegations that shoes were being "dumped" - or sold for less than it cost to make them - by manufacturers eager to gain a share of the EU's markets.
The Commission said at the time it had clear evidence that both China and Vietnam were unfairly subsidising their shoe industries.
Trade Commissioner Peter Mandelson said the emergency tariffs were necessary to prevent European manufacturers being driven out of business by a wave of cheap imports.
The move was welcomed by shoe manufacturers in countries such as Italy, Portugal and Poland.
They said that EU firms faced much higher production costs than their East Asian rivals and could not hope to compete with them on price.
But retailers were furious, suggesting that the scheme would reduce their profits and mean that consumers would have to pay more for their shoes.
No agreement
The temporary measures are due to expire in October. The Commission wants to replace them with a more formal system to regulate Chinese and Vietnamese imports.
But such a scheme would require the approval of at least 13 of the 25 EU member states - and obtaining even that level of agreement is proving difficult.
Initially, the Commission suggested introducing a quota system. It would have allowed 140 million pairs of shoes from China and 95 million from Vietnam to be imported into the EU duty-free.
Additional imports would have attracted duties of up to 29.5%. But this idea was rejected by a committee of the EU's member states.
The opposition was led by the shoe-producing countries, who said it was too lenient. There were also questions of its legality under international trade rules.
The Commission returned to the table with plans for a new scheme, under which imports from China would attract tariffs of 16.5% and imports from Vietnam 10%.
But on Thursday, this plan was also rejected, with 14 member states lining up against the Commission.
Among them were countries such as Britain and Germany, who believe the proposed tariffs are too harsh.
Deep divisions
Commission officials admit that the EU is deeply divided on the issue, and they are now considering what steps to take.
A spokesman for Mr Mandelson said the Commission would continue to seek a solution and still planned to issue formal proposals within weeks.
But he admitted: "There are clearly no guarantees that this is achievable. Member states duly recognise the sensitivity of this issue, so getting a majority is not easy."
For their part, retailers have welcomed the news. The British Retail Consortium said it urged the Commission "to finally bury this plan that has caused so much uncertainty for retailers and consumers alike".
It added: "We are hopeful that this is an indication of a new free trade direction for Europe."
It was an opinion echoed by Horst Widmann, president of the Federation of European Sporting Goods Industries.
He said: "Member states have realised that anti-dumping duties on Chinese and Vietnamese footwear will not help anybody.
"The European Commission has no choice but to look very carefully at this result. At stake are not only the interests of European consumers and the competitiveness of the European industry, but the very credibility of the rules."
But while retailers may be pleased at the current situation, European shoe manufacturers are likely to be very concerned.
So although time is running short, the Commission can expect to come under intense pressure to find an acceptable solution.
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