2nd REPORT from the Commission on the quantitative quotas and surveillance measures applicable to certain non-textile products originating in the People's Republic of China
Date: 1997-01-29
Institutions: European Commission
Subjects: China, import policy, market protection, originating product, quantitative restriction

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels,  29.01.1997 
COM(97)  11 final 

2nd REPORT 

from the Commission 

on the quantitative quotas 
and 
surveillance measures 
applicable to certain non-textile 
products originating in the 
People's Republic of China 

Table of contents 

INTRODUCTION 

A.  Historical  background 
B.  Objective of the Commission  report 
C.  Methodology 

CHAPTER  1 -  Implementation of the quantitative  restrictions 

I.  Background  and evolution  since the previous report 
II.  Management  of the quotas 
III.  Developments  in the trade of the products subject  to quantitative 

restrictions 

CHAPTER  2 -  Should  Community  quotas be maintained? 

I.  Approach  adopted  by the Commission 
II.  Analysis of the sectors concerned 

1.  Footwear 
2.  Porcelain  or china tableware and ceramic tableware 
3.  Glassware 
4.  Toys 
III.  Conclusions 

1 

Page 

P. 3 
p. 3 
p. 4 

p. 6 

p. 6 
p. 8 
p.  10 

p.  14 

14 
15 
15 
20 
29 
36 
40 

CHAPTER  3 -  Implementation  and maintenance of surveillance measures  p. 42 

Purpose of surveillance  measures 
Implementation 

I. 
II. 
III.  Trends in imports of products under surveillance 
IV.  Should  surveillance measures be maintained? 

CHAPTER  4 -  Conclusions and proposals of the  Commission 

p. 42 
p. 42 
p. 43 
p. 44 

p. 45 

INTRODUCTION 

A.  Historical  background 

By Regulation  (EC) No 519/94 of 7 March  1994, the Council  of the European  Union 

introduced  Community-wide  quantitative  restrictions  on  7  categories  of  products 

originating  in  the  People's  Republic  of  China,  namely  gloves,  footwear,  porcelain 

tableware, ceramic tableware, glassware, car radios and toys, and certain  surveillance 

measures. 

The  introduction  of  such  measures  had  been  agreed,  in  principle,  by  the  Council  in 

December  1993  as  part  of  a  global  package  including  acceptance  of  the  Uruguay 

Round  results,  reinforcement  of  the  trade  policy  instruments  and  completion  of  the 

common commercial  policy. 

The  latter aspect  of the  package  involved  the unilateral  elimination  of 6.417  national 

quantitative  restrictions  (of  which  some 4.700 concerning  Chinese  products)  and  the 

introduction  of Community-wide  quotas  on  imports  from  China of  a limited  number 

of sensitive products, whose imports were at that time subject  to national  restrictions. 

The introduction  of such quotas was based on the following  considerations : 

a) 

b) 

the sensitivity  of the Community  industries concerned; 

the  increasing  threat  posed  by  imports  from  China  to  these  industries,  made 

more acute by the particular characteristics of the Chinese economy. 

B.  Objective of the Commission  report 

In  the  course  of  discussions  in  the  Council  on  Regulation  (EC)  No  519/94,  the 

Commission  made the following  statement  which  was included  in the minutes : 

"The Commission  will  report  to  the  Council  before  31  December  1995 and  before 

the 31 December  of every year  thereafter  on  the  implementation  of  the  surveillance 

measures  and  the  quantitative  restrictions  provided for  in Annexes  II  and  III,  the 

need  to  maintain  such  measures,  and  will  propose,  as  the  need  arises,  the 

appropriate adjustments. " 

Like the first  report (doc COM(95) 614 final  of 6 December  1995), this second 
report  is in response to the above-mentioned  commitment. 

C.  Methodology 

1.  The report first  reviews the implementation  of the quantitative restrictions,  including 

the problems raised by their administration. 

In  its  second  chapter,  it  addresses  the  question  of  the  need  to  maintain  the 

quantitative  restrictions  introduced  by  the  Council.  To  this  end,  the  Commission 

examined  whether  the conditions  which justified  the  introduction  of  these  measures 

in  1994 are still present, in particular: 

a) 

b) 

the sensitivity of the Community  industries concerned, and 

the threat posed by imports from  China to these industries. 

This examination  was conducted sector by sector. 

The  implementation  of  the  surveillance  measures  and  the  need  to  maintain  them  is 

dealt with in the third chapter. 

The  fourth  chapter  presents,  on  the  basis  of  the  above  analysis,  the  Commission 
conclusions. 

2.  As  in  1995,  the  Commission  faced  considerable  difficulties  with  regard  to  the 

collection  of statistical  and factual  data on the industries concerned,  as well  as on the 

development  of  the  Chinese  export  potential.  In  particular,  it  should  be  noted  that 

obtaining reliable information  on the prices of Chinese imports remains  difficult. 

Extensive  efforts  were  made  to  obtain  information  from  Community  producers  and 

Community  importers  and  traders,  who  were  approached  directly  or  through  their 

representative  organizations.  The  response  was, however,  incomplete  and  therefore 

again rather  unsatisfactory. 

Regarding  information  on  the  state  of  the  Community  industry,  these  difficulties 

were amplified  by the fact that producers generally produce a wide range of products, 

not just  those subject  to quota,  and that nearly  all  these sectors are made up of  many 

small  and  medium-sized  enterprises,  of  which  a significant  proportion  are  not  even 

known by the relevant national  federations. 

On  the  importers'  side,  the  Commission  received  answers  of  a general  nature  from 

only a small number of associations or individual  importers. 

It should  also be noted  that only  one Member  State, the United  Kingdom,  submitted 

factual  data and comments to the Commission for the purposes of this report. 

3. 

In general, the analysis is based on figures for  1995, as full  statistics  for  1996 were 
not available at the time of the drafting of this report. However, trends for  1996 have 
been used, where possible. 

CHAPTER! 

IMPLEMENTATION  OF THE QUANTITATIVE RESTRICTIONS 

I.  Background and evolution since the previous report 

1.  Since  their  entry  into  force  in  March  1994,  the  quotas  have  been  modified  on 

four occasions: 

In July  1994, the Council decided to increase the  1994 level of the quota on 

stuffed  toys since information  obtained from  the economic  operators and the 

Member  States  indicated  that the balance between  the objective  of  ensuring 

an  appropriate  protection  of  the  Community  toy  industry  and  that  of 

maintaining an acceptable level of trade with the People's Republic of China 

had not been satisfactorily  achieved for this product. 

In March  1995, the quotas were further  modified. 

This  was,  in  the  main,  to  take  account  of  the  extension  of  the  quantitative 

restrictions to Austria, Finland and Sweden. The adaptation  was done on the 

basis of the actual imports of these countries from  China in  1993; 

This  modification  was  also  aimed  at  solving  problems  which  had  arisen  in 

the  implementation  of  the  quotas.  Where  it  was  compatible  with  the 

protection  of the sectors concerned,  the Council  agreed  a certain  relaxation 

of  the quotas  (ceramic  and porcelain  tableware, glassware, car  radios, toys, 

certain  sport  footwear  through  the  reduction  of  the  price  break  for  hi-tech 

shoes  from  ECU  12  to  ECU  9).  In  addition,  three  subdivisions  of  quotas 

were eliminated, two on shoes and one on working gloves. 

In  April  1996,  following  the  conclusions  contained  in  the  Commission's 
first  report on  the surveillance  measures  and  quantitative  quotas  applicable 
to  imports  of  non-textile  products  from  China,  the  Council  decided  by 
Regulation  (EC), No  752/96  to  relax  further  the  quota  regime  vis-à-vis 
China: 

- the quotas on 3 products (gloves, car radios and combined car radios) 
were removed; 

- the 3 toy quotas were merged into one quota* to give more  flexibility 
to traders and allow them to react more rapidly to market changes; 

'••'  •'•_"••:• 

'  ""  "•.'•"  *••"••'•'•'." 

''  .  •- 

:."•••••- 

'  :. 

• 

1 

••.-,  the  remaining  quotas  were  increased  (ceramic  and  porcelain 

tableware and glassware by  10% and shoes by 2'%). 

' 

Finally,  in  October  1996,  Council  Regulation  (EC)  No  1897/96  excluded 

glass-fronted clip-frames  from the quota applicable to glassware, since their 

inclusion  was  not considered  necessary  for the protection  of  the  sectors  of 

Community industry concerned. 

•:K-*y-

II.  Management of the quotas 

a)  Legal basis and objectives 

1.  The management of Community quotas is based on Council Regulation (EC) No 

520/94 of  7 March  1994 establishing  a Community  procedure  for  administering 

quantitative  quotas  and  Commission  Regulation  (EC)  No  738/94  of  30  March 

1994  laying  down  certain  rules  for  the  implementation  of  Council  Regulation 

(EC)  No  520/94  (mostly  concerning  procedural  aspects,  including  the  common 

import licence form). 

It  should  be  recalled  that  before  the  adoption  of  Regulation  (EC)  No  520/94, 

quotas  were  allocated  among  Member  States,  and  not  directly  to  importers. 

Since  the  reform  of  March  1994,  uniform  criteria,  determined  by  the 

Commission  after  consultation  of  the  Management  Committee,  apply  to  all 

Community  importers,  in  conformity  with  the  principles  of  the  Single  Market 

and the relevant case law of the European  Court of Justice. 

2. 

In  the  management  of  the  quotas,  the  Commission  has  been  guided  by  the 

following  principles : 

that  administrative  procedures  would  not  add  to  the  intended  effect  of  the 

quotas on trade and that the available quantities would be fully  used; and 

that  non-discrimination  among  all  Community  importers,  no  matter  where 

they  are established  and  no  matter  where  they  submit  a  licence  application 

would be ensured. 

b)  Functioning of the quota management system 

1. 

In  conformity  with  the  above-mentioned  principles,  the  Commission  felt  it 

appropriate  to  resort  to  the  first  allocation  method  provided  for  by  Regulation 

(EC)  No  520/94,  i.e.  the  method  based  on  traditional  trade  flows,  which 

guarantees  that  "traditional"  importers  receive  at  least  a  part  of  their  previous 

trade  performance  realized  during  a  reference  period,  while  ensuring  a  fair 

access to the quotas to non-traditional  importers. 

This allocation  method,  while  it would  appear  to have worked  satisfactorily,  did 

raise however certain  practical  problems  in relation  to the choice of the  reference 

period  and  the  determination  of  the  relative  shares  set  aside  for  traditional  and 

for other importers  respectively. 

In  addition,  the  management  of  the  part  of  the  quotas  set  aside  for  the  non-

traditional  importers  raises  a problem.  The  chronological  method  ("first  come, 

first  served"),  whose  use  for  the  management  of  the  1994 quotas  did  not  prove 

practicable,  has  been  replaced  by  the  third  method  provided  for  by  Regulation 

(EC)  No  520/94,  i.e.  the  method  of  proportional  allocation  to  the  quantities 

requested.  The problem  resulting  from  the unrestricted  access  to that part  of  the 

quota  however  remains.  In  1994,  12.232  import  licence  applications  were 

submitted  by  non-traditional  importers;  this  figure  grew  to  21.926  applications 

for  the  first  tranche  of  1995,  to  19.613  for  the  second  tranche  (with  fewer 

product  quantity  to be allocated)  and  to 28.204 applications  for  the allocation  of 

the  1996 quotas. This  year  the  number  of  applicants  for  the  1997 allocation  has 

decreased  to  19.708,  but  considering  that  the  number  of  products  under  quota 

has been  further  reduced,  the  problem  remains.  This extremely  high  number of 

applications  results  in  those  non-traditional  importers  being  allocated  more  and 

more  limited  quantities,  a  fact  which  is  likely  to  lead  to  underutilization  of  the 

quotas.  The  Commission  considers  that  a guarantee  set  at  an  appropriate  level 

would  be  the  best  option  to  eliminate  speculative  requests.  This  solution, 

however, has so far met with opposition of the }  ember States. 

2. 

In  the  management  of  the  quotas,  the  Commission  made  every  effort  to  satisfy 
the  wish  of  importers  to  receive  information  as  early  as  possible  on  their 

allocation  for  the  following  period.  To  this  end,  the  Commission  opened  the 

allocation  procedures  for  the  1997 quotas  well before  the beginning  of the quota 

year. 

3. 

In the same spirit, the Commission  modified  the initial duration  of the validity of 

the  import  licences  in  order  to  meet  the  importers'  requests  for  flexibility.  The 

"1997 management  rules currently  provide  for  a  12-month  validity  of  the  import 

licences,  the  Council  having  adopted  the  Commission  proposal  to  allow  the 

carry-over of unused quotas to the following  quota year. 

10 

4.  Concerning  the  administrative  procedures,  the  Community  management  system 

is  based  on  a  "single-stop"  approach,  whereby  all  Community  importers, 

irrespective  of  where  they  are  established  in  the  Community,  may  submit  a 

licence  application  to  the  competent  authority  of  the  Member  State  of  their 

choice, and obtain  an import  licence which  is valid throughout  the Community. 

In  addition,  the  application  procedure  has  been  made  as simple  as  possible  and 

the  formalities  reduced  to a strict  minimum;  the  licencing  process  is totally  free 
of charge for the Community  importers. 

c)  Conclusion 

As  is  unavoidable  when  trade  is  subject  to  restrictions,  the  management  of  these 

quotas  raised  some  problems.  The  Commission  considers,  however,  that  the  system 

adopted  has on  the  whole  worked  well, thanks  to the cooperation  of  Member  States. 

In  particular,  it  is  felt  that  any  (legitimate)  concerns  that  the  management  system 

should not add to the effect  of the quotas, as decided by the Council, have been  met. 

III.  Developments  in the trade of the products subject to quantitative  restrictions 

The following  two tables give a factual  summary  of the developments  in the trade of 

each product  subject  to quantitative  restrictions, both  in terms of volume and  value. 

11 

a)  Evolution  in volume of the products  concerned  (imports and  quotas) 

Imports 

Quotas 

Products 

Unit 

1992 

1993 

1994 

1995 quotas 
(annual  basis) 

1996 quotas 
(annual  basis) 

unused 
quantities 
in  1995 

rubber and plastic 
uppers shoes 
(6402 99) 
leather shoes 
(6403 51  &59) 
leather shoes 
(6403 91  &99) 

textile shoes 
(6404  11) 

textile shoes 
(6404  19 10) 
total shoes 

pairs 

33.498.463 

37.894.757 

37.259.535 
(9.989.423 hi-
tech  incl.) 

39.151.481 

39.151.481 

8.437.277 

(+hi-tech 
exemption) 

(+hi-tech  exemption) 

pairs 

3.030.801 

3.942.271 

2.614.453 

2.740.116 

2.795.000 

924.173 

pairs 

24.860.632 

36.215.974 

pairs 

23.849.323 

20.853.012 

.  30.661.174 
(14.122.199 
hi-tech  incl.) 
22.739.304 
(6.288.335 hi-
tech  incl.) 

11.881.963 

12.120.000 

1.934.408 

(+hi-tech 
exemption) 

(+hi-tech  exemption) 

18.228.780 

18.228.780 

5.721.246 

(+hi-tech 
exemption) 

(+hi-tech  exemption 

pairs 

34.789.708 

31.039.693 

26.575.875 

31.897.716 

31.897.716 

7.644.723 

pairs 

120.028.927 

129.945.707 

119.850.341 

103.900.056 

104.192.977 

24.661.827 

(33.361.807 
hi-tech  incl.) 

(+  hi-tech 

(+  hi-tech 

exemption) 

exemption) 

•figures on hi-tech shoes from  Community surveillance  are based on surveillance  documents  issued,  which do not necessarily  reflect actual  levels of imports 
•figures on unused quanti tites based on import licences returned to the Member  States (no data available for  Portugal) 

12 

Imports 

Quotas 

Products 

Unit 

1992 

1993 

1994 

1995 quotas 
(annual  basis) 

1996  quotas 
(annual  basis) 

unused  quantities 
in  1995  (,) 

porcelain 
tableware 
(691110) 
ceramic 
tableware 
(691200) 

tonnes 

43.960 

42.300 

58.917 

43.619 

45.800 

tonnes 

33.247 

36.681 

46.851 

33.000 

34.650 

7.686 

3.912 

glassware (7013) 

tonnes 

14.374 

16.722 

12.462 

14.210 

15.600 

3.714 

stuffed  toys 
(9503 41) 
toys (9503 49) 
toys (9503 90) 
total toys 

ECU 

260.117.000 

302.919.000 

247.764.000 

274.764.243 

N A( I) 

50.990.985 

ECU 
ECU 
ECU 

110.648.000 
621.200.000 
991.965.000 

171.334.000 
678.864.000 
1.153.117.000 

88.686.000 
478.069.000 
814.519.000 

132.767.177 
649.465.212 
1.056.996.632 

N A( 1) 
N A( I) 
1.056.996.632 

34.034.572 
135.279.994 
220.305.551 

Source : - EUROSTAT 

(*) figures  on unused quantitites based on import licences returned to the Member States (no data available for  Portugal) 
(1 ) breakdown  no longer available because of merger of the quotas 

b)  Import prices of products originating in China 

13 

Product 

Unit price in  1993 

Unit price in  1994 

Unit price in  1995 

Footwear : 

- 6402 99 

-6403 51 

- 6403 59 

-6403 91 

- 6403 99 

- 6404  11 

-6404  19 10 

3,68 

9,76 

3,30 

9,54 

7,45 

3,94 

1,00 

ECU/pair 

ECU/pair 

ECU/pair 

ECU/pair 

ECU/pair 

ECU/pair 

ECU/pair 

3,68  ECU/pair 

11,86  ECU/pair 

3,31  ECU/pair 

4,14  ECU/pair 

6,65  ECU/pair 

2,99  ECU/pair 

10,17  ECU/pair 

11,25  ECU/pair 

8,02  ECU/pair 

9,33  ECU/pair 

4,33  ECU/pair 

7,19  ECU/pair 

0,90  ECU/pair 

0,82  ECU/pair 

Porcelain tableware(*)  : 

6911  10 

1.105,25  ECU/tonne 

1.011,58  ECU/tonne 

1.049,20  ECU/tonne 

Ceramic tableware(*) : 

6912 00 

1.060,06  ECU/tonne 

1.054,41  ECU/tonne 

1.112,21  ECU/tonne 

Glassware(*)  : 

7013 

Toys: 

-9503 41 

- 9503 49 

- 9503 90 

1.961,07  ECU/tonne 

2.227,57  ECU/tonne 

2.547,29  ECU/tonne 

7.831  ECU/tonne 

7.314  ECU/tonne 

6.249  ECU/tonne 

6.013  ECU/tonne 

6.106  ECU/tonne 

5.983  ECU/tonne 

4.812  ECU/tonne 

4.926  ECU/tonne 

4.911  ECU/tonne 

Source : EUROSTAT;  (*) 1995 Prices until September 

..  •.'. 

•'• 

V 

'  •  -14 

CHAPTER2 

SHOULD COMMUNITY QUOTAS BE MAINTAINED? 

I.  Approach adopted by the  Commission 

To reply to this question the Commission sought to find out if the conditions that had 

provoked  the introduction  of quantitative  restrictions  in  1994, namely  the  sensitivity 

of  the Community  industries concerned  and  the threat posed  by Chinese products  to 

them, still  prevailed. 

It  did  this  by  carrying  out  a  sector-by-sector  analysis  on  the  basis  of  the  following 

economic indicators: 

1.  Structureof  the industry 

2.  Production 

3.  Employment 

4. 

5. 

Import trends 

Import prices 

6.  China's export potential 

IL  Analysis of the sectors concerned 

15 

Situation of the Community footwear  industry 

1. 

Structure of the industry 

There  were  no  major  changes  in  the structural  features  outlined  in  the  first  report. 
With  more  production  unit  closures,  the  number  of  producers  again  fell,  by  1%. 
Similar trends obtain in the three new Member States. 

2. 

Community  production 

Despite  a  sluggish  consumer  market,  EU  footwear  manufacturers  saw  the  erosion 
of their share of the Community  market ease off  in  1995, with  sales stabilizing  in a 
contracting  market.  Exports,  up  only  1.5%,  did  not  increase  as  fast  as  in  previous 
years. The drop in EU production  was therefore  quite small. 

1000 pairs 

1992 (x) 

1993 (x) 

1994 (x) 

1994 (xx) 

1995 (x) 

1995 (xx) 

Production 

Exports 

1 081 568 

1 090 236 

1  108 143 

1  125 575 

1 099  119 

1  116  153 

271 438 

291 889 

339 687 

NA 

343 024 

306 331 

Consumption 

1 549  124 

1 529 327 

1 525  128 

NA 

1 482  125 

1 549 201 

810  130 

798 347 

768 446 

NA 

756 095 

809 822 

5 2% 

52% 

50% 

NA 

51 % 

5 2% 

Sales/Community 
production on internal 
market 

Market share of 
Community production 

(x)  EUR 12 
(xx) EUR 15; 

Full  and  comparable  specific  figures  for  products  under  quota  are  not  available  but  the 
general trends outlined below should give a fairly  representative idea of how they  fared. 

Employment 

The  rate  of job  losses  mirrored  the  drop  in  production,  falling  steadily  but  more 
slowly. 

Numbers  directly 
employed Eur  12 
Eur  15 

1991 
318 819 

1992 
302 819 

1993 
291465 

1994 
295 717 

1995 
292  112 

303  129 

299 426 

16 

4. 

Current  restructuring 

The  industry's  moves  to  increase  competitiveness  continued.  Pressure  from 
competitors  eased  as  a  result  of  Community  quotas,  enabling  such  moves  to  be 
brought  to  bear  more  quickly  and  thoroughly.  Besides  improvements  to  the  range 
and  quality  of  products,  and  the  automation  of  most  manufacturing  stages,  there 
was  investment  in  the  development  of  computerized  data  exchange  systems, 
particularly with customers, so optimizing marketing. 

B. 

Sensitivity to Chinese imports 

1. 

Import trends 

Footwear  imports  into  the  Community  fell  7%  on  the  year  to  account  for  around 
50% of the total market, i.e. a slight drop on  1994. 

The  table  below  gives  an  overview  of  import  trends  from  the  main  supplier 
countries. 

1000 pairs 

1992 (x) 

1993 (x) 

1994 (x) 

1995 (x) 

1995 (xx) 

Non-EC total 

738 994 

731 580 

786 675 

730 836 

750 542 

China 

Indonesia 

Vietnam 

Thailand 

India 

293  197 

296 700 

316413 

280 491 

294 990 

85 960 

86 673 

105 461 

99 573 

102 275 

12 255 

32 752 

61 509 

74 834 

76 516 

69 981 

61  118 

55 541 

35 930 

37 627 

14 656 

18 393 

20 980 

19 294 

19718 

South  Korea 

54 999 

30 410 

20578 

14 283 

15 237 

Taiwan 

Brazil 

(x)  EUR 12 
(xx) EUR 15 

37  145 

21538 

18 102 

19 452 

20 455 

24 570 

23 209 

17 809 

NA 

NA 

These  trends  reflect  the  general  stagnation  of  the  European  market,  where 
consumption is at a fivé-year low. 
Imports from  China  and from  all  the Community's  main  suppliers  except  Vietnam 
fell. In the case of China, this was mainly due to the cumulative effect  of the market 
slump and the quotas. 

The overall picture for  imports from China is as follows: 

17 

1000 pairs 

1992 

1993 

1994 

1995 (x) 

1995 (xx) 

Quota footwear 

131671 

137 679 

103 908 

70911 

75 940 

Non-quota 
footwear 

161526 

159 021 

212 505 

209 580 

219 050 

Total 

293 197 

296 700 

316413 

280 491 

294 990 

(x)  EUR 12 
(xx) EUR 15 

The biggest fall  was in quota footwear,  which accounted for a quarter of all  imports 
from  China.  The  likely  explanation  is  that  Chinese  exporters  diversified  their 
production  in  part  to  avoid  the quotas. As  a result,  they  were  still  able  to  keep  up 
market pressure. 

Chinese  products  still  represented  38%  of  all  footwear  imports  into  the  EU  and 
took a fifth  of the total market. Consequently, they continued to have a considerable 
influence  on Community  market conditions. 

In  the  specific  case  of  the  tariff  headings  subject  to  quotas,  the  slowdown  was 
slightly more pronounced for leather footwear  than for other types: 

pairs 

1991 (x) 

1992 (x) 

1993 (x) 

1994 (x) 

1995 (x) 

1995 (xx) 

6402 99 

24516513 

33 498 463 

37 894 757 

37 259 535 

23 591 101 

26 046 878 

6403 51 and 59 

2 547 468 

3 030 801 

3 942 271 

2 614 453 

1 100 882 

1 241 836 

6403 91 and 99 

12 066 280 

24 860 632 

36 215 974 

30 661 174 

14 848 403 

15 616 755 

6404 11 

23 922 387 

23 849 323 

20 853 OP 

22 739 304 

12 717 692 

14 148 760 

6404 19 10 

34 466 034 

34 789 708 

31039 693 

26 575 875 

18 653 036 

18 885 207 

(x)  EUR 12 
(xx) EUR 15 

The  1995 fall-off  in" quota  imports  from  China  does not  appear  to  have  continued 
into  1996: between  January  and  April  of  this  year,  imports  into  the  eight  largest 
importing Member States rose 27% year on year. 

Import prices 

18 

For the reasons given in the first report to the Council, it is not generally possible to 
make  direct  comparisons  between  imports  from  China  and  Community  footwear 
products.  However,  anti-dumping  investigations  now  under  way  do  show  that 
prices have been very sharply undercut. 

A  comparison  between  the  average  prices  of  Chinese  imports  and  Community 
exports is also very telling: 

Product 

1992 (x) 

1993 (x) 

1994 (x) 

1995(x) 

1995 (xx) 

China 

EU 
China 

3.17 

6.43 
8.66 

3.68 

5.98 
9.76 

3.68 

4.14 

6.24 
11.86 

6.08 
6.65 

4.09 

6.17 
6.74 

EU 

21.28 

21.19 

21.50 

21.07 

21.07 

China 

EU 
China 

EU 
China 

EU 
China 

EU 
China 

EU 

3.56 

3.30 

3.31 

2.99 

3.16 

17.38 
8.63 

20.41 
6.72 

14.82 
3.14 

9.14 
0.94 

3.85 

16.64 
9.54 

18.71 
7.45 

14.12 
3.94 

8.80 
1.00 

16.43 
10.17 

19.73 
8.02 

14.17 
4.33 

8.25 
0.90 

18.20 
11.25 

20.28 
9.33 

14.64 
7.19 

10.75 
0.82 

18.11 
11.15 

20.87 
NA 

14.68 
7.15 

10.74 
0.83 

4.12 

4.12 

4.01 

4.03 

6402 99 

6403 51 

6403 59 

6403 91 

6403 99 

6404  11 

6404  19 10 

ECU 

(x)  EUR 12 
(xx) EUR 15 

In  most  cases,  too,  the  average  unit  prices  of  imports  from  China  in  1995  were 
lower  than  those  of  any  other  main  Community  supplier.  This  is  despite  the  fact 
that  the  prices  of  some  products  were  on  an  upward  trend  (owing  perhaps  to  a 
system  of  quotas  per  number  of  pairs  and  to  more  sophisticated,  and  therefore 
expensive, products which  are now likely to be exported). For heading 6404  11,  all 
imports  rose sharply  in price  (e.g. Thailand  up 43%), putting  the Chinese  figure  in 
perspective. For 6403 51, however, there was a marked drop in price. 

C.  .  Opinion of the importers 

19 

The FTA (Foreign  Trade Association)  have argued  that quantitative  restrictions  on 
footwear  were  not justified  on  the  grounds  that  in  the  medium  term  they  would 
threaten  the export  chances  of  the European  shoe  industry,  as  they  would  provoke 
similar  actions  from  exporting  countries. Furthermore,  FTA  maintains  that  import 
restrictions  hinder  the relocation  of  shoe production  to  locations  with  better  factor 
endowments outside the EU. 

D.  Conclusion 

The  footwear  industry  remains  highly  sensitive  to  the  sheer  volume  of  imports 
from  China, their share of the Community  market,  substantial  undercutting  and  the 
export  potential  of  Chinese  exporters.  Their  market  penetration  was  checked 
briefly  in  1995  but  this  was  due  to  quotas  and,  more  generally,  to  weak  demand 
overall. The  expected  upturn  in  the  market  along  with  improvements  to  the  quota 
system  will  probably  lead  to  further  inroads  into  the  Community  market  for  the 
most  sensitive  products  currently  under  quota,  and  this  needs  to  be  kept  under 
control. 

20 

#K^H©-iii(iW^i^B 

.  *  * 

i  liî*  * 

In general  terms, statistics  on the ceramics  industry  are hard  to come by, since  producers 
are very reluctant to give what they consider to be commercially  sensitive  information  to 
their federations.  Moreover,  in the tableware sector, there are many very small  producers 
which are not members of any national  federation. 

A. 

Structure of the EU ceramic tableware sector 

Output  in  the  tableware  sector  in  1995  represented  12.5%  of  the  total  output  of  the 
ceramics  industry  in  the  European  Union  in  value  terms,  but  in  terms  of  numbers 
employed,  it  accounts  for  about  30%.  It is the most  labour  intensive  of  the  six  ceramics 
sub-sectors, and is therefore  particularly  vulnerable to the effects  of low-priced  imports. 

The sector  is made up of some  big producers,  such  as Villeroy  & Boch  of Germany,  and 
Royal  Doulton  and  Wedgwood  of  the  UK,  the  three  biggest  producers  in  the  world,  but 
also  a  large  number  of  very  small  and  medium  sized  enterprises.  The  European 
federation  estimates  it has as  its members  171 independent  producers  which  may or may 
not  have  more  than  one  plant.  In  addition,  there  are  many  small  producers  throughout 
Europe  which  are  not  members  of  any  federation,  and  keeping  track  of  them  is  very 
difficult.  This is particularly  the case in Spain and Italy. 

All  producers  have  a vast  range of  products, which  differ  greatly  between  producers  and 
depend to a large extent on public taste and disposable income. 

Originally,  production  of  ceramic  products  was  built  up  near  to  the  source  of  raw 
materials, and energy,  and where transport  facilities  were good.  These  are no  longer  the 
primary deciding factors, but the sector is still very concentrated  geographically,  with,  for 
example, big concentrations  in Staffordshire  in the UK, the Limousin  in France,  northern 
Bavaria in Germany, and Maastricht  in the Netherlands.  When the industry  was set up in 
Staffordshire  (an area which  became known as "The Potteries", as within  a century  of  the 
first  production  there  were  estimated  to  be  some  400  different  producing  units),  there 
were vast deposits of clay and coal, and a well-established canal  system. 

During  the  discussions  in  the  Council  Commercial  Questions  Group,  it  was  suggested 
that  that  part  of  the  quota  on  CN  6912.00  referring  to  stoneware  could  be  abandoned 
since  there  was  no  longer  any  production  of  stoneware  in  the  European  Union.  This 
statement  appears to be incorrect:  stoneware continues to be produced in the EU, notably 
in  the  UK,  although  precise  production  figures  are  not  available,  since  stoneware  (CN 
6912.00.30)  and  earthenware  (CN  6912.00.50)  are  usually  reported  together.  There  is 
significant  intra-EU  and extra-EU trade in the product. 

B. 

Trends  in production and apparent consumption 

21 

The  European  ceramic  tableware  sector  is  represented  at  European  level  by  the 
Fédération  européenne  des  Industries  de  Porcelaine  et  de  Faïence  de  Table  et 
d'Ornementation  (FEPF),  which  in  turn  is  a  member  of  the  general  European  ceramics 
federation,  Cérame-Unie.  Cérame-Unie  estimates  that  it  represents  some  75%  of 
tableware producers, given that some of the smaller producers  in Spain and Italy may not 
be  members  of  their  national  federations,  and  the  figures  given  below  are  estimates  of 
production, etc., for EUR  12.  The figures directly below concern all ceramic products. 

Units:  million ECU 

Production 
Exports 
Imports 
Apparent 

22761.7 
3301.9 
1233.0 

21216.2 
3667.2 
1259.4 

22187.4 
4217.4 
1342.1 

22581.3 
4475.4 
1360.5 

19457.4 

Consumption  20692.8 
EU sales on 
domestic 
market 
EU  market 
share 
Imports 
market  share 
Direct 
employment 
N°  companies 

94.03% 

319899 
c2500 

5.97% 

18808.4 

19312.1 

19466.4 

17595.2 

17981.5 

18105.9 

93.55% 

93.11% 

93.01% 

6.45% 

6.89% 

6.99% 

292889 
NA 

280586 
NA 

279270 
c2000 

Import and export figures  above are taken from  COMEXT.  Production  and employment 
figures  come from  the DEB A database (Eurostat). 

In comparison, similar information  on  tableware 

CN 6911 + 6912 + 6913 

Units:  million ECU 

22 

^WWWPST**WK»^!SHBPWP  W O w R R ^ ^ ^ Ç ^ w l l ^ WI 

Production 

3600 

3400 

3000 

m^mmwm 

856.4 
501.6* 
668.2 
375.4* 

901.4 
544.7* 
659.0 
370.0* 

1002.6 
653.9* 
677.0 
399.3* 

3411.8 

3157.6 

2674.4 

2743.6 

2498.6 

1997.8 

80.4% 

79.1% 

74.7% 

19.6% 

20.9% 

25.3% 

Exports 

Imports 

Apparent 
Consumption 
EU sales on 
domestic 
market 
EU  market 
share 
Imports 
market  share 
Direct 
employment 

n/a 
(decreasing) 
1043.4 
705.6* 
651.7 
377.6* 

n/a 

n/a 

n/a 

n/a 

105 000 

90 000 

81000 

c75 000** 

Source: 

imports/exports from  COMEXT 
production and employment from  Cérame Unie 

*CN  6911.10+ 6912.00 
** rough estimate by Cérame-Unie 

As is evident from  the figures  above, import penetration for all ceramic products  together 
is not significant,  except that it must be borne  in mind  that Europe is a strong  traditional 
exporter  of ceramic  products,  and  exports  form  an integral  and  indispensable  part of 
many European companies' order books. 

v 

Conversely,  figures  for tableware  only  show  a  more  marked  penetration  of  imports 
(25.3% in 1994). 

It  should  be further  noted  that  the  Chinese  share of imports of all ceramic  products  has 
been climbing steadily, and accounted for  14.9% in  1995 (in value terms). 

C. 

Trends in imports and exports 

As  mentioned  above,  exports  are  very  important  for  EU  tableware  producers,  many of 
whom export up to 30% of their production,  although  the quantity  of tableware  exported 
is generally  well below  import levels.  The tables below  show EU trade in  1995 with  its 
biggest importers, and its biggest export markets-. 

EU Imports 

Source: COMEXT 

23 

Origin 

China 
Poland 
Czech Rep. 
Romania 
Hong Kong 
Philippines 
Bulgaria 
Indonesia 

Total 

WÊBSBSBSÊ 

28134 
16179 
11757 
7734 
4600 
3917 
3759 
3218 

27.85 
16.02 
11.64 
7.66 
4.55 
3.88 
3.72 
3.19 

ÊBfÊBÊlf&ÊÈfëÈÊÊÊÊÈÊiÊ:-

Kil^HHi 
•RHHHIi 
24845 
9667 
817 
5579 
885 
1191 
676 
5014 

25.14 
9.78 
0.83 
5.65 
0.90 
1.21 
0.68 
5.07 

101014 

100.00 

98829 

100.00 

EU  Exports 

Source:  COMEXT 

Destination 

USA 
Czech Rep. 
Switzerland 
Japan 
Israel 
Australia 
Canada 
China 

11081 
4608 
3520 
3300 
2189 
1791 
1696 

28.69 
1.93 
9.11 
8.54 
5.67 
4.64 
4.39 
0.02 

$£k?Ùh^ 

;%Itfftal?fxportS: 

63004 
423 
3663 
4371 
4095 
5364 
3877 

61.38 
0.41 
3.57 
4.26 
3.99 
5.23 
3.78 
0.00 

Total Extra EU 

38624 

100.00 

102646 

100.00 

So  whilst  the  majority  of  imports  into  the  EU  of  porcelain  and  china,  and  earthenware, 
are  from  China,  EU  exports  to China  remain  virtually  nil.  The  Chinese  do  not  import, 
presumably  for  supply  reasons, but  are major  exporters  since their exports  are priced  not 
in accordance with production costs, but in accordance with foreign  currency needs. 

The three biggest  tableware producing  countries  of the EU are France, Germany,  and  the 
United  Kingdom  where  producers  consider  great  harm  has  been  done  to  the  main 
producing  areas  by  cheap  Chinese  imports  over  the  years.  Developments  over  recent 
years, in French, German, and British consumption  of porcelain  and china tableware  (CN 
6911)  for  instance,  are  shown  below  for  the  last  three  years  for  which  figures  are 
available. 

FRANCE 

Source: COMEXT 

'000 ECU 

Domestic  sales 
imports 
Of which, China 
China as % total imports 
Apparent  consumption 
China as % of apparent 
consumption 

WMË9MÊÊÊ 

WÊSBÊÊÊ-
110471 
73405 
15260 

20.8 
183876 

IH^^^SK 
111555 
85442 
11473 
13.4 
196997 

94440 
79167 
9757 

12.3 
173607 

5.6 

8.3 

5.8 

3.7 

24 

WË^ÈÈk 
102261 
82230 
6906 
8.4 
184491 

*  Imports are extra-EU plus imports from  other Member States. 

GERMANY 

Domestic  sales 
Imports 
Of which, China 
China as % total imports 
Apparent  consumption 
China as % of  apparent 
consumption 

UNITED KINGDOM 

Domestic sales 
Imports 
Of which, China 
China as % total imports 
Apparent  consumption 
China as % of  apparent 
consumption 

1992 
494948 
93363 
3773 
3.6 
588311 

1993 
610771 
106015 
4334 
4.1 
716786 

1994 
579813 
111979 
6358 
5.7 
691792 

1995 
n/a 
119284 
7976 
6.7 
n/a 

0.6 

0.6 

0.9 

n/a 

1992 
109292 
44778 
1011 

2.2 
154070 

1993 
147764 
43344 
894 

2.1 
191108 

1994 
168197 
46387 
2943 
6.3 
214584 

1995 
174592 
44677. 
3728 
8.3 
219269 

0.6 

0.5 

1.4 

1.7 

It  should  be  noted  that  the  figures  relating  to  imports  from  China  above,  and  the 
calculations  resulting, are significantly  different  from  the levels in last year's report.  This 
is  because  when  the  report  was  being  written  last  year,  figures  covering  imports  from 
China  were  supplied  by  Cérame-Unie  members.  Checking  these  in  COMEXT  now 
reveals  a  number  of  discrepancies,  which  means  that  the  percentage  share  of  Chinese 
imports  in  total  imports  into  the  three  Member  States  above  has  been  reduced. 
However,  it  must  be  stressed  that  total  imports  means  imports  not  only  from  third 
countries,  but  also  includes  imports  from  all  other  Member  States,  and  there  is 
significant  intra-EU trade in ceramics tableware. 

\ 

. . 

25 
Consumption  in these countries  in  the three years mentioned  above is down  on  previous 
years,  as  tableware  producers  consider  that  the  recession  is  far  from  over  for  their 
products, and that the threat from Chinese imports is growing steadily. 

._ 

D. 

Prices 

Average prices of Chinese imports are well below European prices both for porcelain  and 
chinaware  and  for  earthenware.  Below  is  a comparison  of  average  prices  charged  for 
imported  Chinese  goods, with  the  average price of  similar  products  manufactured  in  the 
EU. 

ECU/kg 

Source: Cérame-Unie members 

1991 

1992 

1993 

1994 

1995 

CN6911 

CN6912 

Chinese 
EU 
Chinese 
EU 

1.21 
5.65 
0.96 
2.43 

1.06 
5.55 
1.04 
2.38 

1.11 
4.15 
1.08 
2.21 

1.04 
5.34 
1.19 
2.34 

1.10 
3.39 
1.10 
2.06 

For the two specific products subject to quota, Chinese prices compared  with the average 
Intra-EU levels in  1995 were: 

ECU/kg 

Source: COMEXT 

CN  691110 
CN 6912.00 

1.06 
1.08 

5.57 
2.46 

As can  be  seen  from  the  above  figures,  whilst  the existence  of  quotas  may have  limited 
the amount of Chinese imports, the prices of these have remained  fairly  stable.  European 
prices have, however, come increasingly  under pressure, not only because of the presence 
of  low  priced  imports  notably  from  south  east  Asia  and  central  and  eastern  Europe,  but 
also because there is significant  production over-capacity  in the European Union. 

E. 

Employment  trends 

Numbers  employed  in  the  ceramics  industry  have  been  decreasing  steadily  in  recent 
years, as can be seen from  the table shown below. 

26 

1000 

Total ceramic 
industry* 
320 
293 
281 
279 

Tableware 
sector 
105 
103 , 
81 
75 

Tableware as 
% of total 
32.8  • 
35.2 
28.8 
26.9 

1992 
1993 
1994 
1995 

* 

includes coarse ceramics - refractory  products, building bricks 
and roof tiles.  1995 figures  are estimates. 

Figures for the total industry employment come from  the Panorama of European  Industry; 
figures  for  the  tableware  sector  are  Cérame-Unie  estimates.  Cérame-Unie  has  also 
provided  some estimates  of the progression  in employment  levels in the tableware  sector 
in certain Member States over the last two years: 

France 
Germany 
Portugal 
Spain 
United Kingdom 
Italy 
Netherlands 
Austria 

4005 
24725 
12278 
656 
22085 
6060 
640 
994 

3894 
21424 
11898 
n/a 
22000 
n/a 
605 
n/a 

It  is  not  easy  to  determine  how  much  of  the  decline  in  employment  in  this  sector  is  a 
direct  result of growing  imports of low priced  Chinese tableware, but there  are a number 
of examples  of closures  or relocations  where the existence of cheap imports  have played 
a major role in the decision making process: 

1.  3 plants in the United Kingdom have closed  down  over recent years, and  others 

are working at reduced capacity 

2.  Royal Doulton (UK) has started to produce tableware in Indonesia in order to be 
able  to  take  advantage  of  cheaper  labour  costs  and  better  face  low  priced 
competition  in its European markets 

3.  Villeroy  & Boch  (D) has moved part  of  the production  from  its Mettlach  plant 
in  Germany,  where  employment  and  social  costs  make  up  some  35%  of  total 
cost, to plants in France and Hungary, where the corresponding  figures  are 25% 
and  11%  respectively.  The reason for  this decision  is specifically  to better  face 
competition from  low priced imports. 

27 
Such  a  move  is  bound  to  have  serious  effects  for  the  town,  where,  out  of  a 
population  of  around  8000,  some  3500  are  employed  in  Villeroy  &  Boch's 
plants  producing  tiles,  sanitary ware,  and  tableware.  The  current  numbers 
employed are already down from  5500 a few years ago, in an area where there is 
little  in  the  way  of  alternative  employment.  In  addition,  unemployment  in  the 
Saarland is well above the German national average. 

N.B. 

Numbers  employed  in  the  ceramics  industry  as  a  whole  went  down  by  an 
estimated  12.7%  between  1992  and  1995;  '  numbers  employed  in  the 
tableware sector went down by an estimated 28.6% over the same period. 

F. 

Counterfeiting  problem 

An  additional  and  increasing  problem  which  EU  tableware  manufacturers  have  with 
Chinese  imports  is that they  are often  counterfeit.  That  is, Chinese producers  have been 
known  to  send  representatives  to  Europe  where  they  copy  European  designs,  which  are 
produced  in China  and  sold  in Europe  at much  lower prices than  the European  products. 
Examples  have  been  shown  in  the  past  of  Chinese  products  being'  sold  in  European 
markets, as virtually exact replicas of EU products (evidence provided by Cérame Unie is 
available if necessary). 

G. 

Chinese tableware  sector 

Very  little is known  of the actual  structure of the tableware sector in China,  although  it is 
known  China  exports  around  25% of  its  total  production.  In  1995,  a German  magazine 
estimated  that  Chinese  tableware  production  amounted  to  about  6  billion  pieces,  for  a 
total  value  of  DM  3 billion  that  year,  coming  from  around  1000 production  units  with 
some 260 000 workers. 

As far  as is known,  no EU producers have any involvement  in the production  of  ceramic 
tableware  in  China.  It  does  not  seem  possible  at  this  stage that  there  would  be  any  big 
Chinese market for their products.  There is a market for their products in other south east 
Asian  countries,  though,  and  production  in  China  could  prove  attractive  in  the  longer 
term. 

H. 

Opinion of the Community  industry 

Cérame-Unie, which represents the major European ceramics producers remains firmly  in 
favour  of  the  continuation  of  the  quotas.  This  position  is  endorsed  by  an  important 
number of members of the European Parliament (Ceramic Intergroup). 

: 
Opinion of the importers 

• 

I. 

•* 

28 

FTA  (Importers  association)  believes  that due to a suppressed  demand  the impact  of  the 
quota  in  the  ceramics  arid  porcelain  sector  is  less  dramatic,  than  in  other  sectors 
concerned.  However  FTA. still  maintains  that  any  quantitative  restriction  should  be 
abolished. 

J. 

Conclusion 

China continues  to be à state-trading country in which it is thought that more than  half of 
industrial  output  is still effected  by state enterprises, and where the financial  system,  and 
the change of hard currencies, remains in the hands of the State.  This means that Chinese 
exporters  can  go  on  selling  tableware  on European  markets  at  prices  which  are  not  cost 
related, and this continues to damage the EU market. 

This  situation  exacerbates  already  difficult  circumstances  for  a  sector  which  is,  as 
mentioned  above,  highly  geographically  concentrated,  where  demand  is  falling,  and 
where there is a certain amount of overcapacity. 

In  view  of  the  above, the tableware  sector  remains  sensitive because  of  the  high  volume 
of  the  Chinese  imports,  their  considerable  disruption  potential  and  the  substantial  price 
undercutting. 

29 

A.  Structure of the EU glass tableware industry 

In  1995,  the  glass  tableware  sector  in  the  European  Union  accounted  for  3.94%  of  all 

glass  production  in  the  EU,  as  opposed  to  container  glass  which  is  the  largest  glass 

sub-sector  with  64.73%,  and  flat  glass  with  25.46%.  95% of  all  EU  glass  tableware  is 

produced  in France, Germany, Italy and the UK. 

Its  largest 
France  occupies  a  dominant  position,  accounting  for  over  half  EU  output. 
producer, Verrerie Cristallerie d'Arques is a world leader, employs around  11 000 people, 

produces  in  the  region  of  5  million  articles,  and  exports  some  75%  of  its  production. 

There  are  other  large  producers,  such  as  Schott(D),  Bormioli  Rocco(I),  and  Durobor 

(B/UK),  but  the  majority  of  producers  are  small  and  medium-sized  enterprises.  The 

principal  competition  comes  from  the USA  and Japan, dominated  by Corning  and  Asahi 

respectively, although competition  from  the far east is growing. 

Total  production  in  1995 was  944 351  tonnes, of  which  around  60% was  in  the  form  of 

drinking  glasses.  Although  this  accounted  for  about  3.94%  of  total  glass  production  in 

tonnage  terms, it  is much  more  important  than  this  share  would  indicate, considering  its 

potential selling price, which can be very high. 

The  glass  tableware  industry  is  represented  at  European  level  by  European  Domestic 

Glass (EDG) for crystal and hand made glass, and by the Fédération européenne du  Verre 

d'Emballage  (FEVE)  for  mechanically  produced  glass, although  contacts  with  producers 

of  the  latter  are  limited.  Both  are  in  turn  affiliated  to  the  Comité  Permanent  des 

Industries du Verre de la CE (CPIV). 

The  EDG  has  members  in  most  Member  States,  although  it  has  never  managed  to 
establish  any  links  in  Spain  or  Portugal,  and  there  is  no  production  in  Luxembourg. 
Where  it does have  members,  it estimates  that  it represents  around  80% of  the  industry, 
i.e  some  86 companies.  The majority  of these companies  have just  one producing  plant, 

but there are some with more than one plant, sometimes  in more than one Member State, 

such as Durobor (B/UK), Saint-Gobain(F/D). 

.;", 
Developments in the sector are closely  linked to changes in life  style, disposable income, 

•'"•'•••'•  V  ,. 

•.•'-  ": :• 

••  '.::  ••.•• ••'.'  ,:'  . 

•." 

30 

and personal taste.  Other factors which have been important over recent years include: 

increasing  mechanisation,  which  has  brought  with  it  a  significant  fall  in prices  and 
extended product ranges 

new forms of distribution, particularly mass distribution 

new  technological  needs  linked  to  the  rapid  spread  of  dishwashers  and  microwave 

ovens 

. 

competition from metal, ceramics, and plastics, particularly  in kitchenware. 

B.  Trends in production and apparent  consumption 

Although  EDG estimates  that  it  represents  about  80% of  glass tableware  production,  the 

statistics  which  it has  available  are  very  patchy  - its members  are often  reluctant  to  give 

out  what they  consider  to be  commercially  sensitive  information.  Therefore,  the  figures 

given  for  apparent  consumption  trends  over  recent  years  are  CPIV  estimates  covering 

EUR  11  (without  Spain,  and,  for  the  sake  of  historical  comparison,  without  the  three 

newest  EU  members).  Production  figures  also  refer  to  EUR  11  and  also  come  from 

CPIV. 

In terms  of production  of  glass  tableware, after  a high  year in  1991, levels fell  by  6%  in 

both  1992 and  1993, picked up again in  1994 (+6%), and fell back by 2% in  1995.  Much 

of  the  improvement  seen  in  1994 was  export-led  since  apparent  consumption  in  the  EU 

continued  to  go  down.  In  1995,  apparent  consumption  grew  again  by  1.5%,  whereas 

exports fell back by 2,6%. 

Latest  figures  available  on  EU  production  and  apparent  consumption  levels  are  given 

overleaf. 

Tonnes, except where otherwise stated 

31 

Production 

nm WSÈÊ 
1032000 

967000 

911000 

963229 

944351 

EU Exports 

358074 

299372 

301979 

368539 

358643 

EU Imports 

121509 

135292 

149851 

149353 

175507 

Apparent 

Consumption 

795435 

802920 

758872 

750043 

761215 

EU sales on 

domestic 

market 

EU 

market 

share 

Imports 

673733 

668029 

609374 

600784 

585708 

84.7% 

83.2% 

80.3% 

80.1% 

77.0% 

market share 

15.3% 

16.8% 

19.7% 

19.9% 

19.9% 

Direct 

employment 

15428 

15366 

15212 

15000 

15000* 

Source: 

Imports/exports:  COMEXT 
Production, employment and n° companies:  CPIV 
Imports market share is calculated on apparent consumption. 
* estimate 

C.  Trends in imports and exports 

Given  that  glass  tableware* and  crystal  are products  which  can  be  transported  over  long 

distances  viably  under  normal  market  conditions,  EU  producers  are  very  dynamic  on 

export  markets, and  have  a traditional  long term presence  in a number  of  them.  Exports 

regularly  account for  a third  of all products produced  in the EU.  The main exports  are in 

the top end of the quality  and design range. Higher value-added  products  are, therefore,  a 

significant  part of the business. 

In  1995, EU  producers  exported  over  38% of  their  total  production,  which  constitutes  a 

steady  increase  since  1987,  when  producers  were  exporting  about  30%  of  their 

production. 

32 

Below  is a breakdown  of  the principal  sources of EU imports of glass tableware in  1995 

(EUR  12), as well as the main destination countries of EU glass tableware exports. 

H K R RH HRWWiSi 

^I^ÊÊÊÊI^^^mÊÊÊÊÊÊÊ 

# ^ / O 3 U 0 T 3 1 , ^ ^ S E B ^ E W^ 

Turkey 

Poland 

Czech Rep. 

Indonesia 

Slovenia. 

Romania 

China 

USA 

36252 

25243 

24486 

13970 

11005 

8420 

6822 

6186 

21.71 

15.12 

14.67 

8.37 

6.59 

5.04 

4.09 

3.71 

Total Extra EU 

166960 

100.00 

10084 

18444 

3809 

268 

2518 

268 

668 

75865 

328299 

3.07 

5.62 

1.16 

0.37 

0.77 

.  0.08 

0.20 

23.11 

100.00 

Whilst  certain  producers,  such  as  in Turkey  or  in eastern  Europe,  increased  their  overall 

share of  imports  into the EU, the share from  China was halved  in  1995 from  over  8% in 

1994.  At  the  same  time,  EU  glass  tableware  producers  have  increased  their  exports  to 

China  from  179  tonnes  in  1994  to  668  tonnes  in  1995,  just  0.20%  of  all  EU  glass 

tableware exports. 

Chinese  producers  have  long  had  a  traditional  presence  on  the  EU  market  for  glass 

tableware,  with  a  period,  between  1990  and  1993, of  increasing  tonnages  coming  in  at 

low prices, but with  a subsequent  and steady  decline from  1994 onwards. In addition, by 

far the largest share (approaching  100%) of all imports of glass tableware from  China are 

plain,  simple  glass  products,  i.e.  not  glass  ceramics,  not  lead  crystal,  and  most  of  it  is 

machine  produced.  That  is, it  is  the  most  basic  quality,  bottom  of  the  range,  glassware 

products. 

D.  Prices 

The principal  point  of  concern  to  the  EU  glass  tableware  sector  is  the  low  prices  being 
practised  by  Chinese exporters, which  do not  appear  to be based  on cost  considerations, 
but  on  Chinese  needs  for  foreign  currency.  In  this  case,  it  cannot  be  considered  that 
normal market conditions prevail, China still being essentially a state-trading country. 

Having  said that,  it is extremely  difficult  to get details on prices of Chinese  imports.  For 
this, there, are two obvious sources:  industry  and COMEXT statistics.  When  a customer 

- 

. 

- 

> 

" 

"

;

•

•' 

' 

'' 

' 

- 

•' 

'

'

;• 

33 

is buying  glass tableware, its source is not as immediately  apparent,  if  at  all, to the  final 

customer as it is for ceramic tableware.  Therefore numerous attempts have been made by 

industry  representatives  to get price-lists  from  importers of Chinese goods, and  none  has 

been successful.  The traders approached have refused  to give prices. 

As  stated  previously,  prices  obtained  by  a simple  calculation  on  the  basis  of  COMEXT 

statistics are unreliable, since for the CN code heading 7013 as a whole for  1995, Chinese 

selling  prices  in  the  EU  were  higher  than  the  selling  prices  which  European  producers 

were able to obtain in other Member States. 

It is argued that Chinese selling prices are unlikely to be higher than EU ones, because: 

most  of  the  glass  products  imported  from  China  (97%)  are  mechanically  produced, 

basic  glass  at  the  bottom  end  of  the  product  range,  commanding  lower  prices  than 

higher value added products 

the  average  European  price  covers  the  whole  range  of  chapter  7013,  including 

higher  value  added  products,  such  as  crystal  or  engraved  glassware,  which 

commands  a  higher  selling price; the  average price  can  therefore  be  expected  to  be 

higher than the average for ordinary bottom-of-the-range  glassware. 

It should  be concluded,  therefore,  that  EU  and  Chinese  prices  of  glass  tableware  cannot 

be compared  since the available figures  are not reliable  and their respective  products  are 

not in competition. 

E.  Employment trends 

In  the  period  from  1980  to  1994,  when  total  glass  production  went  up  by  34%,  actual 

numbers employed went down by 30%.  Much of this may be attributable to  restructuring 

efforts  on  the  part  of  glass  makers  over  recent  years,  although  it  is  not  possible  to 

quantify  this.  The  glass tableware  sector  is  highly  labour  intensive,  and  it  seems  likely 

therefore  that a limited fall  in employment can be attributed, at least in part, to the growth 

in cheap imports. 

No figures  are available  to show  employment  by Member  State  and by  sub-sector.  The 
only  figures  where  a split by Member State is available  cover  total  glass  production  of 
all glass products.  Over the last five  years* trends in employment  in the EU,  and  in  the 
four main tableware producing countries (total production, all glass products), have been: 

Year 

1991 

1992 

1993 

1994 

1995 

EUR 12 

Germany 

France 

UK 

223 464 

219 458 

221611 

208 770* 

n/a 

71736 

69 737 

74 000 

69 000 

n/a 

37 309 

36 601 

35 283 

34 330 

n/a 

45 094 

44 904 

46 817 

38 713 

n/a 

Italy 

21500* 

21000* 

19 500* 

20 000 

n/a 

34 

* estimates 

Figures  relating to  glass  tableware  alone  are available  on  an EU basis  only,  and  here the 
recent evolution has been: 

1991 

1992 

1993 

1994 

- 

- 

- 

- 

15 428 

15 366 

15 212 

15 000 

-1.1% 

-0.4% 

-1.0% 

-1.4% 

Figures for  1995 are not available, but  it is thought that there was very little change  from 

the  1994 level of employment  overall. 

As to the biggest glass tableware producing countries, France, Germany  and the UK, very 

little detailed  information  is available, but it appears that after  a period of job losses  from 

1989 to  1994 due to structural  adjustment,  the employment  situation  has  stabilised  in the 

tableware sector. 

F.  Opinion of the Community  Industry 

The  producers, represented  by  CPIV  believe  that  the  quota  should  be  maintained  on  the 

grounds  that  additional  cheap  imports  would  mean  further  loss  of  market  share, the  loss 

of business, and in the end the loss of production capacity and subsequent loss of jobs. 

G.  Opinion of the importers 

FTA  believes  that  due  to  a suppressed  demand  the  impact  of  the quota  in  the  glassware 

sector is less dramatic than in other sectors concerned. However, FTA still maintains  that 

any quantitative restriction  should be abolished. 

y 

• • 

, 

• 

'35 

H.  Conclusion 

The  growing  capacity  of  Chinese  producers  to  export  low-priced  products  in  the  EU 
remains  a matter  of  concern  for  the glassware sector,  which  would  still be sensitive to 
these imports. 

However,  given  the low and falling  market share and volume of the Chinese glassware 
imports  in  the EU,  the continuation  of  a quantitative  restriction  does  not  appear  to be 
fully justified. 

A. 

Situation of the Community toy industry 

1. 

Structure of the industry 

The  structural  features  outlined  in  the  first  report  have  changed  little.  More 
production  units  have  closed,  leading  to  a  drop  of  around  1%  in  the  number  of 
firms. 

2. 

Community  production 

On the back of stronger Community consumption,  up 3% in  1995, the  production 
of  toys  in  the  EU jumped  5%,  enabling  producers  to  maintain  their  EU  market 
toy 
share  at  around  31%  at  a  time  of  stagnating 
manufacturers  did, however, see their exports drop by over 10%. 

imports.  Community 

The overall picture for products under Codes CN 9501 to 9505 is as follows: 

ECU  '000 

1992 

1993 

1994 

1995(x) 

Production 

3  110412 

3 033  146 

2 879 777 

2 966  170 

961 588 

1 076 856 

1 220 209 

1 071 486 

4 954 520 

4 828 483 

4 326 595 

4 230 665 

1 979 575 

2  196 957 

2 069 550 

2  109 307 

7  103 344 

6 784 773 

5 986  163 

6  126 350 

69.7 % 
27.9 % 

71.2% 
32.4 % 

72.2 % 
34.6% 

69.1 % 
34.4  % 

Exports 

Imports 

of which imports from 
China 
Apparent  consumption 

Market share of  imports 
Market share of  imports 
from  China 
(x)  EUR  12 

Employment 

Against  this  backdrop,  the rate of job  losses  slowed,  with  a fall  of  around  1% in 
the workforce between  1993 and  1994. 

37 

Workforce 

1990 

1991 

1992 

1993 

1994 

Direct employment 

71065 

68 336 

65 012 

61906 

61300 

Current restructuring  moves 

Alongside  efforts 
consolidation. 

to  improve  production  facilities,  the  industry  saw  further 

B. 

1. 

Sensitivity to Chinese imports 

Import trends 

Total  toy  imports  from  outside  the  EU  fell  back  by  2.2%  except  for  those  from 
China,  which  rose  1.9%.  However,  non-quota  toys  from  China,  accounting  for 
76%  of total imports, were up 27%, while those under quota were down 37%. 

E CU '000 

1992 

1993 

1994 

1995 (x) 

Toys under quota 1994 

991 965 

1 153 117 

814519 

509 465 

-9503 41 

- 9503 49 

- 9503 90 

260 117 

302 919 

247 764 

171 348 

110 648 

171 334 

88 686 

42 680 

621 200 

678 864 

478 069 

295 436 

Non-quota toys 

987 610 

1 043 840 

1255 031 

1 599 842 

Total 

1 979 575 

2 196 957 

2 069 550 

2 109 307 

(x) Eur 12 

A  comparison  of  quota  and  non-quota  imports  clearly  shows  how  well  Chinese 
producers  have  been  able  to  boost  their  exports  to  the  Community:  with  no 
^quantitative  restrictions,  imports  have  continued  to  rise  very  sharply,  up  27% 
between  1994 and 1995. 

Import prices 

Compared  to  1994,  Chinese  toys  under  headings  9503  41  and  9503  49  were 
cheaper  in  1995  than  those  from  other  EU  suppliers.  For  heading  9503  90,  the 
prices of all the main suppliers were fairly  similar. 

The  figures  below  show  the  Chinese  are  undercutting  Community  export  prices 
although there are no figures  for the ex-works price of Community products. 

Average price of imports from China and of Community  exports 

(ECU/tonne) 

38 

Product 

1992 

1993 

1994 

1995 

9503 41 

9503 49 

9503 90 

EU 

14 179 

13 137 

13 400 

12 963 

China 

EU 

China 

EU 

China 

7 737 
9 172 

7 831 
9 736 

7 314 
9420 

6 249 
9 137 

5 944 
7 724 

6013 
7 248 

6 106 
7 009 

5 983 
6 199 

5 116 

4812 

4 926 

4911 

The price of imports from  China again fell  in  1995, with a drop of  15% on the 
year for toys under heading 9503 41. 

Another  problem  still  faced  by  Community  producers  is  counterfeiting:  the 
Chinese  seem  to  have  done  little  to  stamp  out  the  practice  and  ways  of  tackling 
the problem have been slow to materialize. 

C. 

Opinion of the Community industry and of importers 

Toys  Manufacturers  of  Europe  (importers)  and  Fédération  Européenne  des 
industries  du  Jouet  (producers),  which  represent  almost  the  entire  European  toy 
industry  have  recently  proposed 
importation  of 
components  for  toys  which  fall  within  the  quota.  They  believe  this  would  be  a 
means  of  stimulating  employment  in  various  EU  countries  based  upon  local 
assembly and other value-adding processes. 

the  liberalisation  of 

the 

However,  it  should  be  noted  that  the  toy  industry's  proposal  is  intended  to 
exclude from  the coverage of the quota, specifically, only the "components of toys 
-  which  are meant  to be  subject  to further  industrial  transformations  (...)  not  to  be 
sold  as individual  items  to end  customers".  The  Commission  believes  that  such 
the  national  customs 
definition  would  entail  management  difficulties 
authorities  due  to  possible  diverging  interpretations,  and  therefore  proposes  the 
exclusion from  the quota of "components of toys", with no further  specification. 

for 

• 
D. 

'••.'••"  •'•• .••  ., 
Conclusion 

:";.'-  ''.,'  ;--' 

"' 39 

The  toy  sector  remains  sensitive  to  the  absolute  and  relative  volume  of  Chinese 
imports,  their  low  prices  and  the  export  potential  of  Chinese  producers. 
Improvements  to the quota system  will probably  lead to further  inroads for  these 
imports, making continued controls all the more necessary. 

I. 

• 

. 

-I 

-V 

40 

III. 

Conclusions 

From  the  information  it  has  gathered  the  Commission  has  drawn  the  following 
conclusions: 

1. 

The  sectors  covered  by  the  quantitative  restrictions  have  made  efforts  that  have 
borne  fruit  in  terms  of  restructuring  production  and  improving  the  quality  of  the 
products  under  quota.  However,  while  the European  producers  are continuing  in 
this effort  the sectors concerned remain sensitive. 

-  The  overall  situation  is  precarious:  all  these  industries  are  affected  in  varying 
degrees  by  stagnating  production,  declining  sales  and  exports,  closures  and  job 
shedding. 

- Most  are labour-intensive,  fragmented  industries  that  are particularly  vulnerable 
to competition  from  low-cost  countries  and have already  lost  a large  share  of  the 
Community  market to them. 

- Most are engaged  in restructuring  exercises which  look promising but are costly 
and difficult  to carry out - a waive of low-priced  imports would condemn  them  to 
failure. 

-  Some have  relocated  part of  their production,  are considering  doing  so, or  have 
subcontracted  work in low-cost countries  in order to reduce costs  and  so  compete 
with these low-cost countries. 

2. 

Chinese competition  in these sectors remains a real threat: 

-  China  has  enormous  -  and  growing  -  production  and  export  capacity  in  the 
sectors  covered  by  quantitative  restrictions  and  its  exporters  would,  in  their 
absence,  soon  be  in  a  position  to  unleash  huge  quantities  on  the  Community 
market. 

-  Imports  from  China  had  already  seized  sizeable  market  share,  or  were  in  the 
process  of  doing  so,  when  quantitative  restrictions  at  Community  level  were 
introduced. 

-  The  prices  of  imported  Chinese  products  remain  much  below  those  of 
comparable  Community  products.  They  are  also  well  below  those  of  other 
Community  suppliers. The extent  of  this  undercutting  is  such  as  to  give  Chinese 
producers the means of disrupting the Community  market. 

-  Frequent  occurrences  of  counterfeiting  in  the  case  of  some  products  further 
distort competition. 

-  An  additional  consideration  is  the  particular  nature  of  the  Chinese  economy. 
China has been  striving, over the last few  years, to liberalize  its trade regime  and 
open  its  economy  to  the  world.  Although  these  measures  represent  important 
steps forward,  they  are still clearly  insufficient  to make the Chinese  trade  system 
compatible  with  internationally'accepted  rules.  The  Chinese  authorities  still 

41 
exercise  great influence  on the operation of  the Chinese  industry: e.g.  artificially 
low  prices  that do  not  reflect  the  real economic  cost  of  the products  concerned 
and export strategies that are governed by not strictly commercial considerations. 
On the import side, China maintains high tariffs  on many consumer products, but 
the  more  prohibitive  restrictions  stem  from  non-tariff  barriers  such  as  quotas, 
licence  requirements,  restrictions  on  foreign  currency  and  technical  barriers. 
Products may be imported only by foreign  trade corporations  that are authorised, 
and essentially controlled, by the Central Government. 

There is thus reason to believe that the abolition of quantitative restrictions would lead to 
a  renewed  upsurge  in  imports  from  China  and  a  further  dangerous  weakening  of  the 
market position  of  the Community  industry  concerned,  with  the exception  of  glassware 
for which such outcome is less likely. 

In light  of  the  above,  the  Commission  believes  that the  reasons  that  led  the  Council  to 
introduce  the  quantitative  restrictions  covered  in  this  report  are,  excluding  glassware, 
overall, still valid. 

42 

CHAPTER 3 

IMPLEMENTATION  AND MAINTENANCE OF SURVEILLANCE  MEASURES 

I.  Purpose of surveillance  measures 

The  Council  introduced  these  measures  to  keep  imports  of  a  variety  of  products 
under closer observation  in cases  where the trend  gave cause for  concern  but was of 
no immediate danger to the Community  industry. 

II.  Implementation 

Prior  Community  surveillance  is  carried  out  through  a  system  whereby  licences  are 
automatically  issued  free-of-charge  for  any quantity  requested  within  five  days of  the 
lodging of a request by a Community  importer. 

Regulation  (EC) No 519/94 brought  in a standard  simplified  Community  surveillance 
document  which  reduced  to  a  minimum  the  formalities  to  be  accomplished  by 
importers and Member States in connection with imports under surveillance. 

In  April  1996, following  the conclusions  contained  in  the  Commission's  first  report, 
the Council decided by its Regulation  (EC) No 752/96: 

- to remove  a range of products of which the imports  in  1994 were negligible or 
lower than in  1993, from  the list of products subject to Community  surveillance; 
- to insert certain products in respect of which quotas were abolished (gloves and 
combined  car  radios)  in  the  list  of  products  subject  to  prior  Community 
surveillance. 

Unfortunately,  despite  repeated  requests,  many  Member  States  still  either  do  not 
provide  the  information  they  were  supposed  to  give  on  the  issue  of  surveillance 
documents  or provide  only partial  information  or give  it too  late  (with  the  exception 
of footwear), so depriving the surveillance system of much of its  usefulness. 

III.  Trends in imports of products under surveillance 

43 

The  table  below  gives  import  figures,  in  thousands  of  ecus,  for  products  under 
surveillance in  1995, excluding footwear,  and sets them against the  1994 figures. 

CN code 

Description 

1994 

1995 

Imports 

China/Extra-

EC  (1995) 

5,48% 

77,78% 

31,48% 

56,03% 

58,18% 

89,48% 

27,84% 

17,59% 

77,50% 

18,69% 

22,45% 

12,13% 

68,22% 

8,92% 

0% 

4,93% 

0.42% 

20,48% 

31,82% 

24,73% 

41,94% 

24,22% 

67,27% 

28,58% 

1.897 

1.307 

3.463 

21.313 

48.402 

7.786 

7.773 

9.927 

67.210 

19.711 

5.513 

4.041 

75.303 

3.223 

0 

35.174 

2.001 

50.884 

6.163 

2.592 

20.235 

7.037 

17.895 

15.857 

190190 90 

Food preparations 

2827  10.00 

Ammonium  chloride 

2905 49 90 

Other polyhydric  alcohols 

2918  14 00 

Citric acid 

2941 30 00 

Tetracyclines and their 

derivatives 

294140 00 

Chloramphenicol 

3204  13 00 

Basic dyes.... 

3204  15 00 

Vat dyes ... 

2.408 

1.083 

1.716 

28.380 

38.101 

9.736 

7.815 

5.034 

3604 

Pyrotechnic  articles 

•  41.578 

3905 20 00* 

Polyvinyl  alcohols 

4203 29 91 

Gloves 

4203 29 99 

Gloves 

6913  10 

Ornamental  articles of 

7004 90 

7901  12 

8527 21 

8712 00 

9503 30 

9503 60 

9504 40 

9603^29 

9603 30 

9603 40 

9603 90 

porcelain 

Other glass 

Zinc, not alloyed... 

Car radios 

Bicycles 

Construction  sets 

Puzzles 

Playing cards 

Brooms and brushes 

Brooms and brushes 

Brooms and brushes 

Brooms and brushes 

Source : EUROSTAT 

15.748 

4.764 

4.992 

94.126 

3.485 

0 

63.696 

1.661 

33.687 

5.201 

2.318 

14.476 

5.068 

15.174 

12.267 

*  formerly  3905 30 00 

44 

In  the  case  of  footwear  imports  Eurostat  figures  do  not  distinguish  between  those 
under surveillance and those not, so the Commission can only refer to the surveillance 
documents issued in 1995: 

ex 6402 99 

1517 290 pairs 

ex 6403 91 et 99 

10 331 353 pairs 

ex 6404  11 

4 466 577 pairs 

total 

1  35 781 669 pairs* 

(*) 1.  including  19 466  44$.pair s for  Italy, for  which  the  breakdown  by  category  is  not 

known. 

2. Germany has not provided  data from  the end of July  1995 to December J 995. 

IV.  Should surveillance measures be maintained? 

The  figures  provided  here  show  that  imports  of  a  range  of  products  have  increased 
significantly.  The Commission  believes that prior surveillance  should be maintained 
for these products. 

In  the  case  of  other  products  (CN  codes  1901  90  90;  7004  90;  7901  12;  8527  21) 
where  imports  are  insignificant  or  down  on  1994,  the  Commission  believes  it 
unnecessary  to  maintain  surveillance  measures  and  so,  with  a  view  to  reducing  the 
administrative  burden  on  both  national  administrations  and  importers,  proposes  that 
they be excluded from  the list of products subject to such measures. 

•.:••. 

•''•'.  V.'-'  ••• „  V 

-•••  •'••','•' 

'  •••'"-':.'-:1 

• 

45 

CHAPTER4 

CONCLUSIONS AND PROPOSALS OF THE COMMISSION 

In view of the above, the Commission believes that the system of quantitative restrictions 
and surveillance measures set up under Regulation (EC) No 519/94 should be maintained 
but with the following  adjustments. 

1*  Quantitative restrictions 

-  Abolition of the quota on Glass tableware (CN 7013). 

-  Exclusion of "components of toys" from the quota on toys. 

2.  Surveillance measures 

The proposal is to end surveillance on products falling within CN codes  1901 90 90, 
7004 90, 7901  12, 8527  21  and  to  include  Glass  tableware (CN  7013)  among the 
products under surveillance. 

£!§$i§:fe 

*':..;.. '.$?-'v/£V^# 

4fe 

ISSN 0254-1475 

COM(97) 11 final 

DOCUMENTS 

EN 

11  02 

Catalogue  number  :  CB-CO-97-007-EN-C 

ISBN 92-78-14987-X 

Office  for  Official  Publications of the European  Communities 

L-2985  Luxembourg