3rd 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: 1998-03-09
Institutions: European Commission
Subjects: China, common commercial policy, import, market protection, quantitative restriction

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 09.03.1998 
COM(1998) 128 final 

3rd 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.  Toys 
III.  Conclusions 

Page 

p. 3 
p. 3 
p. 4 

p. 5 

p. 5 
p. 6 
p. 8 

p. 12 

p. 12 
p. 13 
p. 13 
p. 17 
p. 26 
p. 30 

CHAPTER 3 -Implementation  and maintenance of surveillance  measures 

p. 32 

Purpose of surveillance measures 
Implementation 

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

CHAPTER 4 -  Conclusions and proposals  of the Commission 

p. 32 
p. 32 
p. 33 
p. 34 

p. 35 

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  two  reports  (doc  COM(95)  614  final  of  6  December  1995,  and  doc 
COM (97)  11 final  of 29 January  1997), this third 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 situation of the Community industries concerned, and 

the sensitivity of these industries to Chinese imports. 

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 the previous years, 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  not  all  sectors  concerned  provided  detailed  information  nor  did  they  make 

known their position as clearly as in previous years. 

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  information  of  a  general  nature 
from  only a small number of associations or individual importers. 

It should also be noted that once more 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  1996, as full  statistics  for  1997 were 
not available at the time of the drafting  of this report. However, trends for  1997 have 
been used, where possible. 

CHAPTER 1 

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  a 
number  of  occasions  in order to balance  the  objective  of  ensuring  an  appropriate 
protection  of  the  Community  industry  concerned  with  that  of  maintaining  trade 
flows with the People's Republic of China: 

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

toys. 

-  In March  1995, the  quotas were  further  increased  to take  account  of the  accession 

of Austria, Finland and  Sweden. 

- In April  1996, following  the conclusions contained in the Commission's first  annual 
report  on  the  implementation  of  the  quotas,  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 
liberalized; 

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; 

the remaining quotas were increased (ceramic and porcelain tableware and 
glassware by 5% and certain footwear  by 2 %). 

- In October  1996, Council Regulation (EC) No  1897/96 excluded  glass-fronted  clip-

frames  from  the quota applicable to glassware. 

- Finally,  as a result  of Council  Regulation  (EC) No  847/97 of  12*May  1997, which 

implemented the Commission's proposals included in its 2nd annual report: 

• 

• 

imports of toy parts and accessories have been  liberalized; 

the quota on glass tableware will be removed as from  1  January  1998. 

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,  still 

raises  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,  1^2 232  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), to 28 204 applications  for  the allocation of the 

1996  quotas.  While  last  year the  number  of  applicants  for  the  1997  allocation 

decreased  to  19 708, this year the number of applicants has increased  to 21 439, 

and  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 may lead to underutilization of the quotas. However,, this 

trend  has  been  partly  corrected  by the  5% increase  of the portion  of the  quotas 

reserved  for  non-traditional  importers, which will  allow them  to  be granted,  for 

1998, similar quantities than in previous years despite the increase of applicants. 

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  1998 quotas well before the beginning  of the quota 
year,  in July  1997, and allowed importers to introduce  their  applications  during 
2 months, until September  1997. 

8 

The  1998  management  rules  currently  provide  for  a  12-month  validity  of  the 

import  licences. Moreover,  the unused  1997 quotas will  be redistributed  during 

1998.  The  Commission  considers  that  the  quantities  redistributed  from  the 

previous  year  should  be  kept  separate  from  the  current  annual  quota.  The 

licences  allocated  in  the  redistribution  exercise,  therefore,  have  been  set  to 

expire  one  month  earlier  than  the  regular  quota  licences,  in  order  to  avoid  a 

"snow-ball" effect  towards the end of the year. This differentiated  date of expiry 

has  raised  strong  concerns  by  several  Member  States  which  are  currently  the 

subject  of an examination involving the Commission's Legal  Service. 

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,  such  as  the  selection  of  the  reference  year  for 

traditional  importers  and  the  different  duration  of  the  redistribution 

licences 

compared to the regular annual quota licences. 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. 

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

Products 

Unit 

1993 

Imports 

1994 

1995 

1996 

1996 quotas 
(annual basis) 

1997 quotas 
(annual  basis) 

unused 
quantities 
in  1996 

Quotas 

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 

37 894 757 

pairs 

3 942 271 

pairs 

36 215 974 

pairs 

20 853 012 

pairs 

31 039 693 

pairs 

129 945 707 

35 270 099 
(9 989 423 hi-
tech  incl.) 

2 602 553 

27 050 401 
(1 517 290 hi-
tech  incl.) 

48 845 047 
(6 344 717 hi-
tech  incl.) 

39  151 481 

39  151481 

9 242 791 

(hi-tech not 
included) 

(hi-tech  not 
included) 

1 241 989 

1 395 015 

2 795 000 

2 795 000 

1 337 516 

30 610 418 
(14  122  199 hi-
tech  incl.) 

15 621 517 
(10 331 353 hi-
tech  incl.) 

22 607 883 
(6 288 335 hi-
tech  incl.) 

25 672  115 

14 043 417 
(4 466 577 hi-
tech  incl.) 

18 539 881 
(17 561  189 hi-
tech  incl.) 

21  318791 
(15 975 984 hi-
tech  incl.) 

12 120 000 

12 120,000 

2 928  143 

(hi-tech  not 
included) 

(hi-tech  not 
included) 

18 228 780 

18 228 780 

6 804 272 

(hi-tech  not 
included) 

(hi-tech  not 
included) 

18 892 609 

14 089768 

31 897 716 

31 897 716 

16 239 641 

116 763 068 
(33 361 807 hi-
tech  incl.) 

76 849 933 

(21 223 220* 
hi-tech  incl.) 

104  188 502 
(39 881 890 hi-
tech  incl.) 

104  192 977 

(hi-tech not 
included) 

104  192 977 
(hi-tech  not 
included) 

36 552 363 

-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 quantitites based on import licences returned to the Member  States 
(*) including 4.908.000 pairs for  Italy, for  which the breakdown by category  is not known. 

• 

-Q 

Imports 

Quotas 

Products 

Unit 

1993 

1994 

1995 

1996 

1996 quotas 
(annual  basis) 

1997 quotas 
(annual  basis) 

unused 
quantities 
in 1996 (*> 

porcelain 
tableware 
(691110) 
ceramic 
tableware 
(691200) 

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

tonnes 

42 300 

50 045 

31966 

34 742 

45 800 

45 800 

10 756 

tonnes 

36 686 

38 910 

26 372 

28 454 

34 650 

34 650 

7 823 

ECU 

302 917 000 

246 564 000 

179 717 000 

207 330 000 

NA( 1) 

ECU 
ECU 
ECU 

171 339 000 
678 942 000 
1 153 208 000 

87 263 000 
472 977 000 
806 804 000 

45 853 000 
309 862 000 
535 432 000 

65  177 000 
345 325 000 
617 832 000 

N A( ,) 
NA( 1) 
1 056 996 632 

NA( 1) 

N A( I) 
NA( 1) 

1 056 996 632 

NA( 1) 

NA( 1) 
NA( 1) 
319 850 908 

Source  :-EUROSTAT 

(*) figures  on unused quantities  based on import licences returned to the Member  States 
(J) breakdown no longer available because  of merger of the quotas 

b)  Import prices of products originating in China 

11 

Product 

Unit price in 1994 

Unit price in 1995 

Unit price in 1996 

Footwear: 

- 6402 99 

-6403 51 

- 6403 59 

- 6403 91 

- 6403 99 

- 6404 11 

3.78 

ECU/pair 

4.22 

ECU/pair 

.4.81 

ECU/pair 

11.85 

ECU/pair 

6.74 

ECU/pair 

3.26 

ECU/pair 

3.17 

ECU/pair 

10.14 

ECU/pair 

11.20 

ECU/pair 

8.02 

ECU/pair 

9.25 

ECU/pair 

4.30 

ECU/pair 

7.13 

ECU/pair 

7.56 

ECU/pair 

3.04 

ECU/pair 

12.15 ECU/pair 

9.54 

ECU/pair 

8.31 

ECU/pair 

1.11 

ECU/pair 

-6404  19 10 

0.90 

ECU/pair 

0.83 

ECU/pair 

Porcelain tableware(*): 

6911  10 

1 012.34  ECU/tonne 

1 070.03  ECU/tonne 

1  149.61  ECU/tonne 

Ceramic tableware(*): 

6912 00 

1 077.59  ECU/tonne 

1 077.92  ECU/tonne 

1 212.91  ECU/tonne 

Toys : 

- 9503 41 

- 9503 49 

- 9503 90 

Source  : EUROSTAT 

7316 

ECU/tonne 

6 247 

ECU/tonne 

7  148 

ECU/tonne 

6113 

ECU/tonne 

5 987 

ECU/tonne 

5 618 

ECU/tonne 

4 924 

ECU/tonne 

4 909 

ECU/tonne 

5 308 

ECU/tonne 

CHAPTER 2 

12 

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.  Structure of the industry 

2.  Production 

3.  Employment 

4. 

5. 

Import trends 

Import prices 

6.  China's export potential 

II.  Analysis of the sectors  concerned 

13 

Footwear 

CN 6402 99; 6403 51 and 59; 6403 91 and 99; 6404 11; 6404 19 10 

A. 

Situation of the Community footwear  industry 

1. 

Structure of the industry 

This  year's  trends  followed  those  of  earlier  years:  in  the  south  of  the  EU  the 
number of producers has remained more or less stable, but there have been  further 
closures  in the north.  The number  of undertakings  in this  sector  has continued  to 
decrease. 

2. 

Community  production 

Despite a 4% increase in exports, production  fell  slightly  in  1996. It was  strongly 
affected  by the fall  in sales within the Community, where EU producers'  share of 
the market fell by 3%. 

1000 pairs 
Production 

1993(x) 
1 090  166 

1994 (x) 
1  107 140 

1994(xx) 
1  124 532 

1995(x) 
1 087 305 

1995(xx) 
1  104 339 

1996 (xx) 
1 097 266 

Exports 

291 889 

339 687 

NA 

298 528 

306 575 

319 054 

Consumption 

1 529 857 

1 524  135 

N  A 

1 504 666 

1 545 934 

1 594 863 

Sales/Community 
production on 
internal  market 
Market share of 
Community 
production 

798 277 

767 453 

N  A 

788 777 

797 764 

778 212 

5 2% 

50% 

NA 

5 2% 

5 2% 

4 9% 

(x) EUR 12 -(xx) EUR  15 

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

Employment 

In  1996 there were a further  6000 job  losses  in the  Community  of Fifteen  in this 
sector. 

Numbers  directly 
employed  EUR  12 
Numbers  directly 
employed  EUR  15 

1993 
320  405 

1994 
317  990 

1995 
312  102 

1996 
306  271 

325  436 

319416 

313  666 

14 
N.B.  : Under  the  altered  nomenclature  (PRODCOM),  the  employment  statistics 
now cover a broader sector. The  1993 and  1994 figures  have been extrapolated to 
take account of the changes and provide a valid comparison between the new and 
older statistics. 

4. 

Current restructuring 

Restructuring  of the  industry  over  the  last  few  years  has  begun  to  bear  fruit  and 
productivity  is  increasing.  The  sector  also  became  more  competitive  thanks  to 
quality 
improvements,  diversification  and  greater  use  of  automation  and 
information  technology.  However,  it  has  become  clear  that  it  is  essential  for 
Community  products  to  obtain  better  access  to  non-Community  markets  if  the 
industry is to continue modernising and restructuring. 

B. 

1. 

Sensitivity to Chinese imports 

Import trends 

1996  Community  footwear  imports  from  all  origins  totalled  816  651  000  pairs, 
approximately  8  %  up  on  1995,  and  accounted  for  51%  of  the  Community 
market. 

The table below shows import trends from  different  supplier countries  from  1993 
to  1996. 

1000 pairs 
Non-EC total 
China 
Indonesia 
Vietnam 
Thailand 
Taiwan 
India 
Brazil 
South Korea 
(x) EUR  12-(xx)  EUR  15 

1993 (x) 
731 580 
296 700 
86 673 
32 752 
61 118 
21 538 
18 393 
23 209 
30410 

1994 (x) 
756 682 
301 406 
104 192 
58 064 
51 336 
17 278 
20 989 
17811 
20 462 

1995 (x) 
715 889 
280 143 
99 601 
74 915 
35 937 
19 690 
19 209 
14 834 
14 288 

1995 (xx) 
748 170 
295 072 
102 476 
76 757 
37 717 
20 725 
19 650 
15 375 
15 345 

1996 (xx) 
816 651 
337 484 
99 798 
97 165 
32 268 
21 992 
21 779 
12 976 
9113 

68 million more pairs were imported  in  1996 than in  1995, with 42 million  of the 
increase accounted for by China and 20 million by Vietnam. 

Imports  from  China  fell  in  1995, but  rose again  by  13 % in  1996,  demonstrating 
the capacity of Chinese exporters to adapt to Community quota conditions. 

Chinese  imports  accounted  for  41%  of all  footwear  imports  into the  Community 
in  1996, and their share of the EC market was 21%, 2% up on  1995. 

The following  table shows overall trends in EC footwear  imports from  China: 

15 

1000 pairs 
Quota footwear 
Non-quota 
footwear 
Total 

1993(x) 
137 679 
159 021 

1994(x) 
117 141 
184 265 

1995(x) 
71 611 
208 532 

1995(xx) 
77 073 
217 999 

1996(xx) 
104 690 
232 794 

296 700 

301 406 

280 143 

295 072 

337 484 

(x) EUR  12 -(xx) EUR 15 

The main increase is in imports of quota footwear  (+ 26% as opposed to + 6%  for 
non-quota  footwear). 

This  renewed  increase  in  quota  footwear  imports  from  China  breaks  down  by 
tariff heading as follows: 

pairs 
6402 99 
6403 51 and 59 
6403 91 and 99 
6404 11 
6404 19 10 
(x)EUR12-(xx)EUR  15 

1993(x) 
33 498 463 
3 030 80i 
24 860 632 
23 849 323 
34 789 708 

1994(x) . 
35 292 487 
2 602 553 
30 638 814 
22 662 404 
25 944 728 

1995(x) 
24 270 835 
1 100 882 
14 857 004 
12 717 094 
18 664 920 

1995(xx) 
27 083 126 
1 241 996 
15 652 049 
14 182 196 
18 914 149 

1996(xx) 
49 133 985 
1 395 151 
18 594 437 
21 410712 
14 155 867 

Between  1995  and  1996  imports  of  quota  footwear  under  CN  code  6402  99 
(rubber/plastic)  rose  very  sharply,  by  more  than  80 %,  while  imports  under  CN 
code  6404  11  (textile)  also  rose  by  more  than  30 %.  Only  imports  of  slippers 
(textile soles, CN code 6404  1910) fell between  1995 and  1996, by 25%. 

2. 

Import prices 

As  a  result  of  the  recent  anti-dumping  investigations,  dumping  margins  were 
established  at  133 % for  footwear  with  textile  uppers  and  47.6  % for  shoes  with 
leather/synthetic uppers. 

Comparing  average  footwear  prices for  imports  from  China and exports  from  the 
Community  gives  some  idea  of  the  huge  gap  between  Chinese  and  Community 
prices: 

Product 
6402 99 

6403 51 

6403 59 

6403 91 

6403 99 

6404 11 

6404 19 10 

China 
EU 
China 
EU 
China 
EU 
China 
EU 
China 
EU 
China 
EU 
China 
EU 

1993(x) 
3.68 
5.98 
9.76 
21.19 
3.30 
16.64 
9.54 
18.71 
7.45 
14.12 
3.94 
8.80 
1.00 
4.12 

1994(x) 
3.78 
6.44 
11.86 
21.68 
3.26 
16.43 
10.14 
19.72 
8.02 
14.51 
4.31 
9.32 
0.89 
4.12 

1995(x) 
4.25 
6.24 
6.66 
21.04 
3.00 
18.11 
11.27 
20.25 
9.31 
14.62 
7.19 
10.73 
0.82 
4.00 

(x) EUR  12-(xx) EUR 15 

ECU/pair 

1995(xx) 
4.22 
6.36 
6.74 
21.06 
3.17 
18.13 
11.17 
20.87 
9.25 
14.69 
7.17 
10.72 
0.83 
4.03 

1996(xx) 
4.81 
6.70 
7.59 
21.59 
3.05 
21.84 
12.15 
21.20 
9.54 
15.03 
8.32 
12.40 
1.11 
4.21 

As  in previous  years, most  average  prices  per  pair  for  imports  from  China  were 
lower  in  1996  than  those  of  any  of  the  Community's  other  principal  suppliers. 
However,  they  remained  almost  unchanged  in  relation  to  1995  levels.  The  same 
applies to price differences  per pair for the different  categories of  footwear. 

16 

C. 

Conclusion 

The footwear  sector is still particularly  sensitive to imports from China because of 
their  volume,  their  large  share  of  the  Community  market,  the  extremely  wide 
price gaps and the export potential of Chinese producers. Furthermore, the  fall-off 
in  quota  imports  in  1995  was  very  short-lived  and  was  reversed  by  the  26  % 
increase in  1996. It therefore  seems that there is still a need to keep the growth of 
Chinese imports under control. 

Porcelain  or  china  tableware  and  ceramic  tableware 

CN 6911.10 and CN 6912.00 

17 

Statistics  and  detailed  information  on  the  two  positions  under  quota  are  difficult  to 
obtain,  since  most  producers  produce  a  wide  range  of  tableware  products  which,  when 
they  are  reported,  are  usually  reported  as  "tableware", that  is,  CN  6911  +  6912  +  6913 
combined,  and  also  because  producers  are  usually  reluctant  to  disclose  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. 

Situation of the Community  tableware sector 

1. 

Structure of the industry 

Whilst  output  in the tableware  sector typically  represents  about one tenth  of total  output 
of  the  EU  ceramics  industry  in  value  terms,  it  accounts  for  something  like  a  quarter  in 
It  is  the  most  labour  intensive  of  the  six  ceramics 
terms  of  numbers  employed. 
sub-sectors,  and  is  therefore  particularly  sensitive 
low-priced 
competition. 

to  the  effects  of 

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. These 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. 

2. 

Trends in production and apparent consumption 

The figures  given below are estimates of production, etc, for EUR  12 and EUR  15.  They 
apply to all ceramics sectors. 

Units:  million ECU 

1993 
EUR 12 
21216.2 

1994 
EUR 12 
22187.4 

1995 

EUR 12 
22581.3 

EUR 15 
26081.4 

1996 
EUR 15 
25506.9 

3667.2 

4217.4 

4475.4 

4234.2 

4614.4 

1259.4 

1342.1 

1360.5 

1323.1 

1396.5 

18808.4 

19312.1 

19466.4 

23170.3 

22289.0 

17595.2 

17981.5 

18105.9 

21847.3 

20884.8 

93.55% 

93.11% 

93.01% 

94.29% 

93.7% 

6.45% 

6.89% 

6.99% 

5.71% 

6.26% 

292889 

280586 

279270 
c2000 

322386 

n/a. 

1 

Production 
Exports 
Extra-EU 
Imports 
Extra-EU 
Apparent 
Consumption 
EU sales on 
domestic 
market 
EU market 
share 
Imports 
market share 
Direct 
employment 
N° companies 

Import  and  export  figures  above  for  EUR  12  and  EUR  15  are  taken  from  COMEXT. 
Production  and  employment  figures  come  from  the  DEB A database  (Eurostat:  1995 and 
1996 for EUR  15 using NACE Rev.  1, 26.2 + 26.3 + 26.4.). 

In comparison, similar information  on tableware 

CN 6911 + 6912 + 6913 

Units:  million ECU 

1993 
EUR  12 
3400** 
901.4 
544.7* 
659.0 
370.0* 

1994 
EUR 12 
3000** 

1002.6 
653.9* 
677.0 
399.3* 

1995 

EUR  12 
2800* 
1043.4 
705.6* 
651.7 
377.6* 

EUR  15 
2850** 
959.9 
650.8* 
678.9 
395.0* 

1996 
EUR  15 
2800** 

1014.8 
710.5* 
736.7 
448.8* 

3157.6 

2674.4 

2408.3 

2569.0 

2521.9 

2498.6 

1997.8 

1755.6 

n/a 

n/a 

79.1% 

74.7% 

72.9 

20.9% 

25.3% 

27.1% 

n/a 

n/a 

n/a 

n/a 

90 000 
170(6911) 

81 000 

80 000 

n/a 

75000** 
j y 2 * * * 

Production 
Exports 
Extra-EU 
Imports 
Extra-EU 
Apparent 
Consumption 
EU sales on 
domestic 
market 
EU market 
share 
Imports 
market share 
Direct 
employment 
N° companies 

Source: imports/exports from COMEXT 

production and employment from Cérame-Unie 

19 

* 
* * 
* * * 

CN 6911.10 + 6912.00 
estimate by Cérame- Un ie 
number of tableware producers which are members of 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. 

It  should  be  further  noted  that  the  Chinese  share  of  extra-EU  imports  of  all  ceramic 
products  has been  climbing  steadily,  and  accounted  for  17.2% in  1996  (in value terms). 
This  is  alarming  the  EU  ceramics  industry,  since  at  present,  the  Chinese  export  very 
small  quantities  of  tiles  to  the  EU,  but they  have  been  equipping  massively  over  recent 
years,  and  have  now  overtaken  Spain  and  Brazil  to  become  the  world's  second  biggest 
producer,  after  Italy. 
Imports  of  Chinese  tiles  into  the  EU  are  expected  to  increase 
drastically in the next few years. 

3. 

Employment trends 

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

WO 

1993-EUR  12 
1994-EUR  12 
1995-EUR  15 
1996-EUR  15 

Total ceramic 
industry* 
293 
281 
322 
n/a 

Tableware 
sector 
90 
81 
80 
75 

Tableware as 
% of total 
30.7 
28.8 
24.8 
n/a 

*  includes coarse ceramics - refractory products,  building bricks 

and roof tiles.  1996 figure  is estimated by Cérame-Unie. 

Figures for the total industry employment come from the DEBA/EUROSTAT  database; 
figures  for the tableware sector are Cérame-Unie estimates. 

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 is no shortage 
of examples  of closures or relocations  where the existence  of cheap imports have played 
a major role in the decision making process. 

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. 

B. 

Sensitivity to Chinese imports 

1. 

Trends in imports and exports 

20 

As  mentioned  above,  exports  are  very  important  for  EU  tableware  producers,  many  of 
whom generally export up to 30% of their production, although the quantity of tableware 
exported  is  generally  well  below  import  levels.  The  tables  below  show  the  trend  of 
imports in the EU, and its biggest export markets in  1996. 

Evolution of Imports:  EUR 15 

Source:  COMEXT 

CN 6911.10 

1995 

China 
Poland 
Czech Rep. 
Romania 
Hong Kong 
Philippines 
Bulgaria 
Thailand 
Indonesia 

others 

Total 

Tonnes 
31965.9 
17054.7 
12823.6 
7842.9 
4642.0 
3995.0 
3757.6 
2687.0 
3253.5 

20502.2 

108524.4 

% total imports 

29.46 
15.72 
11.82 
7.23 
4.28 
3.68 
3.46 
2.48 
3.00 

18.89 

Tonnes 
34742.3 
21026.6 
14330.7 
8537.2 
4885.2 
4974.7 
3744.0 
3482.2 
2554.4 

22038.0 

1996 

% total imports 

28.88 
17.48 
11.91 
7.10 
4.06 
4.13 
3.11 
2.89 
2.12 

18.32 

100.00 

120315.3 

100.00 

CN  6912.00 

1995 

China 
Poland 
Czech Rep. 
Romania 
Hong Kong 
Philippines 
Bulgaria 
Thailand 
Indonesia 

Others 

Total 

Tonnes 
26371.7 
10251.3 
995.7 
6415.4 
913.0 
1210.9 
707.8 
14476.0 
5162.8 

36096.6 

102601.2 

% total imports 

25.70 
9.99 
0.97 
6.25 
0.89 
1.18 
0.69 
14.11 
5.03 

35.18 

Tonnes 
28454.6 
9716.3 
1366.6 
7063.4 
706.8 
2016.8 
488.4 
9695.0 
4657.0 

43892.0 

1996 

% total imports 

26.33 
8.99 
1.26 
6.54 
0.65 
1.87 
0.45 
8.97 
4.31 

40.62 

100.00 

108056.9 

100.00 

21 

Exports in 1996:  EUR 15 

Source:  COMEXT 

CN 6911.10 

CN 6912.00 

USA 
Czech Rep. 
Switzerland 
Japan 
Israel 
Australia 
Canada 
China 

Tonnes 
10136.6 
6255.9 
3607.4 
3725.8 
2671.2 
1630.6 
1569.0 
11.0 

% total exports 

Tonnes 

% total exports 

23.5 
14.5 
8.4 
8.6 
6.2 
3.8 
3.6 
0.02 

63334.1 
790.6 
3161.7 
3733.6 
4326.0 
6114.8 
3752.9 
34.7 

59.1 
0.7 
2.9 
3.5 
4.0 
5.7 
3.5 
0.03 

Total Extra EU 

43137.2 

100.0 

107203.7 

100.0 

So  while  imports  from  China  are  growing  and  constitute  the  most  important  source 
imports  into  the  EU  of  porcelain  and  chinaware  and  earthenware,  EU  exports  to  China 
remain virtually  nil. The Chinese can not import, principally  because they  have plenty  of 
capacity themselves, but also because they do not have the financial  means. 

They  can, however,  export,  since, it is alleged, their exports are priced  not  in  accordance 
with production  costs, but in accordance  with foreign  currency  needs.  Chinese  exporters 
continue  to  sell tableware  on  European  markets  at very  low prices, and this  is  damaging 
to European markets. 

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  in  French, 
German,  and  UK  consumption  of  tableware  over  the  last  three  years  are  shown  below. 
(NB  movements  in  domestic  sales  figures  have  been  checked:  whilst  1996  was  a  very 
disappointing  year on the German market, demand in the UK was said to be at its highest 
since the end of the second world war.) 

CN 6911 

Source: Imports - COMEXT; Domestic sales - Cérame-Unie 

NB:  Imports are extra-EU imports + imports from  other Member States. 

FRANCE 

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

WO ECU 

1995 

102261 
82230 
6906 
8.4 
184491 

1994 

111555 
85442 
11473 
13.4 
196997 

1996 

98276 
81285 
5030 
6.2 
179561 

5.8 

3.7 

2.8 

22 

GERMANY 

1994 
579813 

111979 

6358 

5.7 

691792 

0.9 

Domestic sales 
Imports 

Of which, China 

China as % total imports 

Apparent  consumption 

China as % of apparent 
consumption 

*  6911+6912  + 6913 

'000 ECU 

1995* 
670744* 
394616* 
119284 
62938* 
7976 

15.9* 
6.7 
1065360* 
n/a 
5.9* 
n/a 

1996* 
614355* 
400254* 
132371 
70839* 
8559 

17.7* 
6.5 
1014609* 
n/a 
7.0* 
n/a 

UNITED KINGDOM 

'000 ECU 

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

1994 
168197 
46387 
2943 
6.3 
214584 

1995 
174592 
44677 
3728 
8.3 
219269 

1996 
285441 
47326 
4590 
9.7 
332767 

1.4 

1.7 

1.4 

CN 6912 

Source: Imports - COMEXT; Domestic sales - Cérame-Unie 

FRANCE 

W0  ECU 

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

1994 

21284 
94200 
4685 
5.0 
115484 

1995 

20912 
98082 
2750 
2.8 
118994 

1996 

19306 
85749 
2768 
3.2 
105055 

4.1 

2.3 

2.6 

23 

GERMANY 

Domestic sales 
Imports 

Of which, China 

China as % total imports 

Apparent  consumption 

China as % of apparent 
consumption 

*  6911+6912  + 69 

13 

WO ECU 

1995* 
670444* 
394616* 
96486 
62938* 
11967 
15.9* 
12.4 
1065360* 
n/a 
5.9* 
n/a 

1994 
n/a 

92909 

16067 

17.3 

, 

n/a 

n/a 

1996* 
614355* 
400254* 
101321 
70839* 
13968 
17.7* 
13.8 
1014609* 
n/a 
7.0* 
n/a 

UNITED KINGDOM 

W0  ECU 

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

1994 
n/a 
70750 
2705 
3.8 
n/a 

1995 
n/a 
67284 
4043 
6.0 

n/a 

1996 
402030 
80734 
7086 
8.8 
482764 

n/a 

n/a 

1.5 

It  must  be  stressed  that  total  imports  as mentioned  above  means  imports  not  only  from 
third  countries, but  also includes  imports  from  all  other Member  States, and that  there 
is significant  intra-EU trade in ceramic tableware. 

Apart  from  the  good  year  enjoyed  by  the  UK  tableware  sector  in  1996,  EU  tableware 
producers  are  still  generally  feeling  the  effects  of  the  recession  in  the  sector  and 
consumption  levels  are  still  depressed.  They  also  feel  that,  despite  the  existence  of  the 
quota system, the threat posed by Chinese imports of low-priced  ceramics is still harming 
their  industry. 

As the import figures  above  are from  COMEXT, they are reported  figures.  What is not 
known  is  if  this  is  the  true  extent  of  the  Chinese  presence  on  European  markets,  since 
there  is  a  suspicion  that  imports  are  also  being  routed  through  other  countries,  such  as 
Hong  Kong  and,  more  recently,  Vietnam.  For  instance,  there  is  no  local  production  of 
ceramic tableware in Hong Kong, yet in  1996, Hong Kong exported to the EU (EUR  15) 
the tonnages and values shown below: 

24 

CN 6911.10 
CN 6912.00 

Tonnes 

4893.3 
706.8 

Value 
(million ECU) 

ECU/kg 

5.8 
0.9 
Source: COMEXT 

1.19 
1.26 

2. 

Prices 

Average  prices  of  Chinese  imports  have  usually  been  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 

1992 

1993 

1994 

1995 

CN6911 

CN6912 

Chinese 
European 
Chinese 
European 

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 

1996 
1.57* 
5.99* 
n/a 
n/a 

* 

Germany only.  N/afor  rest of EU. 

For the two specific products subject to quota, Chinese prices compared with the average 
intra-EU levels in  1996 were: 

ECU/kg 

Source: COMEXT 

CN 6911.10 
CN 6912.00 

Chinese 
1.15 
L21 

Intra-EU 
5.50 
2.27 

As can  be  seen  from  the  above  figures,  whilst  the existence  of  quotas  may  have  limited 
the  quantity  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 still a certain production  over-capacity  in the  European 
Union. 

3. 

Counterfeiting  problem 

25 

An  additional  problem  which  European  tableware  manufacturers  face  due  to  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 European products, including one of a product manufactured  in 
Germany whose list price is 41 times the selling price of the product made in China. 

4. 

Opinion of the Community Industry 

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  which  represents  some  75%  of  all  tableware 
producers  in  the  European  Union  remains  firmly  in  favour  of  the  continuation  of  the 
quotas. 

5. 

Opinion of Importers 

The  Union  of  European  Glass  and  Pottery  Wholesalers  Associations,  on  the  other  side, 
believe  that  the  persistence  of  quantitative  restrictions  on  Tableware  would  harm  the 
European Industry, and that imports should therefore be fully  liberalized. 

C. 

Conclusion 

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. 

A. 

Situation of the Community toy industry 

Structure of the industry 

The  structural  features  outlined  in  the  two  previous  reports  have  changed 
considerably.  Fresh  data  from  reliable  sources  (Eurostat's  Comext  and  Deba 
databases  and  the  Industry)  have  been  considered,  contributing  to  define  a  clear 
picture  of  the  sector.  Overall,  the  EC  toy  industry  appears  to  be  significantly 
healthier  and  capable  to  compete  in  the  foreign  markets,  as  well  as-much  less 
vulnerable to low-priced  imports as compared to previous years. 

2. 

Community production and export  performance 

Community  consumption  in  1996 was almost  stable  (-0.32% on  19951), as well  as 
the production  (-0.49%1).  Exports  of European  toys  outsicle  the  Community  have 
grown  by  a  record  16.8%2  while  imports  have  grown  by  3% over  the  same  year 
1996. 
The overall picture for products under Codes CN 9501 to 9505 (NACE 36.5  for 
production and consumption) is as follows: 

ECU'000 

1995 

1996 

Production  (excl.VAT) 

5,307,500 

5,281,500 

Exports 

Imports 

1,153,021 

1,346,989.24 

4,413,423.35 

4,548,081.51 

of which  imports from  China 

2,199,355.40 

2,419,509.24-

Apparent  consumption 

8,221,800 

8,195,300 

Market share of imports (est.)-3 

53.7 /o 

55.5 /o 

Market share of imports from 
China  (est.) 

26.8% 

29.5% 

1 Source: Eurostat Deba database, considering NACE Rev.  1  Code 36.50, i.e. CN 9501 to 9504 
2  Source Eurostat Comext database, CN 9501 to 9505 
3  As the figures  on apparent consumption  do not include CN 9505, the market share of imports is probably 
lower. 

27 
These  figures  clearly  indicate  that  the  EC  toy  industry  has  recently  been  able  to 
adapt  to  the  new  global  conditions  and  is  becoming  increasingly  competitive  in 
foreign  markets.  The  healthier  situation  that  the  industry  is  now  enjoying, 
confirmed  by  last  year's  record  export  performance,  is a result  of the  restructuring 
efforts  accomplished  succesfully  thanks  to  the  temporary  relief  ensured  by  the 
quotas. 

Employment 

Direct  employment  fell  by 4.3% in  19964. However,  this loss  is compensated  by a 
considerable  growth  in  indirect  employment,  mainly  distribution  (import-export, 
wholesale  and  retail).  According  to  the  representatives  of  the  industry,  "the 
European  Union  has 2,000  companies  working  in the toys  and  games  sectors.  The 
toy  industry  employs over  100,000 people  in the European Union, 55,000 of which 
working in indirect  employment". 

Workforce 

1995 

1996 

Direct employment 

51,553 

49,321 

B. 

Sensitivity to Chinese imports 

1. 

Import trends 

Total  toy  imports  from  outside  the  EU  (excluding  China)  fell  by  3.9%;  while 
imports  from  China rose  10 %. Non-quota  toys from  China,  accounting  for  74.4% 
of total  Chinese  imports  into the EU, were up  8.3%, while those  under  quota  were 
growing at almost twice this rate (15.2%). 

ECU  '000 

1995 

1996 

Toys under quota  1994 

537,750.03 

619,641.39 

-9503 41 

- 9503 49 

- 9503 90 

179,798.42 

207,387.39 

46,391.40 

65,609.46 

311,560.21 

346,644.54 

1996/1995 
(%) 
+ 15.2 

+ 15.3 

+41.4 

+ 11.3 

Non-quota  toys 

1,661,605.37 

1,799,867.85 

+8.3 

Total  imports  from 
China 
Total  imports from  other 
countries 

2,199,355.40 

2,419,509.24 

+10.0 

2,214,067.95 

2,128,572.27 

-3.9 

4  Source: Eurostat Deba database, considering NACE Rev.  1  Code 36.50, i.e. CN 9501 to 9504 

28 

2. 

Import Prices 

The  import  prices  of  toys  under  quota  from  China  have  slightly  increased 
(+5.60%)  since  1993,  as  shown  in  the  table  below.  At  the  same  time,  the 
difference  between the import prices of the same products and the EU export prices 
has significantly  decreased, due to an improved productivity of the EC industry 

1993 

5 537 

2 023 

1994 

5 602 

1614 

1995 

5 379 

1434 

Prices in ECU/tonne 

1996 

Evolution 93-96 

5 847 

1524 

+ 5.60 % 

- 28.66 % 

Toys under quota 
Differential  with 
EU export price 
Source  : EUROSTAT 

3. 

Current restructuring  moves 

The  temporary  protection  ensured  by  the  quota  has helped  the  EC  toy  Industry  to 
gradually  adapt  its  production  structure  in  order  to  meet  the  needs  of  a  fast-
.  changing  market.  The  efforts  undertaken  during  the  last years  appear  to have  born 
fruit  in terms of restructuring production  and improving the quality of the products. 
Most  manufacturers  in  Europe  are  now  also  becoming  importers  for  some  items 
which may be necessary  for them to keep their market  share both  in the EU and on 
export markets. 

C.  Opinion of the Community  industry 

Toys  Manufacturers  of Europe  and  Fédération  Européenne  des  industries  du  Jouet 
recently merged and formed  a new umbrella organisation, Toy Industries of Europe 
(TIE), which represents over 90% of the industry within the EU. 
While  expressing  satisfaction  for  the  suppression,  on  the  occasion  of  last  year's 
review,  of  quotas  on  toy  parts  and  components  , TIE  clearly  expressed  its  strong 
support for an immediate and total abolition of all quotas on toys. According to TIE 
these  quotas  would  represent  an  additional  administrative  burden,  which  affects 
particularly  small  businesses, while  failing  to restrict  imports  of  Chinese  toys  into 
the EU. 

D.  Conclusion 

The market  share of Chinese toys in the EC remains high  and  is  likely  to  increase. 
However,  the  situation  of  the  EC  industry  has  considerably  improved  since  the 
quota  was  introduced  in  1994.  The  quotas  have  allowed  the  EC  industry  to 
successfully  implement,  in a gradual way, the necessary  restructuring  efforts  and to 
reorganise  its  production  during  the  last  years.  Many  imported  products  are  no 
longer produced  in the  EC. At the  same time, the  EC industry  is now  increasingly 
exporting  and  competing  succesfully  in  foreign  markets,  as  shown  by  the  above 

figures.  Given these recent changes that the toy sector has experienced and in light 
of the EC Toy industry's position, which appears to have become now  sufficiently 
resistant, the Commission believes that the maintenance of a quantitative restriction 
does not appear to be necessary any longer. 

29 

III.  Overall conclusions 

30 

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

1. 

In  general  terms  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 
the  Footwear  and  Tableware  sectors  remain 
are  continuing  in  this  effort 
particularly  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  during  this  particularly 
vulnerable situation would condemn them to failure. 

-  Some, such as the toy industry, have recently  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.  The  toy 
industry has clearly shown to have benefited  from  the temporary relief ensured by 
the  quotas  and  it  appears  now  to  be  ready  to  compete  on  a  sufficiently  strong 
position in the global toy market. 

2. 

Chinese competition, in general, 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. 

-  Frequent  occurrences  of  counterfeiting  in  the  case  of  some  products,  namely 
porcelain and ceramics, 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. These measures represent important steps  forward, 

31 
however, the Chinese  authorities  still 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  outright  abolition  of  the  remaining 
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 the toys sector for which such  outcome 
is less likely. 

However, it should be noted that China is likely to achieve full  WTO membership 
in  the  next  few  years.  In  the  context  of  China's  accession  to  the  WTO,  the  EC 
quotas  will  be  gradually  phased  out.  The  EC  Industry  will  then  be  faced  with  a 
situation  in  which  imports  from  China  will  be  unrestricted.  Consequently,  the 
Commission considers it important to move towards a gradual liberalization of the 
quotas,  which  would  avoid  a  sudden  disruption  of  the  EC  market.  A  moderate 
increase  in the level  of the quotas, therefore,  would  be a step in view of  allowing 
the industry to gradually adapt to compete in the global market. 

This does not mean that specific  issues relating to imports from  China will not be 
dealt  with  appropriately.  Under  WTO  rules,  particular 
import  problems 
concerning  prices  or  volumes  can  be  tackled  effectively  by  specific  trade  policy 
instruments.  Chinese  membership  to the  WTO  is also  likely  to  favour  a  solution 
to the problem of  counterfeiting. 

3. 

4. 

5. 

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  toys,  overall, 
still  valid.  At  the  same  time,  a  gradual  and  limited  increase  in  the  level  of  some  of  the 
remaining quotas, without disrupting the market, would also appear to be appropriate. 

32 

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, as amended by Regulation (EC) No  139/96, 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. 

In May  1997, following the conclusions contained in the Commission's second report, 
the Council decided by its Regulation (EC) No 847/97: 

- to remove a range of products of which the imports in  1995 were lower than in 
1994, from the list of products subject to Community  surveillance; 

- to insert the products  in respect  of which quotas were abolished  (toy parts and 
accessories and glassware as from  1 January  1998) in the list of products  subject 
to prior Community  surveillance. 

III.  Trends in imports of products under surveillance 

33 

The  table  below  gives  import  figures,  in  thousands  of  ecus,  for  products  under 
surveillance  in  1996, excluding  certain  hi-tech  footwear,  and  sets them  against  the 
1995 figures. 

CN code 

Description 

1995 

1996 

Imports 

2827  10 00 

Ammonium chloride 

2905 49 90 

Other polyhydric alcohols 

2918  14 00 

Citric acid 

2941 30 00 

Tetracyclines and their 

derivatives 

2941 40 00 

Chloramphenicol 

3204  13  00 

Basic dyes.... 

3204  15 00 

Vat dyes ... 

3604 

Pyrotechnic articles 

3905 30 00 

Polyvinyl alcohols 

4203 29 91 

Gloves 

4203 29 99 

6402 19 

6403 19 

6913 10 

8712 00 

9503 30 

9503 60 

9504 40 

9603 29 

9603 30 

9603 40 

9603 90 

Gloves 
Footwear1 
Footwear1 
Ornamental articles of 

porcelain 

Bicycles 

Construction sets 

Puzzles 

Playing cards 

Brooms and brushes 

Brooms and brushes 

Brooms and brushes 

Brooms and brushes 

Source  :  EUROSTAT 

1307 

3463 

21313 

48402 

7786 

7773 

9927 

67210 

19711 

5513 

4041 

1112 

5801 

13179 

55431 

6479 

5121 

8888 

89280 

16721 

7581 

5582 

5562722 

4196854 

75303 

9411352 

5768424 

65326 

2001 

50884 

6163 

2592 

20235 

7037 

17895 

15857 

2404 

42353 

8545 

1989 

23408 

8989 

19037 

13620 

China/Extra-

EC (1996) 

81.00% 

17.28% 

40.56% 

64.41% 

85.70% 

21.29% 

14.98% 

77.31%o 

16.96% 

26.17% 

13.52% 

44.44% 

25.34% 

69.95% 

0.53% 

15.98% 

40.30% 

17.66% 

47.22% 

30.08% 

65.23% 

24.76% 

measured  in pairs 

In  the  case  of  certain  hi-tech  sports  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 1996: 

34 

ex 6402 99 

6 344 717 pairs 

ex 6403 91 et 99 

17 561189 pairs 

ex 6404  11 

15 975 984 pairs 

total 

39 881 890 pairs 

IV.  Should surveillance measures be maintained? 

The  figures  provided  here  show  that  the  share  of  imports  from  China  of  most  of 
these  products  is  still  very  high.  The  Commission  believes  that  prior  surveillance 
should be maintained for these products. 

CHAPTER 4 

CONCLUSIONS AND PROPOSALS OF THE  COMMISSION 

35 

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 Toys (CN 9503 41, 9503 49 and 9503 90). 

-  Increase of 5 % in the level of the Tableware quotas. 

The  Commission  believes  that  a  balance  should  be  kept  between  ensuring  an 
adequate  protection  of the  industries  concerned  and  maintaining  an  acceptable  flow 
of trade with China, taking into account all the interests at stake and in the context of 
the developing global market conditions. 

Consequently, a moderate increase of 5% in the level of the Tableware quotas would 
be  appropriate  and  in  conformity  with  the  above  objective,  without  being  likely  to 
disrupt the Community market conditions. 

The proposed increases give the following  results: 

Products 

CN code 

Quotas  1997 

Level of Quotas 
after  5% increase 

Porcelain 
Ceramic 

6911  10 
6912 00 

45 800 tonnes 
34 650 tonnes 

48 090 tonnes 
36 383 tonnes 

2.  Surveillance  measures 

The  proposal  is to  to  include  the  Toys  for  which  the  quota  is  no  longer  considered 
the  products  under 
necessary  (CN  9503 41,  9503 49  and  9503 90)  among 
surveillance. 

36 

ISSN 0254-1475 

COM(98) 128 final 

DOCUMENTS 

EN 

02  11  10 

Catalogue number  :  CB-C0-98-131-EN-C 

ISBN 92-78-31743-8 

Office  for Official  Publications of the European Communities 

L-2985 Luxembourg