5th 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: 2000-02-17
Institutions: European Commission
Subjects: China, import, originating product, quantitative restriction, tariff quota

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 17.02.2000
COM(2000) 91 final

5TH 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

5TH 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

1.

INTRODUCTION..........................................................................................................3

A. Historical background..................................................................................................3

B. Objective of the Commission report..............................................................................3

C. Methodology ................................................................................................................3

2. CHAPTER 1 Implementation OF THE QUANTITATIVE RESTRICTIONS ...............5

I. Background and evolution since introduction of the measures......................................5

II. Management of the quotas ...........................................................................................6

III.

Developments in the trade of the products subject to quantitative restrictions .......8

3. CHAPTER 2 SHOULD COMMUNITY QUOTAS BE MAINTAINED? .................... 12

I. Approach adopted by the Commission........................................................................ 12

II. Analysis of the sectors concerned ............................................................................... 13

1. Footwear.................................................................................................................... 13

2. Porcelain or china tableware and ceramic tableware.............................................. 24

III.

IV.

China's trade liberalisation and WTO accession ................................................. 34

Overall conclusions............................................................................................. 34

4. CHAPTER
SURVEILLANCE MEASURES .......................................................................................... 37

AND MAINTENANCE

IMPLEMENTATION

OF

3

I. Purpose of surveillance measures .............................................................................. 37

II. Implementation .......................................................................................................... 37

III.

IV.

Trends in imports of products under surveillance ................................................ 38

Should surveillance measures be maintained?..................................................... 39

5. CHAPTER 4 CONCLUSIONS AND PROPOSALS OF THE COMMISSION............ 40

2

A. Historical background

1.

INTRODUCTION

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 committed to report to the Council every year on the implementation of
the surveillance measures and the quantitative restrictions provided for in Annexes II
and III, on the need to maintain such measures, and to propose, as the need arises,
the appropriate adjustments.

This fifth 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) the situation of the Community industries concerned,

b)

the sensitivity of these industries to Chinese imports and

3

c)

the progress in Chinese trade liberalisation.

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.

It should be noted that, as in previous years, the Commission faced considerable
difficulties in gathering information on the state of the Community industry, since
producers generally produce a wide range of products, not just those subject to
quota, and that the sectors concerned 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 one association and some individual importers.

3.

In general, the analysis is based on figures for 1998. However, trends for 1999 have
been used, where possible.

4

2. CHAPTER 1

IMPLEMENTATION OF THE QUANTITATIVE RESTRICTIONS

I. Background and evolution since introduction of the measures

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

liberalised;

• 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.

In May 1997, Council Regulation (EC) No 847/97 liberalised imports of toy parts
and accessories and removed the quota on glass products tableware as from 1
January 1998.

In May 1998, as a result of Council Regulation (EC) No 1138/98 of 28 May 1998,
which implemented the Commission’s proposals included in its 3rd annual report:

• imports of toys were liberalised;

• the quotas on ceramic and porcelain tableware were increased by a further

5%.

Finally, in its 4th Report the Commission concluded that, in view of the different
factors to be taken into account, there should be no change in the structure and the
level of the remaining quotas.

5

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.

it
In conformity with the above-mentioned principles, the Commission felt
appropriate to resort to the first allocation method provided for by Regulation
(EC) No 520/94,
trade flows, which
guarantees that "traditional" importers receive at least a part of their previous
trade performance realised during a reference period, while ensuring a fair
access to the quotas to non-traditional importers.

the method based on traditional

i.e.

The method used for the allocation of the part of the quotas set aside for the non-
traditional importers is the third method provided for by Regulation (EC)
No 520/94, i.e. the method of proportional allocation to the quantities requested.
In addition, in order to exclude speculative applications, a maximum quantity
which may be applied for by non-traditional importers, is set.

In 1996, 28.204 import licence applications were submitted by non-traditional
importers; this figure amounted to 19.708 for the 1997 allocation and 21.439 for
the 1998 allocation, while it decreased to 17.416 for the 1999 exercise (a
decrease which has to be qualified as the number of products under quota was
further reduced in 1998). Finally, for the 2000 quota year 27247 applications
were submitted.

6

This extremely high number of applications results in those non-traditional
importers being allocated very limited quantities, a fact which may lead to
under-utilisation of the quotas.

In an attempt to improve the situation the portion of the quotas reserved for non-
traditional importers was increased by 5 percentage points in 1997 for the 1998
quota year and a similar increase was decided, in 1998, for the 1999 quota year.
These limited increases have, at best, allowed non-traditional importers to be
granted quantities similar to those, very limited, they were granted in previous
years.

In its 4th Report, therefore, the Commission indicated that the allocation system
which guaranteed that most of the quotas are set aside for traditional importers,
which was appropriate during the first 4 years, should be amended with a view
to eliminating or at least reducing the imbalance between the quantities granted
to "traditional" and "other importers".

As a result, in 1999 and for the quota year 2000, the portion of the quotas
reserved for non-traditional importers was further increased by 5 percentage
points, while at
the same time the maximum individual quota quantity
entitlement was increased from 4,000 pairs to 5,000 pairs of footwear (per each
CN quota line code) and from 4t. to 5t. for porcelain and ceramic tableware (per
each CN quota line code). Further steps may be appropriate in the future with a
view to, on the one hand, improve the overall utilisation of the quotas and, on
the other, reduce as far as possible the unused quantities re-distributed the
following year.

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 2000 quotas well before the beginning of the quota year, in
June 1999, and allowed importers to introduce their applications during two and
half months, until September 1999.

The 2000 management rules currently provide for a 12-month validity of the
import licences. Moreover, the unused 1999 quotas will be redistributed during
2000. The Commission considers that
the quantities redistributed from the
previous year should be kept separate from the current annual quota.

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 licensing process is totally free of
charge for the Community importers.

2.

3.

4.

7

c) Conclusion

for

traditional

importers and the different duration of

As is unavoidable when trade is subject to restrictions, the management of these
quotas raised some problems. Some of them, such as the selection of the
the
reference year
redistribution licences compared to the regular annual quota licences, have been
satisfactorily addressed. The quantities allocated to non-traditional importers have
again been increased for the 2000 quota year to, at least partially, reduce the
imbalance in the allocation of the relative share of the quotas and thus improve
their access to them. 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
restrictions

the products subject

to quantitative

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.

8

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

Products

Unit

1995

Imports

1996

1997

1998

1998 quotas
(annual basis)

1999 quotas
(annual basis)

Quotas

unused
quantities

in 1998

Rubber
plastic
shoes (6402 99)

and
uppers

pairs

31.348.517
(xxx
"hi-tech" incl.)

48.136.893
(xxx
"hi-tech" incl.)

38.878.434
(xxx
"hi-tech" incl.)

34.623.222
(xxx
"hi-tech" incl.)

39.151.481

39.151.481

6.508.239

("hi-tech" not
included)

("hi-tech" not
included)

Leather
(6403 51 & 59)

shoes

pairs

1242.010

1.541.123

1.511.466

1.079.488

2.795.000

2.795.000

1.294.088

Leather
(6403 91 & 99)

shoes

pairs

15.652.713
(xxx
"hi-tec" incl.)

18.676.971
(xxx
"hi-tech" incl.)

23.288.824
(xxx
"hi-tech" incl.)

23.488.462
(xxx
"hi-tech" incl.)

Textile
(6404 11)

shoes

pairs

14.182.424
(xxx
"hi-tech" incl.)

21.410.923
(xxx
"hi-tech" incl.)

29.416.097
(xxx
"hi-tech" incl.)

25.445.694
(xxx
"hi-tech" incl.)

12.120.000

12.120.000

1.823.036

("hi-tech" not
included)

18.228.780

("hi-tech" not
included)

("hi-tech" not
included)

18.228.780
("hi-tech" not
included)

5.863.051

Textile
(6404 19 10)

shoes

pairs

18.915.085

14.158.153

1.552.812

9.654.874

31.897.716

31.897.716

15.869.720

Total shoes

pairs

81.340.749
(xxx
"hi-tech" incl.)

103.924.063

(xxx
"hi-tech" incl.)

94.647.633
(xxx
"hi-tech" incl.)

94.291.740
(xxx
"hi-tech" incl.)

104.192.977

104.192.977

31.358.134

("hi-tech" not
included)

("hi-tech" not
included)

- figures on "hi-tech" shoes subject to Community surveillance are based on surveillance documents issued; As the latter do not necessarily reflect actual levels of
imports, figures were adjusted, where appropriate, on the basis of data available from the Taric database. Imports may differ when compared with figures supplied
in previous reports due to necessary technical adjustments in the data avaiable from taric database.

- figures on unused quantities based on import licences returned to the Member States

9

Imports

Quotas

Products

Unit

1995

1996

1997

1998

1998 quotas
(annual basis)

1999 quotas
(annual basis)

unused
quantities (*)

in 1998

tonnes

31.966

34.742

37.969

52.381

48.090

48.090

8.175

tonnes

26.372

28.454

32.105

44.255

36.383

36.383

7.043

Porcelain
tableware
(691110)

Ceramic
tableware
(691200)

Source: - EUROSTAT

(*) figures on unused quantities based on import licences returned to the Member States

10

b)

Import prices of products originating in China

Product Unit price in 1995 Unit price in 1996 Unit price in 1997

Unit price in 1998

Footwear:

- 6402 99

4.35 ECU/pair

4.81 ECU/pair

4.95 ECU/pair

4.92

ECU/pair

- 6403 51

6.74 ECU/pair

7.56 ECU/pair

8.34 ECU/pair

10.79

ECU/pair

- 6403 59

3.17 ECU/pair

2.88 ECU/pair

2.69 ECU/pair

3.05

ECU/pair

- 6403 91

11.17 ECU/pair

12.16 ECU/pair

13.69 ECU/pair

13.30

ECU/pair

- 6403 99

9.25 ECU/pair

9.54 ECU/pair

11.09 ECU/pair

11.88

ECU/pair

- 6404 11

7.17 ECU/pair

8.33 ECU/pair

9.41 ECU/pair

- 6404 19

0.83 ECU/pair

1.11 ECU/pair

1.14 ECU/pair

9.58

1.14

ECU/pair

ECU/pair

10

Porcelain tableware(*):

6911 10

1070.0

ECU /

1149.61 ECU /

1364.42 ECU /

1310.00 ECU /

3

tonne

Tonne

tonne

Tonne

Ceramic tableware(*):

6912 00

1077.9

ECU /

1212.91 ECU /

1404.18 ECU /

1500.00

ECU /

2

tonne

Source: EUROSTAT

Tonne

tonne

Tonne

11

3.

CHAPTER 2

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.

2.

3.

4.

5.

6.

Structure of the industry

Production

Employment

Import trends

Import prices

China’s export potential

In addition, in section III below, the Commission analyses the implications of Chinas
rade liberalisation and WTO’s accession for the maintenance of the Community’s
quotas.

12

II.

Analysis of the sectors concerned

1. Footwear

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

The following footwear products are subject to quantitative restrictions:

CN Code

640299

1

640351

640359

640391

640399

1

1

640411 2

64041910

Product description

Footwear, not covering the ankle, with outer soles and uppers of rubber
or plastics (other than waterproof footwear covered under heading 6401;
and other than sports footwear and other footwear covered under heading
6402)

Footwear, covering the ankle, with outer soles and uppers of leather
(other than sports footwear)

Footwear, not covering the ankle, with outer soles and uppers of leather
(other than sports footwear)

footwear with outer

Other
rubber, plastics,
composition leather and uppers of leather, covering the ankle

soles of

leather or

footwear with outer

Other
composition leather and uppers of leather, not covering the ankle

rubber, plastics,

soles of

leather or

training
Sports footwear, tennis shoes, basketball shoes, gym shoes,
shoes and the like, with outer soles of rubber or plastics and uppers of
textile materials

Slippers and other indoor footwear with outer soles of rubber or plastics
and uppers of textile materials, other than those covered under heading
6404 11

1

2

Excluding footwear involving special technology :
shoes which have a cif price per pair of not less than ECU 9 for use in sporting activities, with a single- or
multilayer moulded sole, not injected, manufactured from synthetic materials specially designed to absorb the
impact of vertical or lateral movements and with technical features such as hermetic pads containing gas or fluid,
mechanical components which absorb or neutralise impact or materials such as low-density polymers.
Excluding:
a.

footwear which is designed for a sporting activity and has, or has provision for the attachment of, spikes,
sprigs, tops, clips, bats or the like, with a non-injected sole;
footwear involving special technology (for the precise definition, see footnote 1)

b.

13

A.

1.

Situation in the Community footwear industry

Introduction

The industry has been undergoing modernisation and restructuring for a number of
years under pressure from increasing international competition and technological
change. There has been a shift
in EU countries towards more diversified, quality
products with higher added value. This, however, does not imply – as is sometimes
suggested – that the high end of the Community market is dominated by European-
made top-of-the-line products, whereas the low end of the market is ‘reserved’ for
imports from low-wage countries. As a matter of fact, the segment of bottom-of-the-line
products has increasingly been replaced by products of medium quality – a segment in
which a considerable part of the European industry is still involved and, indeed, highly
competitive. Moreover, even firms which have traditionally produced for the high-end
of the market are more and more obliged to complement their product range also with
less-expensive models.

However, the competitive strengths developed by the industry over the past few years
can only be brought to bear if EU exporters enjoy effective access to world markets –
both with regard to the procurement of raw materials and the actual sale of their finished
products. Although the Community has made the issue of improved market access a
priority in its international trade policy, the actual situation still leaves a lot to be
desired, with a wide range of tariff as well as non-tariff barriers still preventing EU
companies from fully exploiting their export potential. In this context, it should be noted
that even industrialised countries like the United States – one of the Community's
industry principal export markets – maintain tariff peaks of up to 48%.

2.

Structure of the industry

The Community footwear industry consists of a large number of small firms (averaging
20 workers), most of which are located in regions with a low degree of industrial
diversification. However, there are certain differences from one Member State to
another: German and French companies, for example, employ an average of 100
workers, whereas the average in Spain and Italy is closer to ten. The remaining Member
States fit somewhere between those two extremes.

The number of manufacturers in the EU as a whole has been in decline throughout the
nineties, falling from 15,897 in 1989 to 14,588 in 1998 (after 14,817 in 1997).

The geographical concentration of the sector, its labour-intensive character, and its
considerable degree of price sensitivity with regard to low-priced imports lead to a
situation where any fluctuation in the level of economic activity has major regional and
social repercussions.

3.

Community production, consumption and employment

After a rather moderate decline by 1.46% between 1997 and 1996, production fell by a
substantial 4.56% in 1998, thereby reaching its lowest level for years. This fall in
output was – as already stated above – mainly due to a sharp decrease in exports as a
result of the Asian and other international crises (-9.74% in 1998).

14

Consumption fell by 1.6%, while total imports remained fairly stable. As a result, the
market share of EU manufacturers on the EU market fell from 51% in 1997 to 50% in
1998.

Employment continued to decline in 1998, with the loss of a further 11,784 jobs. This
corresponds to a 3.93% drop compared to 1997.

Table 1

1000 pairs

1995

1996

1997

1998

change

97/96

Production

1 104 339

1 104 590

1 088 485

1 038 857

-1.46%

Exports (Extra-15)

306 880

319 374

299 443

270 278

-6.24%

Imports (Extra-15)

748 067

804 412

805 592

809 549

+0.15%

Consumption

1 545 934

1 605 311

1 573 978

1 548 849

-1.95%

313 789

307 699

299 572

287 788

-2.64%

change

98/97

-4.56%

-9.74%

+0.5%

-1.6%

-3.93%

Direct
employment

producers’
EU
sales on internal
market

EC
market share

producers’

Market
Chinese imports

share of

797 764

788 490

798 650

776 521

+1.29%

-2.77%

52 %

19 %

49 %

51 %

50 %

21 %

16.9 %

17.4 %

4.

Trends in exports

After a decline of 6.24% in 1997, exports fell by another 9.74% in 1998, with exports
to Russia showing by far
the worst performance (-24.89% in 1998, after
-20.33% in1997). The market shares of the most important export markets of the
Community remained fairly stable.

15

Table 2

1000 pairs

1995

1996

1997

1998

change

98/97

exportshar
e
(1997)

export
share
(1998)

Total
extra-EU

United States

Switzerland

Russia

Canada

Japan

Saudi Arabia

Norway

Poland

306 880

319 374

299 443

270 278

-9.74%

100%

100%

79 802

84 088

92 871

85 612

-7.82%

31.0%

31.7%

29 341

29 325

27 265

25 519

-6.40%

9.1%

20 231

25 698

20 474

15 377

-24.89%

6.8%

11 660

9 905

12 357

10 956

-11.34%

4.1%

14 639

15 165

11 817

10 433

-11.71%

4.0%

19 964

17 857

11 293

10 123

-10.36%

3.8%

9 035

5 386

8 793

6 640

8 792

7 866

9 236

+5.05%

2.9%

7 961

+1.21%

2.6%

9.4%

5.7%

4.1%

3.9%

3.8%

3.4%

2.6%

(Products covered: CN Codes 6401-6405)

16

Exports to the Community’s main suppliers remained marginal, with China
accounting for only 0.16% of all Community exports:

Table 3

1000 pairs

1995

1996

1997

1998

change

98/97

export
share
(1997)

export
share
(1998)

Total
extra-EU

Taiwan

South Korea

China

Brazil

India

Thailand

Indonesia

Vietnam

306 880

319 374

299 443

270 278

-9.74%

100%

100%

1 986

1 400

1 769

2 849

1 759

2 664

201

250

145

277

160

14

202

433

172

405

116

80

891

269

91

345

220

123

1 711

-2.7%

0.59%

0.63%

449

423

343

173

170

87

61

-83.2%

0.89%

0.17%

-52.5%

0.30%

0.16%

+27.5%

0.09%

0.13%

+90.1%

0.03%

0.06%

-50.7%

0.12%

0.06%

-60.5%

0.07%

0.03%

-50.4%

0.04%

0.02%

(Products covered: CN Codes 6401-6405)

Community exports that were affected most by the Asian crisis were those to South
Korea (-83.2%), Indonesia (-60.5%) and Thailand (-50.7%). Exports to China
decreased by 52.5%. India and Brazil showed a positive development in 1998 – after a
sharp decline in 1997 – with India reaching again the (low) level that it had already
achieved in 1996.

The Community’s trade balance with those countries (in terms of pairs), remained
extremely negative, as can be illustrated by means of export/import ratios for 1997 and
1998:

17

Table 4

imports 97

Imports 98

exports 97

exports 98

exports 97
as % of
imports 97

exports 98
as % of
imports 98

China

Vietnam

Indonesia

Taiwan

Thailand

India

Brazil

South Korea

265 377

136 452

84 807

35 526

37 038

23 681

14 528

6 345

269 983

146 603

66 968

37 807

37 380

23 143

11 291

6 227

891

123

220

423

61

87

1 759

1 711

345

91

269

2 664

170

173

343

449

0.34%

0.09%

0.26%

4.95%

0.93%

0.38%

1.85%

41.99%

0.16%

0.04%

0.13%

4.53%

0.45%

0.75%

3.04%

7.21%

(Products covered: CN Codes 6401-6405)The export/import ratio with China further
deteriorated in 1998 – as it did for Vietnam, Indonesia, Taiwan and Thailand. The
ratio for South Korea fell dramatically, from 42% in 1997 to 7.2% in 1998.

B.

1.

Sensitivity to Chinese imports

Trends in imports

In 1998, EC footwear imports from all sources increased by approximately 0.5%,
reaching a total of almost 810 million pairs, with China slightly increasing its market
share (from 32.9% to 33.4%), followed by Vietnam (18.1%) and Indonesia (8.3%).

With an increase of 1.7% (compared to 1997), China managed to outperform the rest
of the world (‘all sources’) in spite of the quantitative restrictions in place. Among the
main suppliers, only Vietnam and Taiwan performed better (up 7.4% and 6.4%,
respectively), while, of course, starting from a much lower absolute level. Imports
from Brazil and Indonesia, by contrast, fell sharply – by 22.3% and 21% respectively).

18

Table 5

1000 pairs

1995

1996

1997

1998

change

98/97

Total
extra-EU

China

Vietnam

Indonesia

Taiwan

Thailand

India

Brazil

South Korea

748 067

804 412

805 592

809 549

+0.5%

295 107

338 045

265 377

269 983

+1.7%

76 759

102 481

20 726

37 722

19 650

15 377

15 347

96 993

99 729

22 027

32 158

21 803

12 945

9 038

136 452

146 603

+7.4%

84 807

35 526

37 038

23 681

14 528

6 345

66 968

-21.0%

37 807

+6.4%

37 380

+0.9%

23 143

-2.3%

11 291

-22.3%

6 227

-1.9%

(Products covered: CN Codes 6401-6405)

import
share
(1997)

100%

32.9%

16.9%

10.5%

4.4%

4.6%

2.9%

1.8%

0.8%

import
share
(1998)

100%

33.4%

18.1%

8.3%

4.7%

4.6%

2.9%

1.4%

0.8%

In 1998, approximately one third of all footwear originating in China were imported under
quota:

Table 6

1000 pairs

1995

1996

1997

1998

change

97/96

81 341

103 924

94 648

94 292

-8.9%

Change

98/97

-0.4%

Footwear
quota

3

under

Non-quota footwear

Total *

Quota coverage

213 767

234 121

170 729

175 691

-27.1%

+2.9%

295 107

338 045

265 377

269 983

-21.5%

+1.7%

27.6%

30.7%

35.7%

34.9%

(* Products covered: CN Codes 6401-6405)

While imports of footwear under quota remained fairly stable in 1998 (-0.4% as
compared to –8.9% between 1997 and 1996), imports of footwear not covered by
quantitative restrictions increased by 2.9% (after a considerable decline in the
preceding year). This led to a slight decline in the overall quota coverage.

Broken down by CN Codes under quota, the situation is as follows:

3

Figures include imports of so-called “high-tech” shoes which are actually excluded from the quotas.

19

Table 7

Quota footwear

1995

1996

1997

1998

Change

Change

(pairs)

6402 99

6403 51 and 59

6403 91 and 99

64004 11

6404 19 10

TOTAL

97/96

98/97

31 348 517

48 136 893

38 878 434

34 623 222

-19.23%

-10.94%

1 242 010

1 541 123

1 511 466

1 079 488

-1.92%

-28.58%

15 652 713

18 676 971

23 288 824

23 488 462

+24.69%

+0.86%

14 182 424

21 410 923

29 416 097

25 445 694

+37.39%

-13.50%

18 915 085

14 158 153

1 552 812

9 654 874

-89.03%

+521.77%

81 340 749

103 924 063

94 647 633

94 291 740

-8.93%

-0.38%

As a matter of fact, total imports of footwear under quota remained stable only
because of a significant increase in imports of slippers and other indoor footwear with
uppers of textile materials, covered under CN Code 6404 19 10. In 1997, imports of
such slippers had fallen dramatically due to the imposition of provisional anti-
dumping duties in February 1997 (for a period of 9 months), covering both CN Codes
6404 19 10 (i.e. slippers) and 6404 19 90 (i.e. other than slippers).

The definitive measure, adopted on 29 October 1997 and applying to both China and
Indonesia, excluded slippers, resulting in an increase in imports of such slippers by
more than 520% in 1998. By contrast, imports from China of products falling under
CN Code 6404 19 90 – which are still covered by the anti-dumping measure, but are
not under quota – remained at the low 1997 level:

Table 8

CN Code

1995

1996

1997

1998

Change

97/96

change

98/97

18 915 085

14 158 153

1 552 812

9 654 874

-89.03%

+521.77%

117 947 316

120 089 613

17 830 124

17 687 917

-85.15%

-0.80%

136 862 401

134 247 766

19 382 936

27 342 791

-85.56%

+41.07%

6404 19 10

6404 19 90

6404 19 (total)

(in pairs)

Definitive anti-dumping measures were also imposed, on 23 February 1998, on certain
footwear with uppers of leather or plastics, originating in China, Indonesia and
Thailand. Those measures concerned certain positions of CN Codes 6402 99 (i.e. 6402
99 98) and 6403 99 (i.e. 6403 99 93, 6403 99 96, 6403 99 98), while excluding
footwear for use in sporting activities.

As far as CN Code 6402 99 is concerned, both China and Indonesia lost market share
in 1997 and 1998, while Thailand was able to increase its exports despite the anti-

20

dumping measures in place. Vietnam became the Community’s main supplier of those
products:

Table 9

CN Code

6402 99

Total Extra-EU

Vietnam

China

Indonesia

Thailand

(in pairs)

1995

1996

1997

1998

change

98/97

market
share 1998

107 377 026

141 484 322

136 867 673

140 573 152

+2.71%

100%

20 382 805

28 829 276

32 408 667

37 932 343

+17.04%

31 348 517

48 136 893

38 878 434

34 623 024

-10.95%

23 637 838

29 528 805

25 265 664

20 085 445

-20.50%

8 999 241

10 534 893

11 765 228

14 324 934

+21.76%

27%

25%

14%

10%

Also with regard to CN Code 6403 99, Vietnam has become the main supplier of the
Community, while China succeeded in maintaining its level of exports:

Table 10

CN Code

6403 99

Total Extra-EU

Vietnam

Indonesia

China

Thailand

1995

1996

1997

1998

change

98/97

market
share 1998

129 690 664

139 966 455

161 872 851

167 065 089

+3.21%

100%

11 011 255

15 964 478

22 824 260

23 603 959

+3.42%

19 094 480

19 034 263

19 695 445

18 512 334

-6.01%

11 440 370

13 888 711

17 417 339

17 444 357

+0.16%

14%

11%

10%

9 615 502

8 040 358

7 627 196

7 489 173

-1.81%

4%

(in pairs)

2.

Import prices

A comparison of the average prices of imported Chinese footwear with those of
Community exports (‘Extra-15’) demonstrates the extent to which Chinese imports are
undercutting prices on the Community market:

21

Table 11

Price per pair (ECU)

Product

1995

1996

1997

1998

6402 99

China

4.35

4.81

4.95

4.92

Extra-15

6.41

6.73

7.44

7.87

6403 51

China

6.74

7.56

8.34

10.79

Extra-15

21.02

21.52

23.50

22.73

6403 59

China

3.17

2.88

2.69

3.05

Extra-15

18.13

22.03

23.78

25.17

6403 91

China

11.17

12.16

13.69

13.30

Extra-15

20.88

21.15

24.19

24.43

6403 99

China

9.25

9.54

11.09

11.88

Extra-15

14.70

15.08

16.81

17.96

6404 11

China

7.17

8.33

9.41

9.58

Extra-15

10.74

12.58

10.24

14.08

6404 19 10 China

0.83

1.11

1.14

1.14

Extra-15

4.03

4.19

4.65

4.24

Undercutting
in %
(1997)

Undercutting
in %
(1998)

66.5%

62.5%

35.5%

47.5%

11.3%

12.1%

56.6%

54.4%

66.0%

48.6%

91.9%

68.0%

24.5%

26.9%

In 1998, Chinese prices ranged from 12.1% to 68% of the average prices of
Community exports to third countries. Between 1997 and 1998, China’s price
advantage increased considerably for CN Codes 6403 99 (from 66% to 48.6%) and
6404 11 (from 91.9% to 68%) due to rising prices of Community exports (and in spite
of the anti-dumping duties on certain products falling under CN Code 6403 99). The
elimination of the provisional anti-dumping duties on slippers (6404 19 10) had no
immediate effect on prices, which remained at a level of 1.14 ECU per pair. For CN
Code 6403 51, the price differential decreased from 35.5% in 1997 to 47.5% in 1998.

Overall, China – whose average price/unit decreased from 4.82 in 1997 to 4.70 in
1998 – remained the cheapest of the Community’s major suppliers of footwear (in
ECU/unit):

22

Table 12

Imports

China

Vietnam

Thailand

Indonesia

Total Extra-EU

Exports

Total Extra-EU

1995

2.87

4.87

7.55

6.57

6.97

1996

3.40

5.61

8.18

6.90

7.26

1997

4.82

6.41

8.23

8.98

8.65

1998

4.70

6.58

8.57

8.79

8.55

16.10

17.48

20.03

21.13

(Coverage: CN Chapter 64)

In 1998, average Chinese prices (4.70 ECU/unit) reached only 55% of the prices of
Community imports from all sources (8.55 ECU/unit), and 22.2% of the average
prices of European products sold on third markets (21.13 ECU/unit).

C.

1.

Opinions from Interested Parties

Opinion of the Community Industry

According to the European Confederation of the Footwear Industry, in spite of the
existence of quantitative restrictions, imports of footwear from China have continued
to outperform imports coming from all third countries. Moreover, this association
considers that those quantitative restrictions are not even fully utilised, which still
leaves sufficient room for increases in imports from China. Furthermore, it is of the
opinion that Chinese products continued to undercut European prices by a significant
margin, thus putting European industry under severe pressure, which has been faced
with falling production, a deteriorated export performance, and increasing job losses.
For those reasons, European industry is firmly against the elimination of the Chinese
quotas in question, as well as against any increases in their current levels.

2.

Opinion of Importers

The Foreign Trade Association (FTA) has stated that job losses in the community
footwear industry are a natural phenomenon basically caused by automation and
advances in information technology. It does not believe Chinese imports are a threat
to the industry.

D.

Conclusion

The footwear sector remains acutely vulnerable to Chinese imports because of their
sheer volume (33.4% of all Community imports; see table 5), their significant share of
the total Community market (17.4%; see table 1), the price gap (4.70 ECU/unit as
compared to 21.13 ECU/unit; see table 12), and the enormous export potential of the
Chinese industry.

23

In 1998, the unbalanced situation described above was further deteriorated as a result
of the financial crises in Asia, Russia or Brazil, which deprived EU operators of
important export markets without the possibility of turning to other markets instead.
At the same time, the European Union was the only major region in the world which
maintained its level of imports in spite of the economic crises experienced during the
past two years, which made it the main outlet for many third-country producers whose
domestic markets had fallen apart. As a result, both Community exports and
Community production decreased markedly.

In spite of the quantitative restrictions in place, China succeeded in outperforming the
average of all Community suppliers (with +1.7% as compared to +0.5% see table 5).

If, at the current stage, the quantitative restrictions vis-à-vis China were removed, the
Community would risk inconsistencies in its overall industrial policy: On the one
hand, European operators are encouraged to constantly improve their competitiveness
by investing in tangible as well as intangible factors. On the other hand, the European
institutions have undertaken to provide operators with a general framework which
allows them to compete on a level-playing field with their competitors in a global and
open market. At present, such a level-playing field does not exist, since many third
countries still maintain very high tariffs, as well as numerous non-tariff barriers.

If companies find no markets for their highly competitive products, they have very
little incentive to invest – and to innovate – in order to continue with their (often
painful) modernisation and restructuring process. Moreover, expanding markets are
essential for companies trying to achieve sufficient economies of scale, thus increasing
their international competitiveness by producing at lower average cost.

Against this background, and taking account of the fact that the footwear industry
remains an essentially labour-intensive sector, any further liberalisation of Community
imports will have to go hand in hand with equivalent liberalisation efforts by the
Community’s trading partners.

As long as many third-country markets remain virtually closed for EU exports, the
quantitative restrictions against China should be maintained so as to alleviate a
situation which is characterised by a competitive environment which fails to provide a
level-playing field for economic operators.

2. Porcelain or china tableware and ceramic tableware

CN 6911.10 and CN 6912.00

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 small producers which are not members of any
national federation. It has therefore been necessary, as usual, to look to a number of
different sources when compiling this report.

24

A

1.

Situation in the Community tableware sector

Structure of the EU ceramic tableware sector

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.

The sector is principally made up of small and medium enterprises although larger
ones do exist, such as Villeroy & Boch of Germany, and Royal Doulton and
Wedgwood of the United Kingdom, which are probably the three biggest tableware
producers in the world. There is a vast range of products, which differ greatly between
manufacturers and depend to a large extent on public taste and disposable income.

Whilst output in the tableware sector typically represents about one tenth of total
output of the EU ceramics industry in value terms, it has usually accounted for
something like a quarter in terms of numbers employed. It is the most labour intensive
of the six ceramics sub-sectors, and is therefore particularly susceptible to the effects
of unfair competition.

2.

Trends in production and apparent consumption

The figures directly below apply to all ceramics sectors.

N.B. Due to the fact that the DEBA database no longer exists, and pending the full recovery
of the former work by Eurostat, production figures for 1998 are calculated using the
short-term indicators supplied by the Eurostat-European Business Trends database.

Units: million ECU

1995
26081.4

1996
25506.9

1997
25429.4

1998
25260.2

4234.2

4614.4

5205.5

5130.3

1323.1

1396.5

1640.7

1783.7

Production
Exports
Extra-EU
Imports
Extra-EU
Apparent

21847.2

Consumption 23170.3
EU sales on
Domestic
market
EU market
share
Imports
market share
Direct
employment
N° companies

94.29%

322386
2500

5.71%

22289.0

21864.6

21913.6

20892.5

20223.9

20129.9

93.7%

92.5%

91.9%

6.26%

7.5%

8.1%

306614
2000

277234
n/a

262000*
n/a

25

Import and export figures for EUR 15 are taken from COMEXT. Production and employment
figures come from the former DEBA database (except * ==> first estimate by Cérame-Unie4)
and the Eurostat-NewCronos database (1995, 1996, 1997 and 1998 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

1995

1996

Production

2850**

2800**

1998

1997

n/a

Exports

Extra-EU

Imports

Extra-EU

Apparent

959.9

650.8*

678.9

395.0*

1014.8

1147.8

1091.6

710.5*

736.7

448.8*

805.8*

875.0

513.7*

743.9*

945.7

541.1*

Consumption 2569.0

2521.9

EU sales on

Domestic
market

EU market
share

Imports
market share

Direct
employment

n/a

n/a

n/a

n/a

26.4%

29.2%

N° companies

171***

n/a

n/a

n/a

n/a

n:a

n/a

n/a

n/a

77436**

57342**

Sources:

imports/exports from COMEXT

production and employment from Cérame-Unie

CN 6911.10 + 6912.00

estimates by Cérame-Unie

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
It should be borne in mind, however, that Europe is traditionally a big
not significant.

4

The umbrella organisation which represents the whole of the ceramics industry at EU level. The
tableware sectors is represented by the FEPF, the Fédération Européenne des Industries de Porcelaine et
de Faïence de Table et d’Ornementation.

26

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 20.1% in 1998 (in value terms – against 17.2%
in 1996). This is alarming the EU ceramics industry, since there have been imports of only
very small quantities of tiles to the EU, but Chinese tile producers have built up production
capacity over recent years, and have now overtaken Spain and Brazil to become the world's
Imports of Chinese tiles into the EU are therefore
second biggest producer, after Italy.
expected to increase in the next few years.

In addition, a number of current features of the tableware market environment have been
signalled by industry:
(cid:1)

demand for tableware overall continues to grow in line with world population

(cid:1)

(cid:1)

(cid:1)

(cid:1)

(cid:1)

(cid:1)

however, customers are buying fewer large services which are kept for life, as
the trend towards casual dining accelerates. Tableware is therefore becoming a
fashion item which is disposed of in relatively short time as fashion changes

Asian manufacturers are capturing an increasing share of this market segment

EU manufacturers are seeking cost
including by lowering
consumption of high cost – and therefore higher margin – materials, moving
production to low labour cost areas (with subsequent damage to traditional
employment), production outsourcing

reductions,

production in traditional tableware manufacturing regions reduced by $750
millions in the five years to 1997

$1 000 millions increase in Asian production over the same period

EU hotelware manufacturing continues to do well, but is being hit by peak tariffs
in traditional markets such as the USA – see below – a position being made
worse by the fact that Chinese producers seem to be targeting the American
market with low-priced imports, and virtually pushing EU producers out in some
areas.

3.

Employment trends

Numbers employed in the ceramics industry have been decreasing steadily in recent
years. Actual figures for 1998 are not all available, and in any case are more accurate
for some countries than for others. At its annual meeting on 3/4 June 1999, the FEPF
gave the following employment estimates for the last two years for the biggest
producing countries:

27

Number’s Employed0

1997

1998

% change

France

Germany

Portugal

Spain

UK

Austria

Netherlands

Luxembourg

Italy

Finland

3423

17213

25000

1700

20000

600

576

914

7600

410

-

-4.4

-36.0

3425

16541

16000

n/a

16000

-20.0

n/a

591

925

3950

n/a

+2.6

-

-48.0

Total:

77436

57342

-25.9

Numbers employed in the ceramics industry as a whole went down by an estimated 24.9%
between 1992 and 1997 However, the decrease in numbers employed in the tableware
sector alone between 1992 and 1996 has been roughly estimated at 33.0%, with a further
drop of 25.9% between 1997 and 1998 as can be seen from the above. This appears to have
accelerated sharply in 1999, caused by a fall in domestic demand and the effects of the
economic problems in Asia, and, to a lesser extent, in South America. The latter had the effect
of closing off some of EU producers' traditional markets, whilst producers in these countries
were looking to other markets, such as the EU, to off-load their surplus domestic production.

At the same time, the strength of some currencies against the US$, in particular the GBP, has
made selling into the USA more difficult, and has also led to large quantities of cheap
American hotelware coming into the EU, particularly the UK, for the first time, despite
statements made during the EU/US negotiations under the Uruguay Round that US producers
did not export hotelware. This Round also left some very high tariff peaks on hotelware in
the USA, which is a traditional market for EU producers.

28

Individual comments by Member State, where available, are shown below:

(cid:1)

(cid:1)

(cid:1)

(cid:1)

(cid:1)

(cid:1)

United Kingdom

Market share and production both down by approximately 10% in 1998 compared
with 1997, with a further 5% drop forecast in 1999. Turnover in the traditional
volume tableware and total employment down by 25% between 1996 and 1998, of
which 20% came in 1998. Profitability halved over the same period.

Late 1998/early 1999, 1 200 job losses at one of the biggest producers, 140 at
another, and a third producer closed down completely with the loss of 300 jobs.
N.B. it is important to bear the regional aspects in mind: numbers employed in the
ceramics industry in the UK accounts for 1% of total UK employment, but in Stoke-
on-Trent, the principal ceramics producing area, 51% of jobs are in the ceramics and
related industries.

Germany

A fall of 4.4% in 1998 over 1997. This may well represent a fall in the rate of job
losses, since Germany's largest producer has had an employment
reduction
programme for the last three year, with probably a further 1 500 to go; unfair
competition from low-priced imports cited as a principal factor. 2 other producers
each closed down a factory completely. Eurostat figures, available only for
Germany, indicate a loss of 25% of jobs in the "Manufacture of ceramic household
and ornamental articles" sector from June 1995 to November 1998, with numbers
going down from 21 857 in 1995 to 18 326 in 1996.

France

The French FEPF member thought that the employment situation had remained
fairly stable in 1998 overall, although 3 factories closed down completely, with the
loss of over 500 jobs, which were obviously compensated for in other areas. An
ongoing process of restructuring and rationalisation is underway, with 25% jobs
losses since 1990.

Italy

Numbers employed went down by an estimated 48% between 1997 and 1998.

Greece

3 factories closed down completely. The only remaining Greek tableware producer
is in severe economic difficulties.

Portugal

Numbers employed went down by an estimated 36% between 1997 and 1998,
although this may be slightly exaggerated in that the figure for 1997 may have been
too high.

Whilst job losses in the tableware sector can not be attributed solely to imports of low-priced
products, there is no doubt that this is a contributing factor, and one which has been

29

mentioned, often in press releases, as a significant factor behind closure or rationalisation
decisions.

B

1.

Sensitivity to Chinese imports

Trends in imports and exports

As mentioned above, exports are very important for EU tableware producers, many of
whom regularly export up to 30% of their production, although the quantity of
tableware exported is generally well below import levels. The following tables show
EU trade in 1998 with its biggest export markets, and its biggest importers.

Extra-EU imports in 1998: EUR 15

Source: COMEXT

CN 6911.10

CN 6912.00

Tonnes

% total imports

Tonnes

% total imports

China

Taiwan

Thailand

Romania

Poland

Brazil

Indonesia

Malaysia

Turkey

Czech Rep.

Philippines

Hong Kong

40072

2875

3041

10668

24041

1221

4418

712

3762

20175

4051

1116

29.1

2.1

2.2

7.7

17.4

0.9

3.2

0.5

2.7

14.6

2.9

0.8

29438

13011

18193

11083

7252

3780

3707

2749

1978

927

1119

610

26.2

11.6

16.2

9.9

6.5

3.4

3.3

2.4

1.8

0.8

1.0

0.5

Total extra-EU

137692

100.0

112175

100.0

30

Extra-EU exports in 1998: EUR 15

Source: COMEXT

CN 6911.10

CN 6912.00

Tonnes

% total imports

Tonnes

% total imports

11698

27.7

79102

63.9

1244

1280

2453

1693

4210

1457

408

8859

946

22

2.9

3.0

5.8

4.0

9.9

3.4

1.0

20.9

2.2

0.05

6303

5637

4676

2344

3536

2601

1159

654

775

241

5.1

4.5

3.8

1.9

2.8

2.1

0.9

0.5

0.6

0.2

USA

Australia

Canada

Japan

Israel

Switzerland

Norway

Poland

Czech Rep.

Turkey

China

Total extra-EU

42283

100.0

123723

100.0

So whilst imports from China remain high and constitute by far the most important source of
imports of porcelain and china and earthenware, EU exports to China remain virtually nil.
Imports into China continue to be negligible, principally due to own overcapacity as well as
is very
foreign currency considerations.
substantial.

For the same reasons their export potential

Allegations have also been made in relation to the circumvention by Chinese exporters of the
In this respect, it should be noted that the import figures above are
Communities quotas.
those figures which have been reported and relected by COMEXT. However,
allegations
have been raised that
imports from China are 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 1998, Hong Kong exported to the EU the tonnages
and values shown below:

Tonnes

Value

(million

€

)

CN 6911.10

CN 6912.00

1116

610

2.1

1.2

31

ECU/kg

1.88

1.97

Source: COMEXT

Furthermore, as the quotas are expressed in tonnes, the true extent of Chinese imports may be
In this regard, it has been alleged that, according to certain laboratory testing on
unclear.
imported Chinese products the average weight per piece has been reduced by as much as
two-thirds. That is, whilst import quotas may not have been fully taken up in terms of tonnes,
the actual number of pieces of Chinese tableware being imported is alleged to have increased
significantly. Unfortunately, it is not possible to verify this in COMEXT, which has no
provision for reporting by individual pieces.

Finally, an additional problem which European tableware manufacturers have raised is that of
counterfeiting. As in previous years, allegations have been made that certain Chinese
producers 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.

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 (not yet available for 1998).

ECU/kg

Source: Cérame-Unie members

1995

1996

1997

1998

CN 6911

Chinese

1.10

1.19

1.41

n/a

European

3.39

6.72*

10.86**

n/a

CN 6912

Chinese

1.10

1.17

1.43

European

2.06

2.06*

2.12**

n/a

n/a

*

**

France and Portugal only.

France only.

For the two specific products subject to quota, Chinese prices compared with the average
intra-EU levels in 1998 were:

ECU/kg

Source: COMEXT

CN 6911.10

CN 6912.00

Chinese

Intra-EU

5.30

2.49

1.31

1.50

32

As can be seen from the above figures, the existence of quotas may have limited the quantity
In
of Chinese imports, and there are signs of small increases in Chinese selling prices.
general, 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.

C.

1.

Opinions from Interested Parties

Opinion of the Community industry

The European ceramic tableware sector is represented at EU level by the "Fédération
Européenne des Insdustries de Porcelaine et de Faïence de Table et d'Ornamentation”
(FEPF), which in turn is a member of the umbrella EU ceramics federation, Cérame-
Unie. Cérame-Unie, which estimated that
it represents around 75% of all EU
tableware producers (NB there are very many unaffiliated sumall manufacturers),
remains very strongly in favour of the continuation of the quotas into 2000, and with
no increase on 1999 levels.

2.

Opinion of Importers

The Union of Glass and Pottery Wholesalers Associations and the Foreign Trade
Association, on the other side, believe that the persistence of the quotas on Tableware is
no longer necessary since the overall state of the European Industry has significantly
improved as a result of rationalisation, downsizing and relocation of production to East
and Central Europe and the Far East where hourly wage rates are 70% to 80% lower than
in the Community.

D.

Conclusion

It is clear from the above the EU tableware sector remains sensitive because of the high
volume of low priced Chinese imports and their substantial disruption potential. The EU
ceramic tableware sector is continuing a hard rationalisation process in order to increase
its productivity and competitiveness, and during this sensitive period, it is particularly
susceptible to the effects of low priced imports, a further reason why quotas should
remain, and at levels the same as for 1999.

33

III.

China's trade liberalisation and WTO accession

The Community's overtures to China regarding the removal of this country’s 385
remaining quotas have been made within both the bilateral and WTO context. Either
way, the Community is not yet able to ascertain a program for the phase-out of China's
quotas that comes near to matching the EU's own.

The Commission has indicated repeatedly that it expects their quotas to be removed
completely by year 2005 and that the Community would match any earlier removal of
them by liberalising our own quotas. The Chinese have acknowledged their intention
to abolish the quotas by 2005 and to remove a limited number of them before that
date, provided that China’s WTO accession happens in the near future. Their
negotiators have often questioned the 2005 deadline, arguing that it depends on early
WTO membership.

the management of

is often arbitrary and
In addition,
untransparent.
The Commission has repeatedly asked China to adopt uniform
treatment for all importers and exporters when allocating quotas. So far, the existing
unsatisfactory management of quotas rules remain in place.

the Chinese quotas

the Commission has clearly indicated to the Chinese side that a
Furthermore,
in the access to their market could play a key role in
substantial improvement
considering a resumption of the liberalisation process of the remaining EC quotas. To
this date, this has not materialised

IV.

Overall conclusions

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 are continuing in this effort the Footwear and Tableware sectors
remain particularly sensitive:

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

- The sectors concerned 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.

- The industries 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.

2.

Chinese competition, in general, remains a real threat:

34

- 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 liberalise its trade regime and open its
economy to the world. These measures represent important steps forward, 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.

the abolition of the remaining quantitative
There is thus reason to believe that
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.

As regards the level of the remaining quotas, an examination of the actual use of
import licences by Community importers shows that unused quantities are substantial,
ranging from 15 to well over 30%(*) of total quotas. While a part of these unused
quantities are likely to result from the allocation of very limited quantities to "non
traditional" importers (the latter renouncing to import quantities that they consider as
not economically significant), a large portion thereof appears to correspond to
traditional importers' decisions not to fully use their import licences. For certain sub-
categories of footwear (slippers and certain synthetic and leather shoes), it is true that
such decisions may have resulted in 1997 and 1998 from the existence of anti-
dumping measures or pending investigations. This is however not true for most of the
products under quotas for which unused quantities were found to be substantial.

In these circumstances, the Commission considers that it can be assumed that the
overall quantities available are not insufficient to cover the importers' needs and do
not call for an immediate increase. As explained earlier in this report, a readjustment
of the allocation method,
importers, has been
implemented with the effect as from 1/1/2000. The Commission believes that such a
readjustment, together with the efforts already made with a view to correcting the
existing imbalance between traditional and non traditional importers, is likely to

to the benefit of non traditional

(*)

With the exception of slippers (CN 6404 19 10).

35

improve the overall use of import licences and thus to result
quantities actually imported.

in an increase of

Accordingly, while keeping in mind the objective of eventual liberalisation of the
quotas, in tandem with reciprocal and equivalent efforts on the Chinese side in the
context of their efforts to join the WTO at an early stage and their multilateral or
bilateral negotiations with the Community to phase out the quotas on both sides over
an agreed time-frame, the Commission considers it appropriate to recommend that
their level remain unchanged in 2000.

36

4.

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 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.

In May 1998, following the conclusions contained in the Commission's third report, the
Council decided by its Regulation (EC) No 1138/98 to insert toys, in respect of which quotas
were abolished, in the list of products subject to prior Community surveillance.

37

III.

Trends in imports of products under surveillance

The table below gives import figures, in thousands of ecus, for products under surveillance in
1998, excluding certain "hi-tech" footwear, and sets them against the 1997 figures.

CN code

Description

1997

1998

Imports
China/Extra-
EC (1998)

1032

4108

20969

58468

5345

8691

11064

81391

27684

13571

15291

8597403

8892395

81.893

822

53519

370487

121.564

13560

517529

2302

32463

15918

27712

22900

66.54%

20.82%

60.29%

80.52%

73.21%

28.34%

15.88%

91.97%

23.77%

43.03%

29.15%

48.64%

31.65%

73.78%

0.15%

20.61%

69.08%

71.05%

40.26%

64.24%

18.65%

52.68%

32.70%

64.70%

30.87%

and

their

60756

articles

of

79905

2827 10 00

Ammonium chloride

2905 49 90

Other polyhydric alcohols

2918 14 00

Citric acid

2941 30 00

Tetracyclines
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 41

9503 49

9503 60

9503 90

9504 40

9603 29

9603 30

9603 40

9603 90

Gloves
Footwear1
Footwear1

Ornamental
porcelain

Bicycles

Construction sets

Stuffed toys

Toys representing animals

Puzzles

Toys

Playing cards

Brooms and brushes

Brooms and brushes

Brooms and brushes

Brooms and brushes

Source: EUROSTAT

1 measured in pairs

1239

7121

17347

6352

9710

15125

84004

24301

16028

14481

12129432

5884694

701

55874

285568

88895

13620

444711

3344

29621

14385

24655

17001

38

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 1998:

ex 6402 99

2.769.168 pairs

ex 6403 91 et 99

12.108.575 pairs

ex 6404 11

13.647.636 pairs

Total

28.525.379 pairs

IV.

Should surveillance measures be maintained?

The figures provided here show that the share of imports from China of all but one(*) of these
products is still very high. The Commission believes that prior surveillance should be
maintained for these products.

(*)

Namely "bicycles", a product subject to definitive anti-dumping duties and whose sensitivity cannot
therefore be solely assessed in terms of imported volume. On 10 September 1998, an expiry review of
the anti-dumping measures in force in respect of Chinese bicycles was initiated. Pending the outcome
of the expiry review, it appears reasonable, despite the limited share held by Chinese imports, not to lift
the prior surveillance measure in place.

39

5.CHAPTER 4

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, as last modified by
Regulation (EC) No 1138/98, should be maintained: No change in the structure and the level
of the remaining quotas appears to be warranted while the product coverage of the
surveillance should also remain unchanged.

40