6th 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: 2001-02-14
Institutions: European Commission
Subjects: China, fancy leather goods and glove-making industry, footwear industry, glass, household article, import policy, quantitative restriction, toy industry, vehicle parts

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 14.02.2001.
COM(2001)84 final

6TH 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

I.

II.

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

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

III. 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 ............................................................................. 5

III. Developments in the trade of

the products subject to quantitative

restrictions ..................................................................................................... 8

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

I.

II.

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

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

1. FOOTWEAR..........................................................................................13

2. PORCELAIN OR CHINA TABLEWARE AND CERAMIC TABLEWARE........28

III. China's trade liberalisation and W.T.O. accession ....................................... 37

4. CHAPTER 3

IMPLEMENTATION AND MAINTENANCE OF

SURVEILLANCE MEASURES............................................................................ 39

I.

II.

Purpose of surveillance measures................................................................. 39

Implementation ............................................................................................ 39

III.

Trends in imports of products under surveillance ......................................... 39

IV.

Should surveillance measures be maintained?.............................................. 41

5. CHAPTER 4

CONCLUSIONS AND PROPOSALS OF THE

COMMISSION ..................................................................................................... 42

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1.

INTRODUCTION

I. 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 concerned 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.

II. Objective of the Commission report

(a)

(b)

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
and the quantitative
implementation of
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.

the surveillance measures

This sixth report is in response to the above-mentioned commitment.

However, in view of the bilateral Agreement reached with P.R. China on
19th May 1999 in Beijing, (and pending finalisation of China's Accession
Protocol to the W.T.O.), and the progressive phase-out of quantitative
restrictions by year 2005, no further reports will be necessary.

Any problems regarding the administration of the quotas until the end of 2004, will be
dealt with in the context of the Committee established by Council Regulation (EC) N°
520/94 of March 1994 (Community procedure for administering quantitative quotas).

III. Methodology

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

the problems raised by their administration.

In chapter 2, it addresses 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:

- 3 -

a)

b)

the situation of the Community industries concerned,

the sensitivity of these industries to Chinese imports and

c)

the progress in Chinese trade liberalisation.

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,
the sectors concerned are made up of many small and medium-sized
and that
enterprises, of which a significant proportion are not even known by the relevant
national federations.

The Commission also received information of a general nature from importers and
from one association.

3.

In general, the analysis is based on figures for 1999. However, trends for 2000 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 and 5th Reports the Commission concluded that, there should be no
change in the structure and the level of the remaining quotas.

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

- 5 -

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 should not add to the intended effect of
the quotas on trade and that the available quantities should 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,
it
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

the Commission felt

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). For the 2000 quota year 27247 applications were submitted,
while for 2001 quota year the applications reached 58524. This large increase in
2001 was due to a threefold increase of applicants from one Member State

This extremely high number of applications results in each individual non-
traditional importer 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, at best, only allowed non-traditional importers to be
granted quantities similar to those, they were granted in previous years.

- 6 -

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).

However, as already agreed with Member States in an effort
to encourage
optimum use of quotas from genuine importers, minimise speculative applications
and distribute economically significant quantities, with the view to reduce unused
quantities, only those non-traditional importers who participated and made use of
at least 80% of their import licences under the annual quota year allocation can
have access to these unused quotas and with effect as from the re-distribution in
2001 of the unused 2000 quotas.

Further steps may also become appropriate in order to discourage speculative
recent applications, a matter currently investigated (i.e. choice of reference
year(s), Bank guarantee at an appropriate level, etc.).

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 Commission opened the allocation
the following period.
procedures for the 2001 quotas well before the beginning of the quota year, and
importers were invited to introduce their applications from June to September.

To this end,

The 2001 management rules currently provide for a 12-month validity of the import
licences. Moreover, the unused 2000 quotas will be redistributed during 2001.
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 free of charge for
the Community importers.

c) Conclusion

The management of these quotas has raised some problems. Some of them, 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, have been satisfactorily addressed. The quantities allocated to non-
traditional importers have again been increased for the 2000 quota year to, at least

2.

3.

4.

- 7 -

partially, reduce the imbalance in the allocation of the relative share of the quotas
with a view to improving their access to genuine importers. 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 concerns that
the management system should not add to the difficulties for importers in relation to
these 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.

- 8 -

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

Products

Unit

1996

Imports
1997

1998

1999

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

pairs

pairs

pairs

pairs

pairs

48 145 893
(6 344 717 "hi-
tech" incl.)
1 541 123

38 936 514
(4 085 705 "hi-
tech" incl.)
1 511 466

35 173 793
(2 775 243 "hi-
tech" incl.)
1 121 279

38 329 746
(2 668 643 "hi-
tech" incl.)
1 139 221

18 676 971
(7 391 941 "hi-
tech" incl.)
21 410 923
(9 736 665 "hi-
tech" incl.)
14 162 653

23 288 824
(11 757 332 "hi-
tech" incl.)
29 416 097
(15 108 117 "hi-
tech" incl.)
1 552 812

23 540 587
(12 350 036 "hi-
tech" incl.)
25 444 036
(13 656 090 "hi-
tech" incl.)
9 883 554

26 503 908
(12 708 325 "hi-
tech" incl.)
25 074 443
(10 388 169 "hi-
tech" incl.)
15 855 776

1999 quotas
(annual basis)
39.151.481
("hi-tech" not
included)
2.795.000

12.120.000
("hi-tech" not
included)
18.228.780
("hi-tech" not
included)
31.897.716

Quotas
2000 quotas
(annual basis)
39.151.481
("hi-tech" not
included)
2.795.000

12.120.000
("hi-tech" not
included)
18.228.780
("hi-tech" not
included)
31.897.716

104.192.977
("hi-tech" not
included)

unused
quantitiesin 1999
3.996.919

1.522.145

2.132.972

4.539.997

14.241.019

26.433.052

103 937 563
(23 473 323 "hi-
tech" incl.)

94 705 713
(30 951 154 "hi-
tech" incl.)

95 163 249
(28 781 369 "hi-
tech" incl.)

106 903 094
(25 765 137 "hi-
tech" incl.)

104.192.977
("hi-tech" not
included)

- figures on "High-Tech" shoes, not covered by the quotas, are based on data available from the Taric database.
- Data for the years 1996-1998 contained in the tables throughout the report, do not always fully correspond to the data contained in previous reports, since Eurostat constantly
carries out improvements to its database whenever Member States correct or update their submissions to Eurostat.
- figures on unused quantities based on import licences returned to the Member States

- 9 -

Imports

Quotas

Products

Unit

1996

1997

1998

1999

1999 Qutoas
(annual basis)

2000 Quotas
(annual basis)

Unused
quantities (*)
in 1999

Porcelain
tableware
(691110)

Ceramic
tableware
(691200)

Tonnes

34.821

36.270

40.152

44.371

48.090

48.090

4.463

tonnes

28.698

32.176

29.385

34.678

36.383

36.383

5.516

Source : EUROSTAT

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

- 10 -

b)

Import prices of products originating in China

Product

1996

1997

1998

1999

Footwear

(in ECU/pair)

640299

640351

640359

640391

640399

640411

64041910

(in ECU/kg)

*Porcelain
tableware
6911 10

*Ceramic
tableware
6912 00

4.81

7.56

2.88

12.16

9.54

8.33

1.11

4.95

8.34

2.69

13.69

11.09

9.41

1.14

4.89

10.66

2.99

13.30

11.87

9.59

1.14

4.43

9.58

3.62

14.68

12.10

9.57

1.30

1.19

1.41

1.34

1.38

1.17

1.43

1.51

1.43

Sourc:EUROSTAT
* Calculated for the first time in this Report from COMEXT data, they refer to average EU 15 prices.
In the past figures were provided by industry for a limited number of Member States. Some of the figures,
therefore, differ from previous reports and cannot be compared with them.

- 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. Structure of the industry

2. Production

3. Employment

4.

5.

Import trends

Import prices

6. China’s export potential

In addition, in section III below, the Commission has analysed the implications of China's
accession to the W.T.O. and consequent liberalisation of that market, 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

Product description

640299

1

640351

640359

640391

640399

640411

1

1

2

64041910

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)

Other footwear with outer soles of rubber, plastics, leather or composition
leather and uppers of leather, covering the ankle

Other footwear with outer soles of rubber, plastics, leather or composition
leather and uppers of leather, not covering the ankle

Sports footwear, tennis shoes, basketball shoes, gym shoes, training 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 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.

2 Excluding:

a.

b.

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

- 13 -

A.

1.

Situation in the Community footwear industry

Introduction

The industry has been undergoing modernisation and restructuring for a number of years as
a result of 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 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 low-
end segment 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 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 EU's principal export markets – maintain tariff
peaks of up to 48%.

As regards trade relations between the EU and China, the most important recent event was
the initialling of a bilateral agreement concerning the terms for China’s accession to the
WTO (Beijing, 19 May 2000). That agreement provides, inter alia, for the removal of all
footwear quotas on 1 January 2005, and lays down annual growth rates of 5 to 15% (from
the time of China’s accession to the WTO until 31 December 2004). China, which currently
maintains customs duties on footwear between 22% and 25%, undertook to gradually
reduce those tariffs for about half of the tariff lines concerned to 10% or 15%, while
maintaining the current rates for the remaining tariff lines.

- 14 -

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 parameters.

its labour-intensive character, and its
The geographical concentration of the sector,
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 decline by -4.6% between 1997 and 1998, EU production dropped by another 6.1%
in 1999, thereby falling for the first time below 1 billion pairs. This fall in output was mainly
due to a sharp decrease in exports: -13.4% in 1999, after a reduction of -10.2% in 1998.

The increase in apparent consumption (+4%) was mainly absorbed by strongly increasing
imports (+11.2%). As a result, the market share of EU manufacturers on the EU market fell
from 49% in 1998 to 45% in 1999. China took up 18.3% of that market (after 17.2% in
1998).

Employment continued to decline in 1999 (by about 12,000 jobs), thus falling below
300,000 jobs. This corresponds to a 4% drop compared to 1998.

- 15 -

Table 13

1000 pairs

1996

1997

1998

1999

change

change

Production

1 104 590

1 088 485

1 037 984

974 793

98/97

-4.6%

Exports (World)

318 801

299 445

268 929

232 875

-10.2%

Imports (World)

Imports from China

804 415

338 086

806 130

265 435

813 294

271 987

904 480

301 986

+0.9%

+2,5%

99/98

-6.1%

-13.4%

+11.2%

+11,0%

Apparent
Consumption

Direct
employment

EU producers’ sales
on internal market

EU producers’
market share

Market share of
Chinese imports

1 589 628

1 595 170

1 582 349

1 646 398

-0.8%

+4.0%

304 192

303 995

300 549

288 460

-1.1%

-4.0%

785 216

789 040

769 055

741 918

-2,5%

-3,5%

49 %

49 %

49 %

45 %

21.3 %

16.6 %

17.2 %

18.3 %

Products covered: CN Codes 6401-6405
Apparent consumption: production + imports – exports
EU sales on internal market: production – exports
EU producers’ market share: EU sales on internal market divided by apparent consumption
Market share of Chinese imports: Imports from China divided by apparent consumption

4.

Trends in exports

showing

After a decline by 10.2% in 1998, exports fell by another 13.4% in 1999, with exports to
Russia
after
-23.9% in 1998). Exports to Canada and Japan, by contrast, increased moderately. With the
exception of Russia, the export shares of the most important export markets of the
Community remained fairly stable. The US absorbs more than one third of all EU exports.

(-64.2% in

performance

the worst

1999,

far

by

3 It should be noted that the data for the years 1996-1998 contained in the tables throughout this section do not
always fully correspond to the data contained in previous reports, since Eurostat constantly carries out
improvements to its database whenever Member States correct or update their submissions to Eurostat.

- 16 -

Table 2

1000 pairs

1996

1997

1998

1999

change

99/98

World

USA

Switzerland

Canada

Japan

Norway

Saudi Arabia

Poland

Russia

318 801

299 445

268 929

232 875

-13.4%

84 088

29 325

9 905

15 165

8 793

17 857

6 640

25 698

92 871

27 265

12 357

11 817

8 792

11 293

7 866

20 474

85 645

25 657

10 957

10 465

9 346

10 127

8 211

15 589

84 546

24 043

11 374

11 150

-1.3%

-6.3%

3.8%

6.5%

8 436

-9.7%

7 281

-28.1%

6 197

-24.5%

5 585

-64.2%

Products covered: CN Codes 6401-6405
Export share: share of individual country in total EU exports

export
share
(1998)

100%

32%

10%

4%

4%

3%

4%

3%

6%

export
share
(1999)

100%

36%

10%

5%

5%

4%

3%

3%

2%

Exports to the Community’s main suppliers remained marginal – and even fell from already
low levels – with China accounting for only 0.14% of all Community exports:

Table 3

1000 pairs

1996

1997

1998

1999

change

99/98

export
share
(1998)

export
share
(1999)

World

318 801

299 445

268 929

232 875

-13.4%

100.00%

100.00%

Hong Kong

Taiwan

Romania

China

India

Thailand

Indonesia

Vietnam

6 963

1 769

1 192

202

172

405

116

80

6 167

1 759

1 170

891

91

345

220

123

4 056

1 714

1 553

423

135

170

87

62

3 507

-13.5%

1 344

-21.6%

1 173

-24.4%

332

225

151

104

15

-21.6%

67.2%

-11.2%

18.7%

-75.7%

1.51%

0.64%

0.58%

0.16%

0.05%

0.06%

0.03%

0.02%

1.51%

0.58%

0.50%

0.14%

0.10%

0.06%

0.04%

0.01%

Products covered: CN Codes 6401-6405
Export share: share of individual country in total EU exports

As a consequence, 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 the
years 1996 to 1999:

- 17 -

Table 4

China

Vietnam

Indonesia

Taiwan

Romania

Thailand

India

imports 99

exports 99

exports 96
as % of
imports 96

exports 97
as % of
imports 97

exports 98
as % of
imports 98

exports 99
as % of
imports 99

301 986

176 337

63 718

44 080

42 534

33 560

27 935

332

15

104

1 344

1 173

151

225

0.06%

0.08%

0.12%

8.03%

6.06%

1.26%

0.79%

0.34%

0.09%

0.26%

4.95%

3.56%

0.93%

0.38%

0.16%

0.04%

0.13%

4.54%

4.65%

0.45%

0.58%

0.11%

0.01%

0.16%

3.05%

2.76%

0.45%

0.81%

(Products covered: CN Codes 6401-6405)

Sensitivity to Chinese imports

Trends in imports

B.

1.

In 1999, EU footwear imports from all sources increased by 11.2%, reaching a total of more
than 900 million pairs. With imports increasing by 11%, China maintained its high share in
total EU imports (at a level of 33.4%). In spite of the surveillance system which was
recently introduced for imports originating in Vietnam, Vietnamese imports increased by
more than 20%, resulting in an import share of 19.5% (after 18.1% in 1998). Also Taiwan,
Romania, India and Hong Kong managed to increase their market shares, while Indonesia
and Thailand lost some ground.

Table 5

1000 pairs

1996

1997

1998

1999

change

99/98

import
share
(1998)

import
share
(1999)

World

China

Vietnam

Indonesia

Taiwan

Romania

Thailand

India

Hong Kong

804 415

806 130

813 294

904 480

11.2%

100.0%

100.0%

338 086

265 435

271 987

301 986

11.0%

96 993

99 792

22 027

19 671

32 113

21 803

12 718

136 462

146 801

176 337

20.1%

84 807

35 531

32 905

37 038

23 681

10 839

66 975

37 721

33 402

38 020

23 140

14 495

63 718

-4.9%

44 080

16.9%

42 534

27.3%

33 560

-11.7%

27 935

20.7%

18 337

26.5%

33.4%

18.1%

8.2%

4.6%

4.1%

4.7%

2.8%

1.8%

33.4%

19.5%

7.0%

4.9%

4.7%

3.7%

3.1%

2.0%

Products covered: CN Codes 6401-6405
Import share: share of individual country in total EU imports

- 18 -

In 1999, as in previous years, approximately one third of all footwear originating in China
was imported under quota:

Table 6

1000 pairs

1996

1997

1998

1999

change

Change

Footwear under
quota 4

103 938

94 706

95 163

106 903

Non-quota footwear

234 148

170 729

176 824

195 083

Total *

338 086

265 435

271 987

301 986

Quota coverage

30.7%

35.7%

35.0%

35.4%

(* Products covered: CN Codes 6401-6405)

98/97

0.5%

3.6%

2.5%

99/98

12.3%

10.3%

11.0%

In spite of the quantitative restrictions in place, imports of footwear under quota increased
by more than 12% in 1999 – which even exceeded the substantial growth rate of non-quota
footwear (10.3% in 1999, after 3.6% in 1998). This led to a slight increase in the overall
quota coverage. Broken down by CN Codes under quota – and again neglecting the issue of
sports footwear – the situation is as follows:

Table 7

Quota footwear

1996

1997

1998

1999

change

change

(pairs)

6402 99

6403 51 and 59

6403 91 and 99

64004 11

6404 19 10

TOTAL

48 145 893

38 936 514

35 173 793

38 329 746

98/97

-9.7%

1 541 123

1 511 466

1 121 279

1 139 221

-25.8%

99/98

9.0%

1.6%

18 676 971

23 288 824

23 540 587

26 503 908

1.1%

12.6%

21 410 923

29 416 097

25 444 036

25 074 443

-13.5%

-1.5%

14 162 653

1 552 812

9 883 554

15 855 776

536.5%

60.4%

103 937 563

94 705 713

95 163 249

106 903 094

0.5%

12.3%

While imports of most of the products subjected to quotas showed an upward trend in 1999,
the large increase concerned 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 (“slippers”) and 6404
19 90 (“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 footwear by more

4

Figures include imports of so-called "high-tech" shoes which are, of course, excluded from the quotas. As
a result, the quota coverage indicated in table 6 overstates the real amount of footwear imported under
quota. For "high-tech" shoes, imports, see table on page 10 with data available from the Taric database.

- 19 -

than 536% in 1998. By the end of 1999, those imports had fully recovered from the effects
of the provisional anti-dumping measure, and even exceeded the 1996 level.

As regards products falling under CN Code 6404 19 90, which are still covered by the anti-
dumping measure, but are not under quota, imports grew by almost 70% in 1999, but are
still clearly below the levels prevailing before the adoption of the anti-dumping decision:

Table 8

CN Code

(pairs)

1996

1997

1998

1999

change

98/97

6404 19 10

14 162 653

1 552 812

9 883 554

15 855 776

536.5%

6404 19 90

120 089 613

17 830 124

17 657 711

29 967 087

-1.0%

6404 19 (total)

134 252 266

19 382 936

27 541 265

45 822 863

42.1%

change

99/98

60.4%

69.7%

66.4%

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 (and disregarding the exemption of sports shoes),
both Indonesia and Thailand lost market share in 1999, while China was able to increase its
exports, by 9% and market share to 24%, despite the anti-dumping measures in place.
Vietnam – which is not subject to that anti-dumping measure – further strengthened its
position as the Community’s main supplier of those products:

- 20 -

Table 9

CN Code
6402 99

(pairs)

World

Vietnam

China

Indonesia

Thailand

1996

1997

1998

1999

change

99/98

import
share
1999

141 410 001

137 210 331

141 722 622

157 721 894

11.3%

100%

28 829 276

32 415 708

37 986 092

47 156 759

24.1%

48 145 893

38 936 514

35 173 793

38 329 746

9.0%

29 530 044

25 265 664

20 127 417

16 715 168

-17.0%

10 534 893

11 765 228

14 888 487

12 366 066

-16.9%

30%

24%

11%

8%

Also with regard to CN Code 6403 99, Vietnam has become the main supplier of the
Community, while China succeeded in narrowing the gap with Indonesia (which ranks
number 2):

Table 10

CN Code
6403 99

(pairs)

World

Vietnam

Indonesia

China

Thailand

1996

1997

1998

1999

change

99/98

import
share 1999

139 966 437

161 876 438

167 536 746

210 307 423

25.5%

100%

15 964 478

22 824 260

23 593 295

39 193 617

66.1%

19 034 263

19 695 445

18 493 114

21 627 518

16.9%

13 888 711

17 417 339

17 487 958

21 537 121

23.2%

8 040 358

7 627 196

7 491 273

7 282 636

-2.8%

19%

10%

10%

3%

level. As far as footwear under quota is concerned, Germany,

Table 11 aims at examining the issue of import sensitivity of Chinese imports at the
regional
the United
Kingdom, Italy, France and the Netherlands accounted for 80% of EU imports of such
products – from all sources – in 1999. The share of imports from China in overall EU
imports of such footwear amounted to 20% at EU level, and varied considerably between
individual Member States. In Italy, Austria and Portugal, China’s import share was
relatively low (with 13% in 1999), while it reached 33% in Sweden and even 44% in
Finland.

Table 11 also shows Member States’ exports of quota footwear, so as to assess the extent to
which individual Member States are exposed to direct competition from China, both on the
EU market and on world markets. Italy accounted for more than half of all EU exports of
the products concerned, followed by Spain (with an export share of 16%).

- 21 -

Table 11

Country

World

Germany

imports
from World

1999

import
share
(World)

imports
from China

1999

share of
China in
World

exports to
World
1999

export
share
(World)

545 863 560

100%

106 903 094

128 477 737

Utd. Kingdom

106 372 701

Italy

France

Netherlands

Belgium

Spain

Austria

Sweden

Denmark

Greece

Finland

Ireland

Portugal

Luxembourg

78 384 035

65 400 449

58 716 454

41 670 493

23 948 254

9 960 020

8 612 287

8 002 217

7 880 583

4 151 014

2 448 428

1 837 212

1 676

24%

19%

14%

12%

11%

8%

4%

2%

2%

1%

1%

1%

0%

0%

0%

21 026 161

20 636 026

10 579 067

17 355 213

11 560 323

11 308 269

4 989 630

1 309 930

2 834 258

1 404 169

1 366 376

1 820 386

483 598

229 688

20%

16%

19%

13%

27%

20%

27%

21%

13%

33%

18%

17%

44%

20%

13%

178 534 202

100%

14 578 594

11 242 239

8%

6%

93 921 337

53%

9 085 687

2 543 355

404 655

5%

1%

0%

29 381 165

16%

2 882 620

1 200 054

3 598 030

1 283 716

584 243

12 008

7 815 794

705

2%

1%

2%

1%

0%

0%

4%

0%

Product coverage (in pairs): footwear under quota (compare table 6)
Import share: share of individual country in total EU imports from World
Share of China: imports from China divided by imports from World
Export share: share of individual country in total EU exports to World

2.

Import prices

A comparison of the average prices of imported Chinese footwear (under quota) with those
of total Community exports (‘World’) demonstrates the extent to which Chinese imports are
undercutting the prices of its competitors:

- 22 -

Table 12

€
Price per pair (

/pair)

Product

Origin

1996

1997

1998

1999

All
quota
products

China

Vietnam

Indonesia

Taiwan

Romania

World *

5.98

5.93

6.98

6.94

10.71

7.88

7.91

6.75

8.32

6.68

10.98

8.76

7.56

7.03

8.02

5.70

9.87

8.58

7.19

7.69

8.38

5.30

10.10

8.66

(* ‘World’ includes the countries listed in the above table)

Price China
as % of
price World
(1998)

Price China
as % of
price World
(1999)

88 %

83 %

€

€

Chinese prices fell to 7.19
/pair in 1998, while world prices went
up slightly. As a result, Chinese prices went down to 83% of the world price level. Only
imports from Taiwan were cheaper than imports from China.

/pair in 1999, after 7.56

The price situation varies considerably from product to product (see table 13). The most
striking price differential occurs with regard to CN 6403 59, where Chinese prices stood at
only 30% of the world price level.

Table 13

Product

Origin

1996

1997

1998

1999

€
Price per pair (

/pair)

6402 99

China

6403 51

Vietnam

Indonesia

Taiwan

Romania

World

China

Vietnam

Indonesia

Taiwan

Romania

World

4.81

5.23

4.55

4.82

9.02

4.69

7.56

7.67

10.27

24.34

9.87

15.37

4.95

5.60

4.33

4.38

7.33

4.74

8.34

7.81

8.75

15.25

9.70

15.32

4.89

5.76

3.74

3.42

4.69

4.54

10.66

8.31

9.74

11.09

12.91

15.81

4.43

5.74

4.32

3.18

4.38

4.61

9.58

9.72

9.28

12.22

14.42

11.11

Price China
as % of
price World
(1998)

Price China
as % of
price World
(1999)

108 %

96 %

67 %

86 %

- 23 -

6403 59

China

6403 91

6403 99

6404 11

Vietnam

Indonesia

Taiwan

Romania

World

China

Vietnam

Indonesia

Taiwan

Romania

World

China

Vietnam

Indonesia

Taiwan

Romania

World

China

Vietnam

Indonesia

Taiwan

Romania

World

6404 19 10

China

Vietnam

Indonesia

Taiwan

Romania

World

2.88

5.86

9.34

7.08

10.35

12.27

12.16

8.77

11.09

13.99

13.04

12.99

9.54

7.68

9.49

7.34

10.28

10.43

8.33

6.44

8.64

5.90

9.41

7.95

1.11

1.55

1.83

2.12

2.47

1.61

2.69

6.06

8.31

4.79

11.54

12.77

13.69

11.00

13.03

14.01

12.73

13.96

11.09

8.88

10.89

7.59

10.71

11.19

9.41

7.09

9.99

6.52

12.01

8.44

1.14

1.74

1.96

1.47

2.17

2.12

2.99

7.81

8.61

9.35

7.48

13.21

13.30

10.83

11.85

13.60

12.46

13.95

11.87

9.24

10.83

8.19

10.76

11.34

9.59

7.79

10.17

5.51

9.47

8.55

1.14

1.94

2.89

1.92

1.66

1.96

3.62

5.77

9.53

9.54

8.88

11.90

14.68

11.52

12.35

15.53

12.31

14.46

12.10

9.85

10.62

8.55

11.50

11.42

9.57

8.77

9.40

4.91

4.35

8.60

1.30

2.36

2.60

1.57

1.49

2.01

23 %

30 %

95 %

102 %

105 %

106 %

112 %

111 %

58 %

65 %

As the above analysis of price differentials is limited to a comparison between China and its
most important third-country competitors (mainly from Asia), it is hard to assess the impact
of Chinese prices on its EU competitors. For this reason, table 14 compares import prices
from China – which enjoys a share of 18.3% of the EU market – with intra-EU prices.
Intra-EU imports by Germany and the United Kingdom, respectively, have been chosen as
examples, given that those two countries are the EU’s main importers of footwear under
quota (compare table 11):

- 24 -

Table 14

Product

Imports

1996

1997

1998

1999

€
Price per pair (

/pair)

Price China
as % of
intra-EU
price (1998)

Price China
as % of
intra-EU
price (1999)

All
quota
products

EU from China

5.98

Germany from EU

13.46

UK from EU

13.42

6402 99

EU from China

Germany from EU

UK from EU

6403 51

EU from China

4.81

5.99

6.05

7.56

Germany from EU

26.71

UK from EU

6403 59

EU from China

22.46

2.88

Germany from EU

21.47

UK from EU

6403 91

EU from China

17.39

12.16

Germany from EU

18.38

UK from EU

6403 99

EU from China

17.64

9.54

Germany from EU

13.82

UK from EU

14.61

6404 11

EU from China

Germany from EU

UK from EU

6404 19 10

EU from China

Germany from EU

UK from EU

8.33

9.46

7.85

1.11

3.95

2.52

7.91

13.91

14.93

4.95

5.66

6.61

8.34

28.34

21.89

2.69

22.51

19.03

13.69

19.10

19.70

11.09

14.42

15.91

9.41

8.82

8.70

1.14

3.87

2.69

7.56

13.84

14.65

4.89

6.36

8.05

10.66

27.35

20.83

2.99

23.57

16.86

13.30

19.41

22.79

11.87

14.53

15.22

9.59

11.09

9.56

1.14

4.03

3.23

7.19

14.13

14.74

4.43

6.55

9.72

9.58

29.04

13.69

3.62

23.95

18.16

14.68

19.32

24.06

12.10

15.45

14.34

9.57

15.97

24.07

1.30

3.97

2.99

Germany from EU: “EU” excludes Germany, but includes the UK
UK from EU: “EU” excludes the UK, but includes Germany

55 %

52 %

77 %

61 %

39 %

51 %

13 %

18 %

69 %

58 %

82 %

78 %

86 %

100 %

28 %

35 %

51 %

49 %

68 %

46 %

33 %

70 %

15 %

20 %

76 %

61 %

78 %

84 %

60 %

40 %

33 %

44 %

As can be seen from the above table, imports from China were, on average, only half as
expensive as imports from EU countries. The price differential was most significant for
product CN 6403 59, and least significant for CN 6403 99.

Finally, table 15 contrasts prices for quota products imported from China and the World
with export prices of EU exports to the World. While such comparison is not of direct
relevance to competition on the EU market, it helps to illustrate the competitive situation on
world markets. Of course, such comparison does not take account of differences in quality
and design.

- 25 -

Table 15

€
Price per pair (

/pair)

Product

Trade flows

1996

1997

1998

1999

All
quota
products

EU from China

EU from World

5.98

7.88

7.91

8.76

7.56

8.58

7.19

8.66

Price China
as % of
EU export
price (1998)

Price China
as % of
EU export
price (1999)

EU to World

17.08

18.83

19.50

20.57

39 %

35 %

EU export prices kept rising in 1999, while prices of imports from China decreased even
further. As a result, Chinese prices fell to 35% of the value of EU exports.

C.

Opinions from Interested Parties

1.

Opinion of the Community Industry

According to the European Confederation of the Footwear Industry (CEC), imports of
footwear from China kept growing substantially, in spite of the existence of quantitative
restrictions. The CEC consider that there is still sufficient room for increases in imports
from China, given that those quantitative restrictions are not even fully utilised.

Furthermore, the CEC state that 1999 was a particularly difficult year for world production
of, and trade in, footwear. Responding to falling world demand and the resulting build-up of
stocks, China managed to reduce its prices even further, thus creating a very difficult
environment for EU operators both on the EU market itself, and on the EU’s main export
markets. As a result, EU industry faced a sharp decline in production, employment and
exports, while imports – in particular from China – kept rising at a fast pace.

With regard to China’s imminent accession to the WTO, the CEC feel that EU quotas
should not be phased out at a faster pace than envisaged in the EU-Chinese deal on WTO
accession. A sudden elimination of all restrictions – without reasonable transitional periods
– would severely disrupt trade and put the existence of EU footwear production at great
risk.

In any event, the gradual elimination of quotas would have to be accompanied by substantial
liberalisation efforts by China, so as to allow for a fair and level playing field for EU and
Chinese operators.

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. Furthermore they are of the opinion that either the quotas should be
abolished in some of the footwear quota lines immediately or there should be a much
more significant increase of their current level as from 2001, with a complete phase-out
in 2 years.

- 26 -

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 – and growing –
share of the total Community market (18.3%; see table 1), the huge price gap between
Chinese and European footwear (see tables 14 and 15), and the enormous export potential
of the Chinese industry.

In 1998, the situation described above further deteriorated as a result of the financial crises
in Asia, Russia and Brazil, which deprived EU operators of important export markets. 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 contracted. As a result, both Community exports and Community production
decreased markedly.

1999 saw a continuation of those negative trends, with world demand falling considerably,
with China as well as other suppliers (such as Taiwan) further lowering their export prices.
On the EU internal market, this led to a visible substitution of EU-produced footwear by
imported footwear, mainly to the advantage of China – in spite of the quantitative
restrictions in place.

the present

If at
time, the quantitative restrictions vis-à-vis China were removed
immediately, the European footwear industry in its present form and size would be put
at considerable risk. Moreover, the Community would be faced with inconsistencies in
its overall industrial policy: One 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 global and open markets. At present, such a level-playing field
does not exist, since many third countries – including China – 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 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 a
labour-intensive sector – with all its implications on the employment situation within the EU
–, any further liberalisation of Community imports will have to go hand in hand with
equivalent liberalisation efforts by the Community’s trading partners.

In the light of the current competitive environment, which fails to provide a level-playing
field, the quantitative restrictions against China should be maintained, and, as from China’s
accession to the WTO, phased out in strict accordance with the transitional regime agreed
between the EU and China. The growth rates foreseen in that regime will give ample
opportunity to EU importers to further increase trade with China.

- 27 -

2. PORCELAIN OR CHINA TABLEWARE AND CERAMIC TABLEWARE

CN 6911.10 and CN 6912.00

As in previous years, statistics and detailed information on these two specific items have been
difficult to obtain, for three principal reasons:

-

-

-

statistical reporting is normally done by producers on their whole range of production,
which means that figures are usually expressed as CN 6911+6912+6913 combined

many producers are reluctant to disclose what they consider to be commercially
sensitive information to their federations, especially during the recent and ongoing
period of fierce competition which led to a number of businesses failing

there are many small manufacturers which are not members of any federation, and
their share of production has to be estimated.

A number of different information sources have therefore been used in the compilation of this
report.

A

1.

Situation in the EU ceramic tableware sector

Structure of the EU ceramic tableware sector

Production of ceramic products tends to be very concentrated geographically. This was originally
because production grew up near to sources of raw materials and energy. Whilst this is no longer
the deciding factor for location, there are still big concentrations in Staffordshire, and particularly
the city of Stoke-on-Trent, in the UK, Bavaria in Germany, the Limousin in France, and around
Maastricht in the Netherlands.

The ceramic tableware sector is dominated by small and medium sized enterprises, most of which
have become smaller over recent years. There are, however, some large producers, three of which
are probably the largest producers in the world. The range of products they produce is vast;
products differ greatly between manufacturers and depend to a large extent on public taste and
disposable income.

Output in the tableware sector typically represents about one tenth of total output of the ceramics
it has traditionally employed something like a quarter of the total number of
industry, but
employees.
It is the most labour intensive of the six ceramics sub-sectors, and is therefore
particularly susceptible to the effects of unfair competition.

- 28 -

2.

Trends in production and apparent consumption

The figures below apply to all ceramics sectors together. Unfortunately, figures for certain
categories, which are normally supplied by industry, are not available beyond 1998, so no
calculation of EU apparent consumption can be made for 1999.

1996

1997

1998

1999

Production

25506.9

25429.4

25260.2

Exports
extra-EU
Imports
extra-EU
Apparent
consumption
EU sales on
domestic
market
EU market
share
Imports
market share
Direct
employment
N° companies

4614.4

5205.5

5130.3

5156.4

1396.5

1640.7

1783.7

1988.6

22289.0

21864.6

21913.6

20892.5

20223.9

20129.9

93.73%

92.50%

91.86%

6.27%

7.50%

8.14%

306614

277234

262000

2000

In comparison, similar information on tableware (again, not much information is available from
industry):

Units: million

€

1996

1997

1998

1999

Production

2800.0

Exports1
extra-EU2
Imports1111
extra-EU2222
Apparent
consumption

1014.8
710.5
736.7
448.8
2521.9

1147.8
805.8
875.0
513.7

1091.6
743.9
945.7
541.1

1027.7
668.9
1062.9
584.7

1 Figures concern total tableware (CN 6911 + 6912 + 6913)

2 Figures indicate only products under quota (CN 6911 10 + 691200)

- 29 -

EU sales on
domestic
market

EU market
share

Imports
market share

29.2%

Direct
employment

N° companies

3.

Employment trends

As mentioned above under A.1., the tableware and ornamentalware sectors traditionally account for
about a tenth of the value of total ceramics production, but more than a quarter in terms of numbers
employed. Labour costs can equate to up to 60% of total costs in some areas.

Numbers employed in the whole of the ceramics industry fell by 10% between 1995 and 1998,
although there had already been significant job losses in the early 1990s. According to the
European ceramics producers' federation, the situation in the tableware sector was much worse than
the average, and numbers provided suggest that numbers employed went down by 46% between
1997 and 1999 alone. The figures for the last two years, for the Member States where there is
tableware production and where figures are available, are shown below.

Member State

Germany
Greece
Spain
France
Italy
Luxembourg
Netherlands
Portugal
United Kingdom
Total

1998
16 850
N/A
N/A
3 425
4 400
925
591
16 000
16 000
58 191

1999
16 448
206
2 500
3 234
4 200
856
461
N/A
15 000
42 905

Given that figures are not available for some Member States for both years, and that some figures
are estimates, it is not possible to make a straight comparison. Nevertheless, the figures do confirm
the trend which was announced in the 5th report which was finalised in May 1999. This report
indicated a 25% drop overall in numbers employed in the EU tableware sector, with the trend
forecast to continue for the rest of 1999. This trend has been born out by the facts, with further job
losses having been reported in a number of countries.

The 5th report also contained a detailed account of job losses in a number of Member States. For a
variety of reasons, such detail is not available for the 6th report, but some details are available for

- 30 -

Germany and the United Kingdom, the two biggest European players in the ceramic tableware
industry.

Germany

Numbers employed in the German ceramics industry as a whole have been decreasing steadily
for a number of years, and went down by 13%, from 43 000 to 37 400 from 1995 to 1999.
According to information supplied by a German trades union, turnover in the German ceramic
tableware industry is falling, and the overall situation would be much worse if not for the good
export performance of German producers. Between 1995 and 1999, numbers employed fell
by 22%, from 20 985 to 16 448.

Imports of all ceramic products into Germany account for 40% of consumption, but for the
lower and middle segements, imports account for over 50%.

United Kingdom

Numbers employed in the British ceramics industry as a whole have also been decreasing
steadily for a number of years. Currently, over half are in the county of Staffordshire, "the
Potteries", and 43% are in the city of Stoke-on-Trent alone. 46% of all manufacturing jobs in
Stoke-on-Trent are in the ceramics industry (down from 53% in 1996). Overall, the total
number of jobs in the ceramics industry in the city went down from 45 300 in 1975 to just
16 700 in 1998. With such a heavy concentration in one industry in one city, the effects of any
unfair competition are quickly felt.

Since the 5th report which showed significant job losses in the UK in the year and a half up to
May 1999, there were 37 redundancies announced in the tableware sector in Staffordshire in
the summer of 1999, 270 at Christmas 1999, and 135 just before the 2000 summer holidays.

Whilst job losses can not be attributed solely to the effects of low-priced imports, these have
certainly contributed significantly.
The presence of large volumes of low-priced imports,
particularly from China, has often been cited as a reason for job losses by many companies, verbally
and in press statements.

B

1.

Sensitivity to Chinese imports

Trends in imports and exports

The figures below show 1999 imports of the two products subject to quota, that is tableware and
kitchenware of porcelain or china, falling under CN 6911 10 and ceramic tableware, kitchenware,
other household articles and toilet articles, other than of porcelain and china falling under CN 6912
00. The data cover imports from the most traditional sources, including China, with a number of
other south east Asian countries being shown for comparison purposes.

Total imports from these countries went up by between 15% and 20% from 1998 levels. Total
imports from China went up by slightly less – by between 11% and 18% - but still represent the
principal source of imports of these two products into the European Union.

At the time the quotas were introduced, imports from China were concentrated on a limited number
of Member States, but this situation has changed recently. 1999 saw sales of products under CN
6911.10 in all Member States except Luxembourg, and CN products under CN 6912.00 in all
Member States, although some of the quantities were very low. Nevertheless, there are still big
concentrations: 45% of sales of CN 6911.10 were reported by the Netherlands and Germany in
1999. However, in the past, it has often been suggested that sales into the Netherlands are often

- 31 -

delivered onwards to the UK. Of imports of CN 6912.00, 60% were concentrated on Germany and
the UK.

Extra-EU imports in 1999: 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 Republic

Philippines

Hong Kong

44371

6194

5363

13145

26433

825

7340

1817

4760

21954

3608

2294

Total extra-EU

158674

28.0

3.9

3.4

8.3

16.7

0.5

4.6

1.1

3.0

13.8

2.3

1.4

100.0

34678

11983

28469

13251

7681

7053

2861

2017

2564

665

937

840

25.9

8.9

21.2

9.9

5.7

5.3

2.1

1.5

1.9

0.5

0.7

0.6

134123

100.0

Although these are the official figures on imports from China as available in COMEXT, it is not
known if this reflects true developments in imports, and this is for two distinct reasons:

-

is thought

that Chinese producers divert

their exports to Europe via other
it
countries. For example, there were 2302 tonnes of CN 6911.10 and 840 tonnes of
CN 6912.00 reported as having been imported from Hong Kong in 1999, a
significant increase on the previous year, but there is no tableware production there.
Imports from Hong Kong have been coming into the EU at prices similar to, or even
below, those from China (see below for more detail). There has also been evidence
in the past, notably from trade fairs, that some Chinese producers have been selling
whiteware decorated in Indonesia, and it then comes into Europe as Indonesian.
This may also be true of imports from India;

- 32 -

-

the fact that the quotas are expressed in tonnes detracts from the fact that there
appears to have been considerable "lightweighting" of products over recent years.
Regular laboratory testing of Chinese imports by a Danish manufacturer suggests
that the average weight per piece has been reduced significantly, sometimes by up to
two-thirds. So, whilst import quotas may not have been fully taken up in the past in
terms of tonnes, the actual number of pieces of Chinese product imported is likely to
have gone up significantly. Unfortunately, it is not possible to verify this in
COMEXT, where there is no provision for reporting by individual pieces for this
product.

As far as exports of these two products by European producers are concerned, the figures below
show deliveries to their principal traditional markets, with China shown for comparison. As before,
EU sales on the Chinese market are minimal, as the Chinese market is virtually self-sufficient.
In
addition, the market is protected by high import tariffs – currently 30% on the products subject to
quota, compared with EU tariffs of between 5% and 12%.
In the latest tariff offer made in the
context of the negotiations for Chinese accession to the World Trade Organisation, the Chinese
tariff on CN 6911.10.10 will reach its final level – 12%, the same level as the current EU tariff –
only in 2005. CN 6912 will not go below 15%, and this will not be achieved until 2004. Imports
into China will therefore still benefit from considerable protection for a few years yet.

Extra-EU exports in 1999: EUR 15

Source: COMEXT

CN 6911.10

CN 6912.00

Tonnes

% total imports

Tonnes

% total imports

U.S.A.

Australia

Canada

Japan

Israel

Switzerland

Norway

Poland

Czech Republic

Turkey

China

8645

899

773

2209

1505

4322

1277

662

9752

835

43

22.9

78916

67.3

2.4

2.0

5.8

4.0

11.4

3.4

1.8

25.8

2.2

0.1

4347

4412

4337

1577

3622

2943

1279

577

804

113

3.7

3.8

3.7

1.3

3.1

2.5

1.1

0.5

0.7

0.1

Total extra-EU

37802

100.0

117223

100.0

- 33 -

As can be seen from the above figures, the USA is a major market for European tableware
producers. Hotelware producers continue to do particularly well on American markets despite the
very high tariff peaks which continue to be applied (not only in the USA but also in other markets).
The GATT Uruguay Round negotiations only achieved reductions over 10 years from 35% to 25%
on porcelain and china hotelware, and to 28% on other grades. These levels are at least twice as
high as corresponding EU tariffs.

Signs have been seen over recent years that Chinese exporters are also targeting US markets with
low priced imports, making the situation worse for EU exporters to that market, which are virtually
being pushed out in some areas.

2.

Prices

Selling prices for imported Chinese tableware have always been well below European prices, both
for porcelain and china and for earthenware, and 1999 was no exception, as the table below clearly
shows.

€

/kg

Source: COMEXT

1996

1997

1998

1999

CN 6911

Chinese

Intra-EU

CN 6912

Chinese

Intra-EU

1.19

5.32

1.17

2.06

1.41

5.24

1.43

2.12

1.34

5.08

1.51

2.60

1.38

4.51

1.43

2.57

It should be noted that the above average European selling prices have been calculated, for the first
time in this report, from COMEXT data. They therefore refer to average EU 15 prices, whereas in
the past, figures were provided by industry for a limited number of Member States. Some of the
figures are therefore different from those in previous reports, and can not be compared with them.

On the two items subject to quota, average selling prices for 1999 were as follows:

€

/kg

CN 6911.10

CN 6912.00

Source: COMEXT

Chinese

Intra-EU

1.38

1.43

4.51

2.57

For comparison, average selling prices of imports reported from Hong Kong for these two items
were:

CN 6911.10

CN 6912.00

€

€

1.77 per kg

1.24 per kg

- 34 -

3.

Counterfeiting problem

One of the problems that EU tableware producers have had to face over the years is that many of
the Chinese imports which are coming on to the market at prices well below European products are
direct copies of models produced by EU companies. The consumer can therefore find himself faced
with two almost identical products at very different prices, and produced under very different
environmental rules.

4.

Opinion of the Community industry

The ceramics tableware sector is represented at European level by the FEPF, the Fédération
Européenne des Industries de Porcelaine et de Faïence de Table et d'Ornementation, which is in turn
a member of Cérame-Unie, the umbrella ceramic products manufacturers' association of the
European Union. The FEPF held its annual general meeting in June 2000, and came to the
following common position: it feels that there is sufficient reason to continue the existing tableware
quotas, and at the same time effecting better control at the borders, because:

-

-

-

-

unfair trading practices such as the very low prices of Chinese imports, frequent
counterfeiting, and diverting products through other countries, continue to put a
burden on the EU tableware industry, which is suffering the consequences

it feels that the EU-China agreement on WTO membership does not guarantee the
end of the Chinese state trading system, and the tariff reduction for imports into
China are insufficient for EU producers to be able to export to China to compensate
for their losses caused by low-priced Chinese exports to the EU and other countries

it considers that the import of Chinese tableware into the EU constitutes as much a
sensitive issue as imports of Chinese textiles into the USA, for which it understands
If the USA succeeds in achieving a ten-year
that there maybe a safeguard clause.
safeguard clause on imports of Chinese textiles, for example, then Cérame-Unie
would seek the same treatment for imports of Chinese tableware into the EU

to the same relevant

it is of the opinion that products imported from China and other third countries
legislation as EU producers, which is
should be subject
currently not the case, and which discriminates against domestic producers.
In the
case of ceramic tableware,
this means especially Directive 84/500/EC on the
approximation of the laws of the Member States related to ceramic articles intended
to come into contact with foodstuffs (which provides limits on the release of lead
and cadmium), and Directive 89/109/EC on the approximation of the laws of the
Member States relating to materials and articles intended to come into contact with
foodstuffs.

This latter Directive, provides, inter alia, for such materials and articles to be
accompanied by the trade name or registered trade mark of the manufacturer or
processor, or by the importer. Since such information is usually missing on Chinese
imports, Cérame-Unie feels that EU producers are again being discriminated against.

- 35 -

5.

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.

6.

Conclusion

The presence of low-priced imports of tableware originating in China remains a very sensitive issue
for
the EU ceramic tableware industry, and clearly has substantial disruption potential.
Rationalisation in the EU tableware industry is continuing, with consequent continuing job losses,
and in such a sensitive period, the sector continues to be susceptible to the effects of low-priced
imports. Quotas on imports from China should therefore continue into 2001.

However, the Commission has given the Chinese authorities a proposed phasing-out timetable of
the quantitative restriction being applied to industrial (non-textile) products from China, which
means, for the two ceramic tableware products, a 15% increase each year from 2001 to 2004, with
complete removal of the quotas in 2005. In line with this, quotas for CN 6911.10 and CN 6912.00
for 2001 should be set at 15% higher than the level applied in 2000. Quotas should not be
abolished before 2005, in accordance with this proposed timetable.

- 36 -

III.

China's trade liberalisation and W.T.O. accession

The negotiation of an agreement on China's accession to the WTO has been at the
(1)
top of the EU's trade agenda for the past two years. The bilateral Sino-EU agreement
reached on 19 May 2000 therefore marks a major step forward in our trade relations.
Coming in the wake of the Sino-US Agreement of November 1999, the Agreement with the
EU virtually ensures that China will join the WTO early in 2001. The Commission and the
Chinese authorities have agreed to step-by-step market opening in many areas, with
implementation typically taking place within a three to five year period.

Import

The EU-China Agreement will secure vastly improved access for EU (and other WTO
member countries') firms to the Chinese market.
tariffs and other non-tariff
restrictions will be sharply and permanently reduced. WTO membership will consolidate
and accelerate China's own efforts to promote transparency, fairness and openness across
the board in China's own trade regime. And the WTO's independent and legally binding
dispute settlement system will enable both sides to resolve trade problems quickly and
effectively. In short, this Agreement greatly enhances the climate for European companies
to export to, do business with, and invest in, China. As a result, the EU and China can look
forward positively to a reverse of the recently declining levels of Foreign Direct Investment
(FDI) in China

But in addition to the commercial opportunities it will offer, WTO accession will have a
substantial impact on economic reform and development in China. The EU is committed to
working in partnership with China, in order to make this transition process as smooth as
possible. The Commission will share its experience in the WTO with China, including
offering to help China adapt its economy to meet WTO obligations, through the EU-China
co-operation programme.

WTO accession will bring another anchor for structural reform. Entering the world trading
system will be a catalyst for Chinese firms to become more efficient, to show that they can
compete on fair terms with the rest of the world. The Agreement will therefore also be
good for Chinese companies and workers, as they draw the benefits of increasing foreign
investment, and take on the most modern management practices and legal structures.

(2)
The EU accounted for a significant and growing share of China's global trade
surplus in 1998 and 1999. The Asian financial crisis affected Chinese exports in the region,
and led to a diversion of Chinese exports from East and South East Asia towards Europe.
The EU-China trade deficit increased from 24,4 billion in 1998 to more than 30 billion in
1999.

(3)
On 19 May 2000, the EU and China signed a Bilateral Agreement, paving the way
for China's accession to the World Trading Organisation (WTO). Once China joins the
WTO, a key challenge for the EU will be to develop mutually acceptable methods to
monitor and assist with China's compliance with its WTO commitments. The EU will also
continue to address remaining market access barriers.

In anticipation of China's imminent accession to the WTO, the EU needs to look
(4)
ahead to see how this will affect our trade relations. China will require assistance to meet
its WTO commitments. The Commission will continue to develop new channels of
communication with the Chinese authorities, to monitor the implementation of China's WTO
commitments, and to identify instances where China faces difficulties in adhering to these
obligations.

- 37 -

(5)
The EC quantitative restrictions regime towards China was partially liberalised for
the last time in 1998. No EU quotas were removed in 1999 and 2000 in view of the
situation of EU industries in the sectors concerned and the lack of progress in the
liberalisation of the Chinese quota regime. The progressive removal of quantitative
restrictions on both sides is now to be part of China's WTO accession package, with quotas
from both sides to be removed by 2005.

- 38 -

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.

III. Trends in imports of products under surveillance

The table below gives import figures, in thousands of ecus, for products under surveillance in
1999 excluding certain "hi-tech" footwear, and sets them against the 1998 figures.

- 39 -

Source: EUROSTAT

CN code

Description

1998

1999

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

Gloves

1032

4108

20969

58468

5345

8691

11064

81391

27684

13571

15291

754

4.971

28.021

53.180

2.620

10.733

7.380

175.650

24.877

12.864

13.554

Imports
China/Extra-
EC (1999) %

63.59%

53.09%

61.45%

76.04%

82.62%

27.82%

16.32%

93.45%

25.97%

34.49%

27.84%

Footwear1
Footwear1

8597403

13.297.427

55.65%

8892395

7.500.477

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

Ornamental articles of porcelain

81.893

Bicycles

Construction sets

Stuffed toys

Toys representing animals

Puzzles

Toys

Playing cards

Brooms and brushes

Brooms and brushes

Brooms and brushes

Brooms and brushes

822

53519

370487

121.564

13560

517529

2302

32463

15918

27712

22900

90.136

1.505

49.303

645.647

238.479

18.842

733.303

2.994

36.556

18.810

32.704

63.083

36.92%

75.38%

0.28%

19.69%

81.33%

79.59%

51.16%

70.60%

15.97%

56.62%

37.15%

65.83%

45.45%

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 1999:

1 measured in pairs

- 40 -

ex 6402 99

2.668.643 pairs

ex 6403 91 et 99

12.708.325 pairs

ex 6404 11

10.388.169 pairs

total

25.765.137 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
liberalised for these products, as from 1 January 2001, in the context of the bilateral Agreement
with P.R. China and pending finalisation of its Accession Protocol to the W.T.O.

(*) 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. By Council Regulation (EC)
N°1524/2000 of 10 July 2000 (OJ L. 175, p.39 of 14/07/00) current measures are maintained (i.e. 30.6%
AD duties to the net, free at frontier, price).

- 41 -

5. CHAPTER 4

CONCLUSIONS AND PROPOSALS OF THE COMMISSION

In view of the above and pending finalisation of the Accession Protcol for P.R. China, 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
amended as follows:

(1)

(2)

Surveillance measures should be abolished as from 1 January 2001 (Annex III of Council
Regulation (EC) No. 519/94 as last amended by Annex II of Council Regulation (EC) No.
1138/98 abolished).

The level of our remaining quotas should be adjusted each year, as from 1 January 2001 to
31 December 2004 as per attached Annex (phase-out table). Their complete removal
should take effect as from 1 January 2005 (Annex II of Council Regulation (EC) No.
519/94 as last amended by Annex I of Council Regulation (EC) No. 1138/98).

(3)

On this basis the Commission will submit the appropriate proposals for a Council

a)
Regulation to cover the whole period (year 2001 to year 2004 inclusive).

Regarding quota year 2001, as the relevant Commission Regulation allocating the
b)
quotas has already been published based on their previous level, it will become necessary to
publish an additional Commission Regulation allocating the increase foreseen, immediately
after publication of the Council Regulation indicated above in paragraph 3a.

Note: Appropriate proposals will also be submitted to amend Annex I of Council
Regulation (EC) No.519/94 in order to remove from the list of the third countries listed
those that have, in the meantime, become members of the World Trade Organisation
(W.T.O.).

- 42 -

Footwear: In pairs
Porcelain/Ceramics: In tonnes

ANNEX

PHASING-OUT TIMETABLE OF INDUSTRIAL (non-textile) QUOTAS

Footwear falling Within HS/CN Codes

Product

HS/CN Code
Ex 6402 991

Present Level 2000
39.151.481

6403 51 & 59

2.795.000

Ex 6403 91 1 &
99 1
Ex 6404 11 2

12.120.000

18.228.780

6404 19 10

31.897.716

Tableware, kitchen- ware of porcelain or china

6911 10

Ceramic tableware or kitchenware

6912 00

48.090

36.383

Increase:
Level:
Increase:
Level
Increase:
Level:
Increase:
Level
Increase:
Level
Increase:
Level:
Increase:
Level:

2001
5%
41.109.055
5%
2.934.750
5%
12.726.000
5%
19.140.219
5%
33.492.601
15%
55.304
15%
41.840

2002
5%
43.164.507
10%
3.228.225
5%
13.362.300
5%
20.097.229
5%
35.167.231
15%
63.599
15%
48.116

2003
10%
47.480.957
15%
3.712.459
10%
14.698.530
10%
22.106.951
10%
38.683.954
15%
73.139
15%
55.334

2004
15%
54.603.100
15%
4.269.328
15%
16.903.309
15%
25.422.993
15%
44.486.547
15%
84.110
15%
63.634

2005
Proposed
Removal
Proposed
Removal
Proposed
Removal
Proposed
Removal
Proposed
Removal
Proposed
Removal
Proposed
Removal

1 Excluding footwear involving special technology: shoes which have a cif price per pair of not less than EURO 9 for use in sporting activities, with a single- or multi-layer 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.

2 Excluding:

(a) footwear which is designed for a sporting activity and has, or has provision for the attachment of, spikes, sprigs, stops, clips, bats or the like, with a non-injected sole;

Taric codes:

6404 11 00 20

b) footwear involving special technology: shoes which have a cif price per pair of not less than EURO 9 for use in sporting activities, with a single- or multi-layer 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.

6404 11 00 10

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