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TORONTO, Canada: Trade relations between Canada and China are being tested under the economic downturn as the specter of trade protectionism has been rearing its head.
The Canadian International Trade Tribunal (CITT) issued a ruling late last week supporting claims that China and Vietnam have dumped imports of waterproof footwear and are hurting the domestic industry. The Canadian Border Services Agency also announced that it is investigating the dumping of waterproof footwear from the two countries.
Canadian producers of waterproof footwear say they have been unable to attach much-needed price increases to their products, as imports from China threaten to take a larger market share. Domestic producers also claim that the allegedly dumped products have forced them to lay off workers.
The dumping of Chinese footwear on the Canadian market isn’t a new issue and has “been going on since 1982,” said George Hanna, president of the Shoe Manufacturers’ Association of Canada (SMAC), which filed the complaint.
But the most recent dumping duty on waterproof footwear expired in 2006, with the CITT rejecting claims from the footwear industry to renew it. Once the duty expired, “the exports started pouring in,” Hannah said.
Chinese producers have been able to produce the footwear at costs far below Canadian manufacturers. Because footwear manufacturing is labor intensive, it creates a lot of jobs, according to Hannah. “That’s why they’ve taken the business away from high labor-cost countries like Canada.”
China’s ability in recent years to attract an increasing share of global manufacturing has seen the country excel in areas such as footwear, apparel and textiles.
But Hanna said that when Chinese producers are capable of producing waterproof footwear, which is capital intensive, they shouldn’t be able to offer such low prices.
“The rubber component is the same price all over the world. They can’t get it any cheaper than we can,” said Hanna. “If they’re able to sell a waterproof rubber boot that’s half the cost than one produced in Canada, then something is wrong.”
The Canadian government is quick to put down any fears that there has been a rise in trade measures against China.
While the economic slowdown has put international trade under pressure from politicians, it has yet to start anything close to a trade war. But it’s certainly not out of the question.
“Maybe in a year we will have more cases, but that’s not for sure right now,” said Hélène Nadeau, a spokesperson from the Tribunal. “It’s possible, but it’s hard to predict.”
Typically, the CITT initiates about three or four cases a year. If the global economy gets worse and trade relations continue to worsen, then there is a chance there might be a resurgence of trade protectionism.
But Nadeau cautioned that the effects from the current economic downturn likely won’t settle in for another year, as it takes a significant amount of time and money to initiate an investigation.
The CITT has yet release its decision concerning the dumping of waterproof footwear.
Hannah is confident in SMAC’s renewed efforts to attach dumping duties on waterproof footwear from China. “I think we have a strong case,” he said. “We find the margin of dumping is higher this time. Whether the tribunal will accept that — I don’t know.”
The alleged dumping of waterproof footwear follows a recent ruling by the CITT that found aluminium extrusions from China were dumped and subsidized.
The tribunal intends to impose anti-dumping and or countervailing duties, as the dumped or subsidized products are said to be harming domestic producers.
However, China’s Ministry of Commerce (MOC) has denied the charges. MOC spokesperson Yao Jian said the decision by the CITT is not a market-oriented one.
Yao criticized that most Western countries have not given China its due market economy status. As a result, investigations into the dumping charges against Chinese companies often compare Chinese production costs to those of Western counties.
The China Nonferrous Metals Industry Association was also unhappy with the decision. It sent a letter to Canada’s Ambassador to China, Robert Wright, saying it was “shocked and disappointed about being treated unfairly by a country which preaches free trade and practices protectionism.”
Chinese companies are also critical of the decision — with a number of businesses looking for ways to appeal the ruling.
“Chinese companies are definitely talking to the Ministry of Commerce about taking this to the WTO,” said Cyndee Todgham Cherniak, a trade lawyer at Lang Michener.
