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BUILT-IN CONFLICTS BETWEEN PRODUCERS AND IMPORTERS IN HOME COUNTRIES By Professor Sylvain Plasschaert By Professor Sylvain Plasschaert.

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Presentation on theme: "BUILT-IN CONFLICTS BETWEEN PRODUCERS AND IMPORTERS IN HOME COUNTRIES By Professor Sylvain Plasschaert By Professor Sylvain Plasschaert."— Presentation transcript:

1 BUILT-IN CONFLICTS BETWEEN PRODUCERS AND IMPORTERS IN HOME COUNTRIES By Professor Sylvain Plasschaert By Professor Sylvain Plasschaert

2 SOME CASES OF BUILT-IN CONFLICTS SOME CASES OF BUILT-IN CONFLICTS

3 1. BICYCLES (2004) EBMA (European Bicycle Manufacturers Assocation) versus ETRA (European Two-wheel Retailers) 2004 re bicycles manufactured in Vietnam EBMA (European Bicycle Manufacturers Assocation) versus ETRA (European Two-wheel Retailers) 2004 re bicycles manufactured in Vietnam The press reported both the complaint by EBMA and the rejoinder by ETRA, both of which were reported on the same page The press reported both the complaint by EBMA and the rejoinder by ETRA, both of which were reported on the same page The bicycles were manufactured in Vietnam by Taiwanese firms The bicycles were manufactured in Vietnam by Taiwanese firms

4 2. LADIES UNDERWEAR (2003) Manufacturers in the USA had secured safeguard quotas against surging imports from China Manufacturers in the USA had secured safeguard quotas against surging imports from China Importers (mainly large distributors) protested promptly Importers (mainly large distributors) protested promptly Almost no longer manufacturing in the USA, which was outsourced and subcontracted to Honduras, where fabrics and elastics were sent and processed into goods re-exported duty-free to the USA Almost no longer manufacturing in the USA, which was outsourced and subcontracted to Honduras, where fabrics and elastics were sent and processed into goods re-exported duty-free to the USA

5 3. STEEL PRODUCTS (2006) This sector is frequently targeted by complaints about dumping This sector is frequently targeted by complaints about dumping European producers of steel urged protection against imports from China (with rapidly growing output), when they themselves reduced production European producers of steel urged protection against imports from China (with rapidly growing output), when they themselves reduced production Users of (semi-transformed) input goods protested. They had difficulty obtaining supplies from Europe; same-quality products from China were cheaper Users of (semi-transformed) input goods protested. They had difficulty obtaining supplies from Europe; same-quality products from China were cheaper Membership of steel sector associations comprises both importers and users Membership of steel sector associations comprises both importers and users

6 4. THE SHOE SAGA (2006) Until end of 2004, the EU applied quotas against Chinese imports Until end of 2004, the EU applied quotas against Chinese imports The European Commission imposed provisional anti- dumping duties on some imports of leather shoes footwear from China and Vietnam, subsequently transformed into a 2-year duty The European Commission imposed provisional anti- dumping duties on some imports of leather shoes footwear from China and Vietnam, subsequently transformed into a 2-year duty Approved by 9 against 12 members and 4 abstentions Approved by 9 against 12 members and 4 abstentions Rift between Northern and Southern member-states (whereto shoe manufacturing had been relocated in the seventies) Rift between Northern and Southern member-states (whereto shoe manufacturing had been relocated in the seventies)

7 4. THE SHOE SAGA (2006) The duty increased the import price by 1 Euro The duty increased the import price by 1 Euro This was objected by a.O. The Footwear Association of Importers and Retail Chains and Eurocommerce This was objected by a.O. The Footwear Association of Importers and Retail Chains and Eurocommerce The measure has been renewed for 18 months in Dec The measure has been renewed for 18 months in Dec. 2009

8 RELEVANT PARAMETERS Protective measures are an age-old phenomenon Protective measures are an age-old phenomenon IMPORT DUTIES are also being applied as a source of tax revenue IMPORT DUTIES are also being applied as a source of tax revenue Today it is no longer used for import goods, exclusively produced in a single country but in a globalizing world, because …. Today it is no longer used for import goods, exclusively produced in a single country but in a globalizing world, because ….

9 a) MULTINATIONALISATION OF ENTERPRISES Production abroad geared overwhelmingly to host country market Production abroad geared overwhelmingly to host country market Not to re-export (of labor-intensive goods or components ) Not to re-export (of labor-intensive goods or components ) In own affiliates or joint ventures In own affiliates or joint ventures Or through local contract manufacturers Or through local contract manufacturers made in China made by China made in China made by China

10 b) FRAGMENTATION : PRODUCTION CHAIN OF FINAL GOODS INVOLVES SEVERAL COUNTRIES Ex. Nokia handles 100 bln components for its mobile phones Ex. Nokia handles 100 bln components for its mobile phones Finalized made in China products contain much less value added in China Finalized made in China products contain much less value added in China Domestic content share of export processed (output only 18 % in 2006 and mainly operated by foreign – invested firms) Domestic content share of export processed (output only 18 % in 2006 and mainly operated by foreign – invested firms) made in China full value added within China made in China full value added within China

11 c) PRODUCTION PROCESS INVOLVES THREE STAGES c) PRODUCTION PROCESS INVOLVES THREE STAGES 1. PRE MANUFACTURING 1. PRE MANUFACTURING Research, design and development Research, design and development 2. MANUFACTURING PROPER 2. MANUFACTURING PROPER 3. POST-MANUFACTURING 3. POST-MANUFACTURING Marketing to the consumers or users, directly or through intermediaries Marketing to the consumers or users, directly or through intermediaries Significant mark-up at retail stage Significant mark-up at retail stage

12 d) VARIOUS PARTIES INVOLVED d) VARIOUS PARTIES INVOLVED SAME MULTINATIONAL with own production abroad SAME MULTINATIONAL with own production abroad GLOBALIZED FIRM which outsources manufacturing GLOBALIZED FIRM which outsources manufacturing LOCAL CONTRACT MANUFACTURER LOCAL CONTRACT MANUFACTURER TRADITIONAL IMPORTER TRADITIONAL IMPORTER Has only contact with exporting firm in host country Has only contact with exporting firm in host country Many firms in textiles, shoes, furniture in EU abandoned manufacturing and turned into traders/importers Many firms in textiles, shoes, furniture in EU abandoned manufacturing and turned into traders/importers

13 TRADE DEFENCE INSTRUMENTS URGED BY PRODUCERS

14 Under WTO rules: a) ANTI-DUMPING Dumping = introducing products…at less than the normal value Dumping = introducing products…at less than the normal value Anti-dumping investigations and actions proliferate, not only by old industrial, but also by new industrial countries, including India and China Anti-dumping investigations and actions proliferate, not only by old industrial, but also by new industrial countries, including India and China China is major targeted country China is major targeted country Academic research is critical of anti-dumping actions, typified as veiled protectionist moves Academic research is critical of anti-dumping actions, typified as veiled protectionist moves

15 Requests for anti-dumping measures are often protested by anti anti-dumping requests and representations Requests for anti-dumping measures are often protested by anti anti-dumping requests and representations Anti-dumping measures must be based on proven material injury to the complainant home-country producers Anti-dumping measures must be based on proven material injury to the complainant home-country producers China not viewed as a market economy. Analogues (ex. Brazil) unfavorable to China China not viewed as a market economy. Analogues (ex. Brazil) unfavorable to China EU also applies the Community Interest test: the interests not only of producers in home country, but also those of importers, users and consumers should be taken into account EU also applies the Community Interest test: the interests not only of producers in home country, but also those of importers, users and consumers should be taken into account

16 b) COUNTERVAILING (= ANTI-SUBSIDY MEASURES) c) SAFEGUARDS AGAINST IMPORT SURGES

17 GENERAL COMMENTS

18 THE CANONS OF INTL TRADE THEORY CANNOT BE FAULTED : Sourcing products from the most efficient producer enhances global welfare and should not be artificially thwarted Sourcing products from the most efficient producer enhances global welfare and should not be artificially thwarted Provided, and to the extent the lower costs of production percolate in lowered prices, the consumers of final goods enjoy higher real incomes. And the users of intermediate inputs can buttress more efficient production processes Provided, and to the extent the lower costs of production percolate in lowered prices, the consumers of final goods enjoy higher real incomes. And the users of intermediate inputs can buttress more efficient production processes

19 Their cheaper purchases release purchasing power for other outlays, allowing to reallocate resources to sunrise sectors – apart from holding inflationary tendencies in check Their cheaper purchases release purchasing power for other outlays, allowing to reallocate resources to sunrise sectors – apart from holding inflationary tendencies in check The benefits of free trade for consumers and users are widely spread over many consumers and are much less visible than the immediate losses of jobs, output and profits in out-competed domestic firms. Psychologically, the wage component in the value added chain appeals more to public opinions than the other components of the chain and adds readily political weight to claims for protection The benefits of free trade for consumers and users are widely spread over many consumers and are much less visible than the immediate losses of jobs, output and profits in out-competed domestic firms. Psychologically, the wage component in the value added chain appeals more to public opinions than the other components of the chain and adds readily political weight to claims for protection

20 International trade should also be based on rules of fairness. This does not imply equalized wages, but respect for some generally acceptable international labour standards International trade should also be based on rules of fairness. This does not imply equalized wages, but respect for some generally acceptable international labour standards Where is the value mainly produced? In China? In the EU? To what extent are pure producers in EU protected? Where is the value mainly produced? In China? In the EU? To what extent are pure producers in EU protected?


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