EC poised to extend shoe duties after German U-turn

British shoe retailers say proposed tariffs would be a 'backward step' for industry

Lord Mandelson and British shoe retailers reacted furiously to the European Commission's proposal yesterday to extend punitive shoe tariffs on imports from Asia beyond January, following a first-round vote against the duties just two weeks ago.

The proposal came after Germany, Austria and Malta performed a major U-turn by abstaining in a working group vote on whether to extend duties on adult leather shoes, of 16.5 per cent from China and 10 per cent on those from Vietnam, for a further 15 months. This makes it increasingly likely that the protectionists will win the day at a legally binding ministerial vote set for 22 December.

The British Retail Consortium said the tariffs typically add £1.60 to the cost of an imported pair of shoes and that UK footwear retailers pay £330m a year in duties from the two countries. The business secretary Lord Mandelson said: "This is a disappointing development. These measures are no longer justified and we will not support any extension to them."

On 19 November, 15 European Union member states voted against the extension – including the UK, Malta, Austria and Germany – two abstained and 10 voted in favour. Under European Union rules, the abstentions of Austria, Germany and Malta yesterday would count as votes in favour of extending the tariffs. The BRC's Brussels director Alisdair Gray suggested that certain countries had resorted to "arm twisting" – particularly with Germany, which wants a separate anti-dumping duty to be introduced on ethanol imports from the US to protect its domestic producers.

He said: "The commission has behaved very badly in that it has been twisting people's arms. The commission and countries such as Poland have threatened Germany by saying if you are not going to support us on shoes we will not support you on ethanol. It is just different countries in effect blackmailing each other over related matters with horse-trading."

Retailers responded with dismay. Martin Salisbury, the finance manager at Clarks, the high street stalwart, said: "It is clearly disappointing. For companies like ourselves and the consumer it is a backward step."

When he was EU Trade Commissioner in 2006, Lord Mandelson set the original tariffs for two years, and in 2008 they were extended for a further 15 months. Yesterday, he said: "The commission and member states should respect the original agreement reached in 2006 and allow the duties to expire in January 2010. Extending them would be contrary to G20 commitments against protectionism and damage trade with both China and Vietnam." Emma Ormond, an international trade consultant at PricewaterhouseCoopers, said extending the tariffs could lead to an "escalation in companies moving production from China and Vietnam to India, Indonesia and Cambodia". The duties were designed to protect shoe manufacturers in countries such as Italy. Ms Ormond said: "It is very bad news for shoe retailers. It means they will not be able to reduce prices at a time when the footwear sector is still in a pretty dire state. You can only wonder which will be the next shoe retailer to go under and these duties will not help."

The European Commission said in a statement: "Chinese and Vietnamese-made leather shoes continue to be dumped in the European market. Although measures have partially stemmed the effects on dumping, this uncompetitive behaviour has continued to cause significant harm to EU manufacturers, which are undertaking significant efforts to adjust their business models."