EU-China rift on shoe trade grows

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China and Europe moved a step closer to a trade war yesterday after Brussels denied market-economy status to Chinese footwear makers. The move will make it harder for Chinese importers to argue they are selling their goods at a true market price and pave the way for the imposition of anti-dumping duties.

A spokesman for Peter Mandelson, the EU trade commissioner, said there was "overwhelming support" from member states to withhold the status.

"We will now proceed to the next phase in this investigation, which is to establish if dumping has taken place, has there been injury, is there a causal link between dumping and injury, and then would measures be in the general interest of the European economy," he said.

Retail lobby groups said the decision would damage trade relations between the two blocs and add up to £10 to the price of a pair of shoes on the high street. "This is the last thing we need," Alisdair Gray, the director of the British Retail Consortium in Brussels, said. "This is a dangerous precedent for EU-China relations."

He said China's trade negotiator, Gao Hucheng, made it clear in a meeting with the BRC his country was prepared to retaliate, and that China "would stop buying from Europe".

A Chinese official in Brussels told Reuters the decision was "shocking". He said: "Now we must wait to see what the EU comes up with in its preliminary findings [in the investigation]."