Fresh China trade war looms over 'dumping' shoes

The European Union will this week unveil plans to impose tariffs on Chinese shoes imports after the European Commission uncovered "compelling evidence" of vast government subsidies.

In a move that threatens to spark a fresh trade war between the two economic superpowers Peter Mandelson, Europe's trade commissioner, will tell ministers he will slap a tariff of up to 20 per cent on leather shoes from China and Vietnam.

The decision is the culmination of a nine-month investigation and intense lobbying by shoemakers, who claim they are victims of unfair competition, and retailers, who warn of sharp rises in shop prices.

Yesterday retailers condemned the decision, saying it would add an average of £5 to the price of a pair of shoes on UK high streets and open the door for similar demands for tariffs from other manufacturing groups.

A source close to the investigation said EU officials had found evidence of state support through cheap finance, tax breaks, tax holidays, non-commercial land costs, improper valuation of assets and suspicious accountancy practices. "Flowing from all of this, it shows compelling evidence that dumping is taking place," the source said. "Given the finding of state intervention, the commissioner believes that there will be a consensus among member states."

Tariffs would start at 4 per cent on 7 April and be raised to a maximum somewhere below 20 per cent. The move will fuel fears of a repeat of the so-called "bra wars" of last summer when Brussels imposed quotas on clothing imports that left tons of merchandise locked in customs warehouses at European ports.

But the source said: "We are not talking about any form of quantitative limit so it is not a question of people having to rush to get their stuff in. The door will not close on shoe imports at any time."

Brussels will insist it has struck a balance between manufacturers and retailers by refusing to impose the 50 per cent duties demanded by the shoe industry. "We are simply adding a fifth to the price of leather shoes which make up 8 out of every 100 pairs in European shoe shops," the source said.

The British Retail Consortium said it was inevitable that the investigation would come down in favour of dumping because of flaws in the inquiry.

It said any tariff above a single-digit number would result in a loss of choice, high prices and major disruption as retailers sought to find new sources for their shoes.

Kevin Hawkins, its director general, said: "Even if it is something under 20 per cent it is really tough.

"We recognise that it is all about compromise, but they still have to realise the massive impact on retailers' margins."