Last Updated: Thursday, 5 October 2006
Vietnam counts cost of shoe penalties http://news.bbc.co.uk/2/hi/business/5408628.stm
By Bill Hayton BBC News, Hanoi
[The shoe industry employs thousands in Vietnam]
The European Union is to impose further tariffs on shoes made in China and Vietnam because of what it regards as unfair pricing.
The new tariffs will last for two years - replacing temporary measures which have been in force since April.
They are intended to protect European shoemakers from subsidised competition.
But some of the biggest brand names in shoes say the new duties are not likely to result in any jobs moving back to Europe.
Working environment
At the Taiwanese-owned Stella Shoe Factory on the outskirts of Haiphong, a port city in northern Vietnam, 7,000 workers make shoes for the British company Clarks and US firm Timberland.
It also makes shoes for a well known Italian designer label, but I am not allowed to tell you which one.
As shoe factories go, it is a nice one.
[Clarks is committed to keeping production in Vietnam]
It is bright, cool and the workers have access to a clinic and welfare services.
Graeme Fiddler, who is the Vietnam manager for Clarks, says he has been to plenty of other shoe factories in Vietnam which his company would never work with.
"Clarks owners are Quakers, which means they try to live up to ethical standards," he says.
The workers here earn on average between $60 and $80 per month. In Europe and North America that would be considered abominable.
But in Vietnam it is double the minimum wage in the state sector.
Stable income
Through a translator, I asked Vu Thi Tham, a worker on the children's shoes production line, what she thought of her job.
"Binh thuong", she said in Vietnamese: "It is OK".
"I'm working here because the income is stable. Before I was a farmer and my income depended on the weather. If was good weather, I could make good money. But if it was bad weather I couldn't. Even in good times I could only make $30 per month but working here I can make $60 or more if I do overtime."
[Workers earn far more than they would in other jobs]
The Stella plant is one of the hundreds of Vietnamese and Chinese shoe factories being hit by EU anti-dumping duties.
The duties are intended to protect jobs in the EU against companies which are receiving unfair government subsidies.
The original complaint was brought by the Italian footwear industry against Chinese firms. Vietnam was caught up almost by accident.
The office of the European Commission in Hanoi asked the Vietnamese government to disprove the Italians' claims.
Financial mess
The government selected five factories and the EU auditors checked their accounts.
What they found was a mess. The factories could not clearly account for their income and expenditure and they couldn't prove that they were not receiving subsidies whether in the form of direct government handouts or cheap land or bank loans.
[It is a fallacy to believe that additional duties imposed on Vietnam will solve (European shoemakers') problems when they still have to compete with the rest of the world
Martin Salisbury, Clarks Shoes]
So every factory in Vietnam got tarred with the same brush - even those in the private sector, such as Stella, which get no government handouts at all. The Stella management say they've already lost a few contracts.
But Clarks and Timberland who focus on quality and reliability say they're going to stick with their arrangements.
However, other plants nearby are already in big trouble because they rely on agents and middle-men who arrange short run contracts based purely on where they can get the lowest cost.
Cancelled contracts
I visited another Taiwanese factory in Haiphong which employed 1,200 workers at the beginning of August. Now it's down to less than 100.
Hundreds of sewing machines, each one costing $800, are sitting idle.
[Expensive sewing machines are sitting idle]
The manager, Deng Deng, says that as soon as the agents saw that tariffs were going to be introduced they cancelled their contracts and disappeared to countries which were not going to be affected by duties.
"Almost from the beginning of August the orders came down and now we can't get enough orders to support this factory," she says.
"I know that it was because of the anti-dumping duty problem because this factory's output was 100% leather upper shoes the ones targeted by the EU - so it is absolutely affected by the duties."
Staying here
Despite the anti-dumping duties, Clarks won't be moving any jobs back to the EU, according to Graeme Fiddler.
"No we definitely won't shift any production back to Europe," he says. "We'll keep most of our production here. What we will do is look into Cambodia and Thailand and India, because India is a growing economy and it already has a footwear industry," he says.
Martin Salisbury, a Clarks director, says that he has a lot of sympathy with Italian producers; indeed his company buys three million pairs of shoes from Italy every year.
However, he warns: "Some producers in Italy, even after decades of quota protection and EU state aid, have not modernised and cannot supply the volume, quality, choice and value demanded by the modern consumer.
"It is a fallacy to believe that additional duties imposed on Vietnam will solve their problems when they still have to compete with the rest of the world."
And ironically for the EU - one of the effects of the tariffs will be to force Vietnamese producers to be even more competitive on cost.
So that when the tariffs are eventually lifted - the competition from this part of the world will be even more intense than it is now.