The EU is removing Vietnam's footwear industry from a preferential tariffs programme for exports to the bloc after deciding the sector had become one of the most competitive in the world, officials said yesterday.

European Commission Ambassador Sean Doyle told a news conference in Hanoi that graduating out of the programme that helps poor countries to export their products "confirmed Vietnam's success in diversifying its exports to the EU and reduce over-dependency on single commodities".

He said the EU was willing to offer Vietnam a long-term tariff regime for all sectors, including footwear, in talks on a free trade agreement between the EU and the Association of Southeast Asian Nations, of which Vietnam is one of 10 members.

Leading sports shoe makers Adidas and Nike have opposed the EU move, saying it would damage the industry on top of anti-dumping duties imposed on leather shoes from Vietnam and China in 2006.

Footwear ranks third in Vietnam export value after crude oil and garments. The developing economy is suffering a trade imbalance and inflation running at 25 per cent, the third highest in Asia.

Mr Doyle said the EU decision, which was expected for months, was not intended to penalise Vietnam, where market reforms of the ruling Communist Party have been built on opening trade, including World Trade Organisation membership.

"We would be in trouble with the WTO and some of Vietnam's biggest competitors if we tried to extend the present arrangement," the envoy said.

A Vietnam trade official said the Generalised System of Preferences, as it is known, would be changed to Most Favoured Nations status, meaning the tariffs would be raised to about five to 10 per cent from three to five per cent.

Other exports that benefit from GSP were not affected.

"It is very difficult to change the EU's ruling on the treatment and some footwear businesses will have a hard time ahead," said Dinh Van Hoi, deputy director of the Europe Department of the Trade and Industry Ministry.

The footwear industry accounts for 1.25 per cent of employment in Vietnam, or half a million workers, 80 per cent of them women. Ninety per cent of production is exported, with the EU being the largest market - it earned €1.7 billion in export turnover last year.

The Vietnam Leather and Footwear Association said it forecast leather and footwear exports to all countries would rise nearly 13 per cent this year from last year to about €2.9 billion.

Exports of the products in the first five months rose 13.4 per cent from a year ago to €647,000, accounting for 7.4 per cent of Vietnam's total exports.

Saturday, 14th June 2008

Reuters

Source: www.timesofmalta.com