EU ANTI-DUMPING LAWSUIT AGAINST VIETNAM - WHAT CAN BE LEARNT FROM THE FOOTWEAR CASE?

Graduation thesis

EU ANTI-DUMPING LAWSUIT AGAINST VIETNAM - WHAT CAN

BE LEARNT FROM THE FOOTWEAR CASE?

ACKNOWLEGEMENTS

First and foremost, I would like to express my special thanks to my

supervisor, Phan Thi Hien Giang, MSCs., for her professional and

inspirational suggestions, corrections and advice in bringing this thesis to

completion.

I am also grateful to Hanoi Foreign Trade University, especially those

teachers at the English Faculty, for giving me the opportunity to study in such

an academically stimulating program in Bachelor of Business English. The

course has provided me with comprehensive knowledge and useful skills in

business and foreign trade so that I am able to fulfill this thesis and have the

courage to embark on the challenging journey of life-long learning.

My sincere thanks are due to the World Bank Library and National

Library, the librarians, staff and the administrative office of the Hanoi Foreign

Trade University for providing me the valuable materials and assistance.

I am deeply indebted to my close friends, my relatives and my

boyfriend who have always supported and encouraged me to finish the thesis.

Last but of course not least, I would like to share this moment of

happiness and sense of achievement with my parents and my brother, who

have always stood by my side and rendered me enormous support and

unfaltering love during the whole process of my study.

Le Thanh Hai - A4 - BBE - K41 1

Graduation thesis

Le Thanh Hai - A4 - BBE - K41 2

Graduation thesis

ACKNOWLEGEMENTS................................................................................1

INTRODUCTION............................................................................................5

Background to the study....................................................................................................5

Objective of the study........................................................................................................6

Research questions.............................................................................................................6

Structure of the thesis.........................................................................................................6

Scope of the study..............................................................................................................7

Research methodology.......................................................................................................7

Chapter 1...........................................................................................................9

LITERATURE REVIEW................................................................................9

1.1. Dumping in international trade...................................................................9

1.1.1. Definition.................................................................................................................9

1.1.2. Impacts on importing countries and international trade........................................10

1.1.2.1. Impacts on importing countries.....................................................................10

1.1.2.2. Impacts on international trade .......................................................................10

1.2. Anti-dumping law........................................................................................11

1.2.1. WTO's anti-dumping law.......................................................................................12

1.2.1.1. Determination of dumping.............................................................................13

1.2.1.2. Anti-dumping measures.................................................................................17

1.2.2. EU's anti-dumping law...........................................................................................21

1.2.2.1. Determination of dumping.............................................................................21

1.3. Comparison between WTO and EU anti-dumping laws..........................28

Chapter 2.........................................................................................................32

THE FOOTWEAR CASE.............................................................................32

2.1. Overview of the Vietnam footwear industry.............................................32

2.1.1. The importance of Vietnam’s footwear industry..................................................32

2.1.2. Footwear exports to the European Union..............................................................37

2.2. Overview of the EC's anti-dumping petition.............................................38

2.3. The petitioner's arguments.........................................................................40

2.3.1. Market economy treatment ...................................................................................41

2.3.1.1. Business decisions..........................................................................................43

2.3.1.2. Accounting.....................................................................................................44

2.3.1.3. Assets and 'carry over'....................................................................................45

2.3.1.4 Legal environment and currency exchange....................................................45

2.3.2. Individual treatment...............................................................................................46

2.3.3. Vietnam's selling under the normal value.............................................................47

2.3.4. Injury .....................................................................................................................48

2.3.4.1. Macro-economic indicators...........................................................................49

2.3.4.2. Micro-economic indicators............................................................................51

2.4. The subject country's arguments...............................................................52

2.4.1. Market-economy treatment ...................................................................................54

2.4.2. Level of ‘injury’ to EU producers.........................................................................56

2.4.3. Inappropriate choice of surrogate country.............................................................60

2.4.4. Effects on interest of the Community....................................................................61

2.5. Summary......................................................................................................63

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Graduation thesis

On the 4th of October, 2006, the EC made their final decision on leather

footwear anti-dumping case against Vietnam. An official anti-dumping

duty of 10% has been imposed on uppers leather footwear from Vietnam

in the period of 2 years...................................................................................65

Chapter 3.........................................................................................................66

RECOMMENDATIONS AND LESSONS LEARNT.................................66

3.1. Conclusions and recommendations............................................................66

3.1.1. Diversify the markets outside the EU....................................................................68

3.1.2. Diversify the product range...................................................................................71

3.1.3. Enhance model of business transfer......................................................................72

3.1.4. Improve competitiveness.......................................................................................73

3.2. Lessons learnts.............................................................................................74

3.2.1. Fully understanding on international trade law concerning dumping issue.........74

3.2.2. Strengthen market economy in Vietnam...............................................................76

3.2.3. Domestic enterprises must be well-prepared ........................................................78

3.2.4. Create good public relation....................................................................................79

CONCLUSION...............................................................................................81

BIBLIOGRAPHY..........................................................................................82

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Graduation thesis

INTRODUCTION

Background to the study

In recent years, a great number of bilateral and multilateral trade

agreements have been signed between Vietnam and other countries and

international organizations, which, among other things, have provided greater

access for Vietnamese goods to the global market. However, several kinds of

Vietnam exports have been accused of being sold at dumped prices in some

foreign markets. In particular, anti-dumping tariff was imposed on Vietnam by

the European Union on glutamate in 1998, by Poland on gas lighter in 2000,

by Canada on garlic in 2002, by the US on catfish in 2002, shrimp (2003),

woodwork (2004) and again by the EU on bicycles in 2004. On July 2005, the

European Commission officially lodged yet another dumping lawsuit against

Vietnamese footwear products exported to the EU market. Such series of

lawsuits has raised massive concern for Vietnamese producers, as it has had a

negative impact on international economic integration process of Vietnam, as

well as shown that Vietnam has not adequately prepared for a bigger "playing

field".

Active integration inevitably entails proactive study about foreign markets.

Nevertheless, international markets in general, and the EU market in particular

have different regulations and trading practice that requires deep understanding

to defend oneself from implicit risks. Although dumping and anti-dumping

suits are not something new to Vietnam as it was several years ago, and

Vietnam has been moving on a very steep learning curve, it is still necessary for

Vietnamese enterprises to deepen their understanding by further analysis if they

are to avoid anti-dumping petition as they break into markets abroad.

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Graduation thesis

Objective of the study

This graduation paper, therefore, aims to furnish Vietnamese exporters and

concerned government agencies with a structured approach to anti-dumping

lawsuits by contributing a closer look at anti-dumping regulations and

experience from the footwear case. With this study, Vietnamese exporters will

hopefully be able to gain the essential ‘weapon’ to defend themselves when

there is a complaint filed against them, and more importantly, to avoid being

challenged and getting exhausted in the daunting investigation and lawsuit

process.

Research questions

The key question is: "How can Vietnamese exporters prove that Vietnam

leather footwear is not being dumped into the EU market?" To seek answer to

the question, the following sub-questions will be addressed:

- What are the differences between antidumping law of WTO and that of the

EU?

- How did the EC accuse Vietnam of dumping leather footwear in the EU

market?

- What were the arguments used by Vietnam in the footwear lawsuit?

- What are the lessons learnt for Vietnam for future dumping and antidumping

lawsuits?

Structure of the thesis

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Graduation thesis

To achieve the above objectives, the thesis is divided into of three

chapters. Chapter 1 lays the theoretical ground for the paper by defining the

two concepts: dumping and anti-dumping, and presenting different perspective

of anti-dumping according to GATT/WTO, and the EU. Chapter 2 will then

move on with an actual case study: the footwear case. It begins with an

overview of the footwear industry in Vietnam, and then provides a detailed

description and analysis of the footwear dispute procedure, the arguments

used by two sides: the EU and VN. Finally, the last chapter will conclude the

paper with some recommendations for settling other dumping disputes in the

future; for avoiding anti-dumping lawsuit; and avoiding negative

consequences from the case.

Scope of the study

Dumping and anti-dumping lawsuits are a very broad topic. However,

this study only focuses on a particular case: the VN - EU dispute on leather

footwear. This will serve as an empirical but structured approach that

Vietnamese current and potential export enterprises need to familiarize with if

they are to survive and succeed in the international market.

Research methodology

The report draws heavily on desk research, with data and information

obtained from the Official Journals of the European Union, Action Aids

Vietnam, the Vietnam Leather and Footwear Association, official and

unofficial reports, various comments and figures from published studies by

experts in the field, newspapers, magazines, and the Internet. This is

supplemented by primary information and experience gathered in the field

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Graduation thesis

verification exercise by the EU investigators to the footwear enterprises in

Vietnam in the summer of 2005.

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