A key European Union trade panel rejected on Thursday a European Commission proposal to extend dumping duties on shoes from China and Vietnam, much to the relief of major retailers, global brands and consumers.

Sources with knowledge of the decision taken by the EU's anti-dumping committee — made up of 27 national trade officials — told Reuters that 15 states opposed the plan, 10 supported the Commission and two countries abstained.

EU ministers must decide next month whether to uphold Thursday's vote or take the unusual decision of over-ruling their officials. Any decision to extend or end the duties would take effect on January 3.

Officials at the EU executive Commission — which oversees trade policy in the bloc — said it would still propose to ministers in December to extend the duties by 15 months.

"We will take note of today's vote and the reasons put forward by the member states before submitting our final proposal to ministers in December. The final decision will lie with them," said Lutz Guellner, spokesman for EU Trade Commissioner Catherine Asthon.

A senior Commission official involved in preparing the Commission's case told Reuters that Brussels was confident of overturning the vote at ministerial level.

"Member states will have to come up with very good legal arguments to reject our proposal. The evidence is clear that these taxes have had no affect on retailers or consumers," the official said.

Withdraw proposal

The EU first imposed duties for two years in 2006 after EU manufacturers accused the two governments of unfairly subsidising their low-cost shoe makers so that EU producers could not compete.

In October last year, Brussels extended duties of up to 16.5% on imports of Chinese leather shoes and 10% on those made in Vietnam, pending a review.

The decision was taken despite opposition from most member states and a threat of legal action by Beijing at the World Trade Organisation. It also frustrated large global footwear producers, major retailers and consumers in Europe who are struggling to deal with the worst economic downturn in decades.

To avert another so-called "shoe war" and further damaging already tense economic relations with China, the Commission has now proposed the 15-month extension instead of the normal five-year term for what are known as "definitive duties".

But the European Footwear Alliance, representing global brands such as Nike, Adidas and Timberland, said the Commission should withdraw its proposal following Thursday's vote.

"Today's outcome is a vote in favour of European business, we expect the European Commission to withdraw its proposal to extend the duties with immediate effect," EFA said in a statement.

Major retailers led by the British Retail Consortium that includes Tesco and Marks & Spencer described Thursday's vote as "a major victory for customers, retailers and free trade".

"This vote could have dealt another hammer blow to shoppers just as the recession-bound UK economy is starting to show some signs of recovery. Instead it's sounded the overdue death-knell for these unjustifiable taxes," British Retail Consortium director, Alisdair Gray, told Reuters.

Source: Reuters, 20th Nov,2009