The Single-Market Programme
European footwear

Footwear accounts for about 0.8% and 1.2% of EC industrial value added and employment respectively. Spain, Greece, Italy and Portugal are strong net exporters while the other EC members are significant net importers, so trade policy has significant intra- EC distributional effects. Competitive pressure from developing- country suppliers has contributed to trade policy shocks on footwear, while several countries have national quantitative restrictions on footwear imports, which will be merged into EC- wide restrictions on the completion of the internal market.

In Discussion Paper No. 679, Programme Director L Alan Winters models the removal of tariffs on trade between Spain and the rest of the EC as part of the former's accession to membership. He finds that this brings increased footwear consumption in the EC(9) (Community members in 1973) and reduced intra-bloc sales within the EC-South (ECS), whose suppliers displaced efficient developing-country producers. Within the ECS, internal and external trade creation occurred; consumers gained and tariff revenues fell everywhere, while profits fell in the EC(9) but rose in the ECS. The final welfare effects of accession were negligible in the EC(9) but strongly beneficial in the ECS.

Winters then considers the replacement of the 1988 French and Italian quantitative limits on footwear imports from Taiwan and South Korea by the 1990 EC-wide quotas and VERs, which shifted the burden of protecting French and Italian producers from consumers within their own countries to those elsewhere in the Community and probably benefited all producers: EC producers' profits rose, Korean and Taiwanese rents increased, and returns to other foreign producers rose. The increase in tariff revenues created a coalition of interests in the extension of trade restrictions over the whole EC market.

Finally, Winters models the abolition of restrictions on footwear imports from Eastern Europe, which boosts these economies' exports by 50% and raises their export earnings, although the rent component of those revenues falls to zero. Italy suffers most because of its large leather sector. Hence, total EC consumer net gains are 1.3% of total expenditure on footwear, but Italy and the ECS suffer welfare losses through reduced profits. Variants of this exercise all point to substantial export gains for East European producers if they correct their supply distortions and the EC opens its markets simultaneously. This also yields much larger benefits to Community welfare than the measures taken to complete its own `1992' programme.

Integration, Trade Policy and European Footwear Trade
L Alan Winters

Discussion Paper No. 679, June 1992 (IT)