If Vietnamese leather shoe enterprises fail to win their case, tens of thousands of workers will lose their jobs. Legal proceedings in international trade and business activities are just a normal part of the globalization process but the creation of an overall strategy to avoid lawsuits from partners has become an important goal.

According to the Vietnam Leather and Footwear Association (Lefaso), Vietnamese leather capped shoe products currently account for more than 80 percent of the country’s footwear exports to the EU and around 80-95 percent of orders. Therefore, importing partners opposed Vietnam by reducing orders from the country to target some other regional countries such as Indonesia, Cambodia, Thailand and Sri Lanka. This has sent many Vietnamese businesses into a tailspin as they rapidly lost orders and customers.

In the first quarter of this year, the number of orders fell by 25-50 percent compared to last year. If the lawsuit continues or the EU imposes an anti-dumping tax rate of 10 percent on imported leather shoes from Vietnam, half a million workers will lose their jobs, of which 80 percent are women.

Lefaso says that currently, up to 60 percent of Vietnamese leather shoe products are manufactured to fulfill partner orders.

Vietnamese enterprises only produce and directly deliver goods to traders who have previously placed orders. They do not export their products directly to major distributors. Therefore, domestic enterprises cannot fix prices of their leather shoes on the EU market. In fact, traders fix a price following preferential quotas between the EU and Vietnam. Accordingly, although the selling price is higher than the original price, it is still lower than the common EU price. As a result, EU shoe manufacturers have lodged lawsuits against Vietnamese-made shoes because they are sold at a price cheaper that the equivalent EU products. Benefits mostly go to intermediary importers, while domestic producers and labourers are finding themselves in a disadvantaged position.

Trade counselor of the European Commission (EC) in Vietnam Felipe Palacios said the lawsuit focuses on traders who import Vietnamese leather-capped shoes to the EU market. Most traders benefit from the preferential treatment for Vietnam and sell imported products at a high price in the EU market.

Trade disputes and litigation are part of global trade. However, to avoid unfair lawsuits, economists said the garment and textile sector has to resolve two key issues. First, it is essential to quickly develop a supporting industry to lessen the dependence on partners. Second, it is necessary to boost business co-operation with global distribution groups, instead of the current intermediary traders. However, this relies not only on the enterprises but also on a concerted effort of related ministries and sectors.