Mexican industry shaking in its boots

The threat might not be apparent from the billboards hawking Mexican-made sneakers, boots and dress shoes that line the highway leading into town. Or from the malls devoted entirely to shoe stores. A statue of a cobbler graces a major thoroughfare. A footwear museum is under construction. More than 70,000 people in Leon and the surrounding state of Guanajuato labor for one of the region's shoe manufacturers or suppliers.

"Practically my whole neighborhood" works in the industry, said Lorena Hernandez Alcala, who sells cowboy boots in the Galeria del Zapato, or Gallery of Shoes, which boasts more than 50 footwear retailers. "We'd be in trouble" if anything happened to the sector.

So it's hardly surprising that thousands took to the streets of Leon in December to demand protection from what many here view as a lethal threat: China.

Low-priced Chinese imports have supplanted domestic shoe producers in many nations around the globe. The United States, for example, has all but abandoned shoemaking. About 98% of the footwear sold in the U.S. is imported. Most of it comes from China, whose low wages and nearly inexhaustible supply of factory hands have turned it into the world's largest shoe manufacturer.

Mexican producers say they have survived thanks in part to compensatory tariffs of as much as 1,105% on Chinese shoes. Domestic firms still manufacture the majority of shoes sold in Mexico. They produced nearly 174 million pairs in 2006, about 70% of them in Guanajuato, according to the state's Footwear Industry Council. China supplied just 5% of the 46 million pairs of shoes imported by Mexico that year.

But many here worry that's about to change. As part of a deal worked out when China entered the World Trade Organization in 2001, Mexico was allowed to maintain lofty compensatory tariffs on shoes and some other products for a six-year period that ended in December.

The transition period was supposed to give Mexican manufacturers time to prepare for unfettered competition with China.

Now Mexico's shoe industry is pressing the government to extend that protection for an additional five years. Businesses say that they have ample evidence of dumping and other unfair Chinese trade practices such as illegal government subsidies that they say make it impossible for them to compete.