October 12, 2017

European protectionism steps up a gear

European protectionism steps up a gear

The efforts of European bicycle manufacturers to lobby for tariffs to be levied on their international rivals will dampen competition and hurt consumers, writes Bill Wirtz. 

Last week, the European Bicycle Manufacturers Association (EBMA) filed an anti-dumping complaint to the European Commission, demanding immediate action against mass low-cost Chinese productions of e-bikes. According to these manufacturers, Chinese e-bikes are heavily subsidised and dumped on the European market at discounted prices. According to the association, China is “heavily subsidising” and “illegally dumping” large numbers of e-bikes on the European market. The EBMA has submitted an officials complaint with the European Commission, calling for urgent anti-dumping measures on e-bikes from China. 

The EBMA has very clear interests in filing an anti-dumping complaint, as it has already been successful with a similar endeavour this year. Back in February, following an EBMA complaint against China and Taiwan, the European Commission imposed a 34.4 per cent tariff on Chinese bicycles. These tariffs reduce consumer choices and give European manufacturers the breathing space they need for long-term price increases. Suspiciously, the Commission’s press release reads exactly the same way as the Bicycle Manufacturers statement: it first displays increases in Chinese products, then shows the effective price differences between local European producers and those originating from Asia.

Tariffs are arbitrary and regressive taxes which hurt the poorest of the poor. A research paper on American tariffs exposed this as recently as January of this year:

“It appears tariffs are imposed in a regressive manner – in part because expenditures on traded goods are a higher share of income and non-housing consumption among lower income households, but also due to explicit regressivity.”

In plain English, tariffs fall disproportionately on those least able to afford them. 

The paper concludes that the lowest income categories are burdened at 1.5 per cent of disposable income, which is exponentially higher than the wealthier elements of society. For high earners, this percentage is below 0.3.

The protectionism that the EBMA is proposing hurts the most vulnerable consumers. Its claim that Chinese bikes are indeed heavily subsidised will be subject to an investigation by the European Commission, before it will announce its decision. It stands to reason that the Commission chooses to be careful with the imposition of such tariffs.

The Bicycle Manufacturers Association, tries to claim that new measures would bolster international environmental efforts:

“Anti-dumping measures are clearly in the EU’s interest because e-bikes are a strategic, innovative industry for Europe’s green and smart e-mobility future, and European consumers and suppliers all want local EU production to prosper.”

For consumers, the “green and smart e-mobility” initiative will be more expensive and less likely to succeed if production is limited to the European continent. Market competition has made e-bikes cheaper and more accessible for consumers, in particular for those with low incomes. If the argument of the EBMA was indeed an environmental one, it would welcome a drop in prices, as price competition makes e-bikes and its emissions-free transportation accessible across the board.

As demand for e-bikes continues to grow in Europe, it is the responsibility of the industry itself to find the necessary innovative ideas that appeal to consumers. Their drive to lobby for tariffs is transparently self-serving and clearly detrimental to consumers. Europe needs more competition and consumer choice.

2.69 avg. rating (56% score) - 13 votes
Bill Wirtz
Bill Wirtz
Bill Wirtz is a policy analyst for the Consumer Choice Center. He has written for Newsweek, the Washington Examiner, City AM, RealClear, The Daily Caller and CapX.
  • Lakesman

    Ah, Bobsworth – so you are obviously in a high position in government as you seem to know our post-Brexit trade strategy intimately!

  • Stuart

    If that price is a rough norm for EU E-Bikes then it’s no wonder they need help.

  • Debs

    That’s your view. I see it differently.

  • Tony Griffiths

    A bicycle at Euro2999 is beyond stupid. It’s pure virtue signalling. A pure-bred racing bike with carbon frame – well, yes, any price you can get away with as the market is limited but knowledgeable and enthusiatic. But a ride-to-work-in-the-pouring-freezing-rain job – come on, you can buy one for Euro50 if you shop around.

  • Nockian

    Its never worked and heaven knows it’s been tried by companies far and wide. As far as monopolies, they can only be enacted by Government decree and only within the borders of that country. However, all companies are in competition, importantly, not just in their own specific production, but against every other company. A monopoly that is forced to selling at prices below its costs is a very poor monopoly, so therefore it must raise its prices ever higher in an attempt to maximise profits, as it does so it begins to lose business to other competitors that aren’t even directly in its market. Raise the price of water too high and people by orange juice instead. This isn’t just theory, standard oil, the supposed monopolistic company was selling its paraffin oil for less and less even without competition. OPEC have tried to maintain profit on oil sales by restricting supply, but the created fracking and we have seen prices fall from $120 a barrel to around $50.

  • Nockian

    China and the USA are stupidly protecting unsustainable enterprises – and no doubt a whole raft of political party income. The cost is on the head of those in their countries, it’s effectively a hidden tax on customers.

  • Nockian

    Thank goodness for logical thinking people.

  • Nockian

    You understand that subsidising exports is effectively handing customers in the EU a big wad of their own tax payers cash free gratis. That free cash can then be spent on other things that are perhaps made within EU borders. It’s a win win for consumer and the EU and a stupid loss for China.

    Resources aren’t allocated inefficiently on the side of the EU, only in China. If someone wants to sell us a Rolls Royce for the price of a mini we should welcome their foolishness. We get a better car and have a lot more cash to spend on other things.

    It might well put competing companies out of business, but then, competing businesses can act as import agents selling the bikes in the EU until such times as the Chinese decide that making huge losses is no longer sustainable, at which point they can begin making bikes again. The competition also drives innovation. China uses cheap man power and the products are often of an inferior standard which gives a technologically more advanced EU companies the option to invest in automation, better quality and increased performance. That’s what being an entrepreneur is about, no one has a right to maintain a business, it’s a risk which good entrepreneurs respond to with intelligence and poor ones by getting a political solution who’s costs land on the head of the consumer.

  • Gordon Stewart

    You shouldnt condemn others in this way,he is correct,just because the EU is a racket doesnt mean the UK isnt,we should aim for ALL tarriffs to be abolished,and anyway let the Chinese subsidise everything they will go bust…..eventually

  • EppingBlogger

    The article does not seriously consider the piossibility that the Chinese are, indeed, subsidising prooduction costs and therefore competing unfairly. Unfair competition is harmful because it allocates the world’s resources inefficiently and puts fairly competing firms out of business. The usual consequence is long term price rises by the monopolists who have survived on unfair subsidies, usually from their governments.

    A more balances account would have been more convincing.

  • Androsupial

    There have been problems with tariffs in one form or another for centuries: you want to exclude low-priced overseas imports, but by doing so (a) you insulate inefficient manufacturers and enable zombie enterprises to survive, and (b) you keep prices higher than they might otherwise be, to the disadvantage of your own citizens. In other words, you protect businesses – whose directors stay rich – and disadvantage voters – who pay more. As it is voters who, er, vote, the appropriate response is clear, innit?

  • bobsworth

    No similar column on the US’s proposed 300% tariff on Bombardier aircraft then? Nor the tariffs the US imposes on almost everything else?

    No column on the tariffs that China imposes on foreign cars – which are up to 200%? Nor the tariffs China imposes on almost everything else?

    Is this Comment Central, or just Anti-EU Childish Propaganda Central??

  • bobsworth

    When were you first diagnosed as terminally naive? The Chinese aren’t cuddly little fair trade fans you know – they deliberately use massive state subsidies to wipe out global competition in key markets, which they can then dominate.

    A post-Brexit Britain will have its own customs regime including a variety of tariffs to stop below-price dumping from the Far East – by your mad “logic” that will be anti-competitive.

  • ScaryBiscuits

    Dumping is illegal for good reason. It is the practice of using profits made in one market to dominate another, with the ultimate aim of driving out competition and establishing a monopoly. Whilst poor people might benefit whilst the dumping is in progress, this is only temporary as the point of the monopoly is ultimately to raise profits, disadvantaging all consumers in the long-run. It is the point of regulators and government to stop this happening.
    If you were based in the UK and you used anti-competitive practices, you should very quickly find yourself in the criminal courts. The writer here seems to think that this shouldn’t apply if the manufacturer is Chinese or if the products are cheap for the moment.
    When you next see a great Chinese product and wonder how they could make something so cheap, the answer is usually that they couldn’t. They have access to effectively free capital through official or unofficial banks with very little control. If we allow this to continue, all UK manufacturing will cease and we will eventually be reliant on the Chinese for everything and I can guarantee it won’t be cheap at that point.

  • Stuart

    Just had a look at some pricing. One German city style bike €2,999
    Chinease equivalent between £700-1200.
    That’s not definitive but a quick search only.
    Still one isn’t bad and the other the price of a half decent used car……

  • Debs

    Where the EU is concerned we all end up paying more. The customs union is anti competitive.

  • Tommein

    You may as well compare Chinese mobile phones with Apple phones, is it the Chinese who are subsidising their phones or are Apple massively hiking the prices of their phones? I know where I would put my money.

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