Yet more EU protectionism
Wednesday, July 14, 2010
Just weeks after G20 leaders vowed to stave off protectionism, the EU is bowing to vested interests (yet again). Under pressure from the European Bicycle Manufacturers Association, the EU is threatening to extend an egregious 48.5% tariff on bicycles imported from China for a further five years. The EU should banish this egregious tariff, which has stood since 2005, and allow European consumers access to cheaper goods.
The justification for imposing this tax—that Chinese manufacturers were undercutting European producers—is perverse. Getting the same good at a lower price is a benefit, not a cost, to an economy and for the few European producers who may temporarily benefit, millions of consumers will lose out through higher prices. China has been able to utilise its extensive pool of cheap labour produce goods at well below the cost of more labour scarce economies. This comparative advantage is utilised by many European producers who outsource manufacturing to China and rely upon higher skilled labour- design, marketing, accountancy- within the EU. Import tariffs discriminate against these more cost-efficient producers too.
Unfortunately, EU legislators continue to appease lobbyists and vested interests at the expense of everyone else: last year EU erected no fewer than 89 new barriers to trade. Thankfully, Brussels has agreed to repeal a similar levy (34.5%) imposed upon Vietnamese bicycle imports, which has reportedly devastated the small, but important, Vietnamese bicycle manufacturing sector. But this is too little, too late: If the EU is serious about free trade, protecting its consumers, and empowering its very capable producers, it should abolish all barriers to trade outright- including this self-harming tariff.