The established European bicycle sector has been rattled by a consumer switch to electric bikes and a surge in imports of both electric and conventional bicycles from China. That might help explain why bicycle producers obtained protection in the form of provisional dumping duties on Chinese e-bikes.
The European Bicycle Manufacturer Association – which represents 25% of the EU’s e-bike producers and 45% of the EU’s traditional bicycle producers – filed an dumping case last September against imports of e-bikes from China. An investigation started one month later.
As a result of this probe, the European Commission imposed duties of up to 83.6% on bicycles equipped with an electrical motor. A definitive decision is due in several months.
The e-bike sector is booming in Europe. Sales in Germany alone increased by 19% in 2017, according to the Zweirad-Industrie-Verband, an industry group. Signs of a similar boom are visible all over Europe. According to the commission’s data, consumption of e-bikes in the EU grew by 74% between January 2014 and September 2017. E-bikes are part of a change in urban mobility trends.
The commission’s investigation sampled close to 60% of European producers. The European e-bike producers it investigated increased sales by 21% in the above period under review. The commission’s data also show that employment in the EU’s bicycle sector grew by 40% and that productivity slowed by 8% in that same period, despite lower labour costs.
Chinese market share
So what’s the problem? In the eyes of the commission – and of the complainants – it’s China’s rapidly growing market share.
Dumping determinations are made on the basis of a diagnosis of ‘injury’ to domestic producers stemming from imports.
“Confronted with an accelerating flow of dumped imports from China, the union industry was not able to capitalise on the growth of the electric bicycle market,” the commission writes.
This echoes statement from the complainant that took the case to the commission: “Overall, the European market is booming, but the explosion in growth of dumped Chinese e-bikes is rapidly taking away market share from the EU producers, and will annihilate European production,” said the EBMA’s chief, Moreno Fioravanti, last October.
Between January 2014 and September 2017, “23 points of market share were lost, of which 18% went to Chinese imports, having undercut union industry’s prices by 16% to 43% in the investigation period”, the commission writes. Also: “after 2015, the union industry was forced to reassess its sales expectations”.
“On the basis of the above, the commission concluded at this stage that the union industry suffered material injury” between October 2016 and September 2017, the commission’s notice states.
The EU executive also said Chinese imports caused the injury. Imports of e-bikes from other countries such as Taiwan or Vietnam, other key bicycle producers and competitive e-bike exporters, also climbed between January 2014 and September 2017, but these countries increased their market share by only 5%.
EU prices as benchmark
The commission accused China of dumping the products. “The average price of imports from the PRC decreased by 11% between 2014 and the investigation period [October 2016 to September 2017], with a first decline of 4% between 2014 and 2015 and a second decline of 12% between 2016 and the investigation period.”
“As the detailed product type mix was not known due to the general nature of the Eurostat [the EU’s official] statistics, the evolution of prices is not completely reliable. However, the commission noted that the average prices of imports from [China] were markedly below those of both union producers’ and imports from other third countries than the PRC,” the commission notes.
“In addition, while Chinese exporters expanded the range of products sold in the union market and included more expensive electric bicycles, the average price of Chinese imports decreased.”
The commission said non-market economy conditions prevailed for the production of e-bikes. Firms such as Giant Group purchased aluminium tubes and frames that are produced, said the commission, under conditions of heavy state interference in China.
Furthermore, “the Giant Group benefitted from several preferential tax schemes, refunds, financial incentives and special deductions for expenses incurred [in China]. These advantages, particularly in combination, are considered as significant distortions carried over from the non- market economy system”, the commission states.
Giant Group was afforded a provisional duty of 27.5%. That is at the lower end of the spectrum of tariffs charged on other Chinese producers, which goes from 21.8% for Jinhua Vision Industry to 83.6% for “all other companies” – around 95 firms.
The e-bike case was filed as the European bicycle industry faces the prospect of lower trade protection.
Dumping duties of 48.5% on bicycles from China have been in force for 25 years. This comes in addition to duties applied on all foreign bicycles of 14% to all other WTO members without a preferential agreement with the EU. This rate is among the high import duty rates – or peak tariffs – on manufactured products imported by the EU.
The dumping levies were due to expire in June. But the EBMA filed a request for an expiry review, which means the tariffs remain in place until the commission takes a final decision about extending them.
The expiry review will operate under new dumping rules, under a regulation that came into force on 20 December to replace the ‘non-market economy’ methodology applied to Chinese imports until then. The EU announced that it would compare prices with countries such as Turkey for that expiry review. Current tariffs are based on price comparisons with Mexico, another emerging market.
Note that the e-bike duties applied this week are imposed based on the previous methodology.
Protectionism vs green innovation?
Critics of the tariffs in the EU say the constituency behind the duties missed out on a technological revolution. The EBMA, for its part, says it is not reaping the benefits of an electric bicycle innovation that was initiated in the EU itself.
The dumping case was met with fierce opposition from the China Chamber of Commerce for Import and Export of Machinery and Electronic Products, and from a ‘collective’ of 22 EU-based e-bike importers and producers led by LEVA-EU, the EU operation of an international group of light electric vehicles whose sponsors are United States-based electric vehicle producers and one Chinese company, Lishen. Both groups were cited in the commission’s notice of provisional application of the duties as interested parties.
In early July, LEVA-EU filed a complaint at the Court of Justice of the European Union against a decision by the bloc in May to start registering imports of Chinese e-bikes. Registration of imports is seen in Brussels as a prelude to the retroactive imposition of trade defence duties.
The pleading and pressuring of these two groups appears to have brought some results.
The commission, for example, decided against using Switzerland as a comparator or ‘analogue’ country to compare prices with Chinese imports – given Switzerland’s notoriously high production costs. The executive initially took on the EBMA’s suggestion to use Switzerland but then switched to European prices.
It is unusual to use EU prices, and this presumably explains why the levies are so high. EU dumping duties usually are roughly half that amount.
The EBMA’s Fioravanti welcomed the commission’s decision to register imports. In May, he said: “The EBMA applauds today’s European Commission decision to order the registration of all imported e-bikes from China, a first vital step for the legitimate defence of 90,000 EU workers and over 800 SMEs against unfair competition. This means that provisional EU anti-dumping measures may be imposed on Chinese e-bikes imports with effect prior to 20 July 2018 [the final date at which dumping duties were expected].”
Fioravanti did not see his hopes fulfilled, though. “As far as the current anti-dumping investigation is concerned, and in view of the above findings, the registration of imports for the purpose of the anti-dumping investigation … should be discontinued,” the commission writes in its notice of provisional duties released this week. However, the registration continues due to the parallel antisubsidy case.
Dumping experts told Borderlex that it is quite unusual for the commission to register imports in dumping cases. The new EU rules oblige the executive to register imports at the request of dumping complaints, but in this case, the commission is operating under the regulatory regime prevailing before 20 December 2017.
The case pits new against old bicycle players in the EU. “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 want local EU production to prosper,” Fioravanti wrote on the EMBA’s website.
In its submission to the commission during a 13 June hearing, the collective contested claims by the complainants in the dumping and antisubsidy cases that China is preying on EU innovations, citing initial Japanese patents as proof that the innovation started elsewhere.
LEVA-EU also argues that EU ‘producers’ – including EBMA’s members – are mainly bike assemblers anyway, sourcing products from across the world in line with supply chain patterns common in other industries. What is more, there is already a re-shoring trend in the e-bike industry in Europe, said LEVA-EU. “They want to keep out competitors in the EU,” said Annick Roetynck, LEVA- EUs manager.
That statement is hard to verify. However, the commission stated in its notice that it “provisionally concluded that the imposition of an anti-dumping duty would be in the interest of the suppliers of the union industry”.
Bicycles and e-bikes have been a deal-breaker in international trade negotiations – the EU’s refusal to liberalise duties on imports of these products at the request of China was one reason the Environmental Goods Agreement failed. Negotiations of this ‘plurilateral’ agreement aimed to eliminate import tariffs on goods deemed ‘green’ and environmentally friendly.
“The decision to impose duties in e-bikes is bad for consumers, bad for innovation and bad for Europe’s climate ambitions,” said MEP Christofer Fjellner, rapporteur on trade defence in the European Parliament.
The commission does not see it this way. “There is no conflict between imposing anti-dumping duties and the objective to reduce CO2 emissions. The objective of reducing CO2 emissions is not justification for accepting unfairly traded products,” the commission stated.
The EBMA declined to comment for this article.