The return of the tariff

In today’s ‘global economy’ you have to question the use of protective import tariffs, particularly when the near unanimous consensus among economists is that they tend to have a negative effect on economic growth and welfare.

The latest development in our market is that tariffs of up to 56.1 percent might be imposed by the European Union on Chinese built aerial work platforms with working heights of more than six metres.

Indications are that the Registration Notice announcing this is not the result of having found widespread ‘dumping’ - selling equipment below the prices in the market of origin - but due to imports of such equipment increasing suspiciously quickly - up 16.1 percent on the same quarter last year - following the announcement of the original investigation.

The Commission has therefore assumed that some manufacturers are ‘stockpiling’ equipment to delay the impact of any tariffs that might be imposed. It has consequently ordered customs authorities to start registering imports by manufacturer so that should tariffs be implemented they can be applied retrospectively.

It is ironic that some who normally advocate the free market and survival of the fittest etc… are often the same individuals that demand governments block imports when the competition gets tough. This is nothing new. In the early days of the European self-propelled aerial lift market, local manufacturers struggled to compete with those from North America which benefited from a massive, more developed home market providing huge economies of scale. Some did also ‘price to market’ to supress local competition.

There are many good examples of where protection - usually on a temporary basis - is not only required but is also a fair solution. However, protectionism is hardly a sign of an open free market economy and can lead to unintended consequences.

There could be many reasons why sales of Chinese built lifts have dramatically increased in Europe, such as machines being in stock for immediate delivery, an innovative new product, being easy to deal with, or some customers thinking the units they were buying were built elsewhere? A competitive price is, of course, an important factor but buying decisions for capital equipment are rarely made on price alone.

There is another issue to consider. If you are in the market for a boom lift with a working height of 50 metres or more… you cannot buy one made in Europe. Your choice is limited to American or Chinese built models. And over 58 metres you have no option but to buy a Chinese built one. The same applies to electric powered mega booms or big RT scissor lifts. And yet buyers may face a tariff of between 30 to 56% on top of the price for these machines.

Tariffs will not apply to machines under six metres. Why not? The majority of them, regardless of brand origin, are built in China.

At Intermat a Chinese manufacturer told me that by redesigning and using the latest manufacturing methods they could reduce the production cost of a €4 million crane by almost 50%!

Might the cause of the price disparity be at least in part, to certain manufacturers not investing enough in totally new products or the very latest manufacturing equipment and methods? This occurred in 1970s with car makers in the US and UK crying foul, the bogeymen back then were Japanese and German manufacturers with their new factories and radical new products. Today buyers pay a premium for products from these companies and everyone has benefited.

Looking to the future, the Chinese market for aerial lifts is likely to become the world’s largest and foreign companies will want a slice of the pie. I wonder what happens then?

See also: EU AWP dumping - tariffs set