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Proposed bike tariff puts chill on retailers

Thirty per cent surtax would raise price of low-end commuter bikes, kids bikes

With gas prices rising, cities rethinking transportation strategies, and a prevailing trend toward more active living, the bicycle industry is booming. Sales of bicycles in Canada have been increasing steadily, and according to one 2003 report about 42 per cent of Canadians list cycling as a regular activity.

But the issue of where a growing number of Canadians are getting their bikes – mostly China and Taiwan – has resulted in calls for emergency protection tariffs of 30 to 48 per cent on imported bicycles.

According to Canadian companies Raleigh Canada and Procycle, the Canadian bike manufacturing industry is being threatened with cheap bikes from China and Taiwan. The number of bikes produced and sold in Canada has declined by more than 200,000 units per year since 2000, while the number of imports has increased from about 500,000 units per year to more than a million units in the same time frame. Without tariffs, there is concern that hundreds of jobs could be lost in Quebec.

The political implications of the proposed tariff have not been lost on its critics – the Quebec factories are located in key Liberal Party ridings, where candidates won narrow victories over the Bloc Quebecois. It has also been pointed out that the proposed tariffs come at the same time that Canada is crying protectionism over U.S. tariffs applied to softwood exports.

The trade tariffs were recommended by the Canadian International Trade Tribunal and would be applied on a temporary basis until the Canadian companies can readjust their production and business models to include more high-end bikes and specialty bikes that would not compete directly with cheap Asian imports.

The issue will go to the federal finance minister next month, and will be reviewed by cabinet before a final decision is made.

Opponents of the proposed tariff include several big box retailers, like Costco, Wal-Mart, Zellers and Canadian Tire, which exclusively sell mass market bikes in the price range that would be impacted by the tariffs.

The Independent Bicycle Retailers of Canada also objects. Unlike the big box stores, they generally buy bikes through a network of distributors, which in turn will increase the markup on low-end commuter bikes and kids bikes. In other words, if the tariff is only supposed to apply to bikes valued at $400 or less, with the addition of distributor fees it could also apply to bikes in the $600 to $700 range.

Jay Taylor, the owner of Snow Covers Sports in Whistler, is skeptical that the tariff will pass, but says it will likely affect his business if it does.

"Most of what we sell is above that price point, but what it does do is it hits the kids bike market pretty hard, and in a sport where we’re trying to encourage participation that’s going the wrong way, it’s sending the wrong message, and it’s making it more difficult to get people into the sport," he said.

"It’s just another barrier to entry. And for us it will have an impact – we hope a very minor impact, but it will make the sport more expensive."

While Snow Covers sells high-end mountain bikes and road bikes, they also sell bikes in the price range that will be affected by the tariffs to people looking for commuter bikes, or entry-level mountain bikes. Taylor can see the price of a bike in the $450 range go up to $550 or higher with the tariffs.

"The industry is only as healthy as the number of people that ride – unless we get more people riding, there’s no point," he said. "A person who buys a $600 bike is the same person who comes back and buys an $1,100 bike a few years later, and comes back to get a $1,500 bike a few years after that. If we increase the cost of entry, and make it too expensive for kids and other people to buy that first bike, it’s definitely a problem."

While it helps that the big box retailers are on the same side as independent bike retailers, Taylor believes that if the tariff is imposed the bigger retailers have the buying power to move factories to countries that are not specifically covered by the tariffs. If that happens, the difference in price between similar bikes at big box stores and independents could be hundreds of dollars, and small stores would no longer be able to compete.

Grant Lamont, president of the Whistler Off Road Cycling Association, believes the sustainable thing to do would be for people to make an effort to purchase Canadian bikes rather than imports, but at the same time opposes anything like a tariff that could be a barrier for entry-level riders.

"Anything that discourages the use of bicycle transportation is ridiculous," he said. "It’s not a bad thing to try and save some jobs, but it’s going to take more than a tariff to help these people."

Lamont recently returned from the Interbike conference in Las Vegas, where he saw the latest bikes being manufactured in places like Taiwan and China. Not only are they cheaper than what’s available in Canada, he has also noticed that the quality of the construction and components have improved significantly in only a few years.

However, the fact that China has lower wages and more lax environmental laws than Canada, should also give buyers something to think about. "I could see objecting to these bikes for that reason, but I think tariffs are the wrong way to go. Don’t target the people who need these cheap bikes to get around, or kids, or the guy who buys a bike to get in shape. Bikes are a good thing, and we should be doing everything we can to encourage more people to ride – if we doubled the number of cyclists in Canada, there should be lots of work in Quebec."