Tariffs as a concept are both emotive and double edged. For one side they
are seen as needed to help support and shelter indigenous industries form
unfair competition by aggressive and subsidised exporters - they are presented
as 'anti-dumping duties'. From the other side they are seen as 'protectionism',
safeguarding uncompetitive industries from low cost and more efficient
industry. When we then put into the mix that they often have a 'tit for tat'
element and also involve consumers (directly or via assemblers), who may have
other priorities, such as price (e.g for the British Retail Consortium the
plastic bag tariff would raise leading UK supermarkets' costs by £61 million a
year, which would be passed on to consumers, and tariffs on children's shoes
would add £25 a year to shoe costs per child), then this is a volatile
We can see this in the recurring spats between China and the EU. More recent
tariffs by the EU range from on underwear, plastic bags, shoes, ironing boards
and bicycles to paper, textiles and chemicals. In July 2010 it spread to steel
fasteners with China retaliating with the same on September, followed by EU
plans to raise tariffs on Chinese aluminium wheels and then certain fibreglass.
These last two cases are good exemplars of the issues.
Car-makers such as BMW and Ford are worried the tariffs could increase their
production costs. Manufacturers estimate the duties will add more than 300
million euros to the cost of wheels bought in the EU every year, squeezing
profits already depressed by the global economic downturn. In 2009 EU car
makers bought about 35 million aluminium wheels (1 million from China) at a
total cost of about 1.4 billion euros.
Regarding the fibreglass case, the stated aim is to counterbalance illegal
market dumping by Chinese exporters, which the EU says, is hurting European
producers. "The significant price undercutting prevented the Union industry
from passing on increased production costs ... which resulted in low and ...
negative profitability levels," the EU said in its official journal. There were
complaints that fibreglass dumped on the EU market was threatening jobs at
producers such as PPG Industries and Saint-Gobain Vetrotex. European fibreglass
users, such as wind turbine producer Vestas, oppose higher tariffs, arguing
they may create supply shortages and raise production costs for companies
involved in turning fibreglass into composites used as wind turbine blades,
lightweight hulls for ships and in cars.
Of course, key aspects in this debate are views of China as engaging in not
only trade-distorting aid and illicit measures (eg to paper manufacturers and
plastic bag producers - by means such as free land and tax holidays), but also
currency interventions, with arguments the yuan is undervalued, so an illegal