Bicycle retailers attack “protectionist” tariffs
Proposed surtax could lead to price jump
Tessa Vanderhart, Staff
A proposed surtax on imported bicycles is being protested across the country by independent retailers, who claim that the tariff would harm the bicycle industry.
The Canadian International Trade Tribunal (CITT) recommended to the finance minister that a 30 per cent surtax be imposed on all imported bicycles that enter at a cost below $250. These bikes sell for $400 to $700 at most independent retailers.
Two Quebec-based bicycle manufacturers — Procycle and Raleigh Canada — are behind the surtax; it was proposed to make Canadian bicycles more competitive in the domestic market. The CITT convened with several interested parties, including these manufacturers, the Retail Council of Canada and small business owners before recommending the surtax to the Department of Finance, where the proposal currently sits.
Independent retailers, however, are voicing concerns not about the availability of cheap products, but how the proposed tax, imposed to protect Procycle and Raleigh, could impact cycling throughout the nation.
“These are two companies that have a poor business model. They can’t make bikes that we generally sell in the independent bike market,” said Tim Woodcock, owner of Woodcock Cycle Works in Winnipeg. “This tariff will affect bicycles that they can’t even manufacture and have no intention of manufacturing.”
Usman Valiante, who conducts public policy research on the environment for Corporate Policy Group, and is a self-proclaimed “avid cyclist,” has been involved with assisting retailers — who have banded together in the Independent Bike Retailers of Canada (IBRC) to demonstrate the pitfalls of the surtax.
“This surtax is going to hit right smack dab in the middle of the commuter market,” said Valiante, calling the policy “economically regressive as well as environmentally unfriendly.” He noted that most students and young people purchase bicycles in this price range, which accounts for 55-60 per cent of sales at independent retailers.
The IBRC provided a proposal to the Department of Finance on Oct. 14 to counter the recommendations of the CITT. This proposal calls for the elimination of all existing bicycle trade protections and the removal of GST from all bicycle paraphernalia. Also, it calls for the federal government to encourage provinces to remove the PST from the same items and direct a portion of revenue from the federal gas tax to fund cycling initiatives at local levels.
Valiante likened the argument against lifting the gas tax to removing taxes from bicycle sales: “everybody benefits”, he said, as it is good for bicycle sales, the environment, and individual health.
“Why don’t you make the bike market bigger, in total, by eliminating all taxes?” Valiante asked. “Let’s get rid of all taxes, and let’s get more people on bikes.”
Woodcock is most concerned that the most meaningful effect of the tariff would be higher prices to consumers — which could dissuade people from the sport.
“Canada as a country has the highest taxed bicycles in the entire world market. It’s not really well-known, but any bicycle coming into Canada . . . is hit already with a 13 per cent tariff.”
In addition, many larger retailers, such as Wal-Mart and Canadian Tire, are opposed to the tariff on the basis that bicycles in this price range represent the majority of sales. Currently, all imported cycles are subject to the 13 per cent tariff, as well as anti-dumping tariffs that prevent large quantities of bicycle parts from being brought into the country to avoid taxation.
Woodcock explained that the new surtax is intended to impact low quality and low technology imports, which generally retail for less than $100. But, he says, in including all cycles priced under $700, the majority of bicycle sales will be impacted — particularly among students and those who commute, he noted.
He added that what would amount to approximately a $50 increase in the price of a quality, entry-level bicycle (estimated to cost $400) could make consumers less likely to invest in a high-quality bicycle, and more likely to purchase what Woodcock bills as “disposable” cycles in a lower price range.
In British Columbia, bicycles and related products have been exempt from provincial sales tax for some 20 years.
“BC also happens to be the nucleus of cycling and innovation in Canada, and it’s probably no accident that we also have no PST here,” said Mike Theil, owner of four Bicyle Sports Pacific stores in Vancouver. “The industry is certainly thriving in BC — and I think that having no tax on bikes certainly helps that.”
“There are tax incentives on buying a hybrid car, yet there are no incentives on buying a bicycle, which is a greener choice,” said Theil.
Derek Nighbor, vice president of national affairs for the Retail Council of Canada, said that the council is strongly opposed to the surtax, given its commitment to meet consumer demand.
“What a safeguard is supposed to do, it’s supposed to be a temporary measure to assist domestic manufacturers of a product if there’s a sudden and shocking wave of products from another country. We don’t think that’s the situation we have here: one of the issues we’re facing is these two domestic manufacturers are producing low-end product,” said Nighbor.
The proposed surtax would be over and above the already-present taxes, adding 30 per cent to the retail price of bicycles in the first year of its implementation, and 25 and 20 per cent in the two years after. The recommendation of the CITT is that the tariff only be imposed for three years. Originally, the proposed surtax was set at 48 per cent, but was reduced to avoid unnecessarily facilitating market saturation of low-quality bikes.
Nighbor also expressed concern at the precedent that stands to be set by the surtax, as the CITT is also recommending safeguards on barbeques imported from China — which could lead to “a pretty interesting relationship with our trade partners.”
Nighbor noted that there are 5,000 jobs in the bicycle industry at stake if prices are to rise, in comparison to the five or six hundred seasonal manufacturing jobs with Procycle and Raleigh Canada. He noted that many retailers would prefer to sell Canadian cycles — but will only do so if the quality is the same as imports, and Nighbor said that the “protectionist” policies may provide no incentive for these companies to improve the quality of their product.
Woodcock said that his store stocks the most Canadian cycles in Winnipeg — six different brands, including those from Procycle and Raleigh some years. He said that he stocks Canadian brands when possible — and when they’re competitively priced.
The RCC does not support the IBRC’s proposal to remove all taxes from bicycles, however; Nighbor said that the concern is mostly with the immediate issue, namely economic safeguards that represent an unfair advantage and could directly harm employees and consumers.
Nicole Gauthier, senior media relations for Finance Canada, said that both proposals can not yet be discussed, but that the government “must take into account the impact to all stakeholders, and will respond to the report in due course.” Many have expressed concerns that with larger issues to tackle, finance minister Ralph Goodale may not make a decision on either proposal until after an election.
