Saturday, November 15, 2008

Candles In The Wind ?

This is going to be one of those weekends where I ask the commentariat for help.

I hear on the news today that the EU are imposing import duties on Chinese candles, because they're selling to the EU at 'below cost price'.

"Brussels launched a probe after candlemakers from Germany, the Netherlands and other countries complained that they were being hurt by illegal pricing practised by Chinese rivals and accused them of getting unfair export aid"

Hmm. So we'll help "Germany, the Netherlands and other countries ". When I lived in South London in the 80s I used to be cheered by seeing a classic Victorian factory near the Battersea Heliport which announced "Price's Patent Candles".

Oh dear.

Up until the 1970's Price's also had an international reputation for designing and manufacturing candle-making machinery; this ceased in 1980 and the engineering workshop space was vacated. Increasing production costs, the logistics of transporting raw materials into and goods out of a central London location and the increase in value of what is now a prime riverside location led the company to reconsider its position. In 1998 it relocated its UK candle manufacture to Bicester in Oxfordshire, and in 2001 Price’s Head Office moved to Bedford to join the Distribution Centre. On the original site, a Price’s retail shop remains, sharing the Wilsons' original Battersea site with elegant riverside apartment blocks and a heliport.

I see that the factory became a building site (and it actually incorporated some bits of a 15th century moated house) and that Price's went bust, the Bicester site closed and the company was bought - well, the brand name was bought - by an Italian company who manufacture in Italy.

But that's not what I wanted to ask about. How does this 'dumping' work ? I presume the manufacturers aren't going to sell below cost price - and they wouldn't last long if they did.

How then is their export subsidised ? Do the Chinese Government pay a candle export subsidy or give the candle firms grants ? Or are the EU telling porkies again ? Do they just want to protect the candle industry for their own reasons ?

After all, in the new energy world, candles could be a strategic resource again. With no EU candle industry and North Sea oil running out, what if the Chinese blow out the candles just as the Russians turn off the gas ?

UPDATE - via anonymous in the comments, dirty candle-related EU deeds and an insider's view of Trade Commissar Mandelson :

Warming to the subject, he explained that Mandelson had, in the past, made so many errors in promoting free trade that he had no choice now but to introduce protectionist measures.

He said: “His wish is to remove barriers for trade, but unilaterally. Only to remove barriers at any cost. And in the real world this is, of course, not possible . . . He showed his sometimes radical, extreme positions so that member states that did not share his views were really scared and this you can’t do.”

He also poked fun at Mandelson: “He has a vision — without to be nasty — to be always on the front of the Financial Times. This is a problem with a visionaire. Ha? Someone who has vision, they don’t listen.


Rob said...

Below the cost price in China or the cost price in the EU?

Anonymous said...

No idea whether the eurocrats have strategic reasons for the tariffs as you imply - they've never needed them before (see their recent behaviour over shoe tariffs). However, I do recall an article on dirty deeds surrounding the candle thing.

Anonymous said...

Candles in themselves are not a strategic resource. They are a product of the petro-chemical industry.

Anonymous said...

"How does this 'dumping' work ? I presume the manufacturers aren't going to sell below cost price "

If they have enough financial backing, and a long term strategy, they will. And if you can destroy indigenous industries that way, it is worth doing. That is what the Japanese used to do.

It happens regularly in the semiconductor industry.


Thud said...

Besides being an informative post I enjoyed the archaeology link...two for the price of one.

Tim Worstall said...

"Or are the EU telling porkies again"

Yes. When economists study such dumping tales with rather more rigour than the politicians do they almost never find evidence of subsidy or loss to gain market share.

Dammitall! said...

I remember Price's, and visited it a couple of times. The firm was a household name, like Reckitt's Blue and the Bisto Kids: when a child I lived in two houses that had no electricity, and went up the wooden hill each night with one of their candles in one of those blue enamel candle-sticks. But I'm also old enough to remember knife-powder, applied to old pre-stainless black-bladed table knives with a bottle-cork.
Visiting their Battersea place was like going back in time; it was largely wooden inside, I think, and must have been an amazing fire hazard. You actually saw that things were being made there, some in traditional ways. Shame it's gone.
Ho-hum, so have the Bisto Kids! another shame.
It's remembering the older ways and noticing how fun and craftsmsnship have been drained out of life keeps me going.

Anonymous said...

"It happens regularly in the semiconductor industry."

Yeah, Asian companies undercut Western RAM prices, and ended up with a cut-throat business producing low-margin commodity products.

Meanwhile, the high-margin chips like CPUs and GPUs are almost entirely designed in the West even if many of them are manufactured in Asia; most of the profits end up with Western companies.

Hardly what I'd call a good advertisement for the benefits of selling products below cost price with a 'long term' strategy; just imagine if things had gone the other way, with the Asian companies producing CPUs at a profit while Western governments imposed tariffs to keep RAM production in their countries...