CANADA'S GLOBAL SAFEGUARD INQUIRY INTO BICYCLES

UNCLAS OTTAWA 002700

SIPDIS

E.O. 12958: N/A
TAGS: ECON ETRD
SUBJECT: CANADA'S GLOBAL SAFEGUARD INQUIRY INTO BICYCLES
FINDS 'SERIOUS INJURY'

REF: OTTAWA 01021


1. The Canadian International Trade Tribunal (CITT) has
published its final report determining that imports of
bicycles are a principal cause of "serious injury" to
Canadian bicycle manufacturers. CITT has recommended a
surtax on assembled or unassembled bicycles with a wheel
diameter greater than 15 inches and a FOB of C$225 or less
(equivalent to C$400 retail) of 30% in the first year of
application, 25% in the second year and 20% in the third
year.


2. Possible exception for U.S. manufacturers: CITT has
recommended that bicycles imported from countries with which
Canada has entered into a free trade agreement (U.S.A.,
Mexico, Israel, Chile) and developing countries other than
China, the Philippines, Thailand and Vietnam be exempted,
presumably under WTO rules for small developing-country
suppliers.


3. As explained in reftel, an exception for
U.S.-manufactured bicylces is almost meaningless, because
very few U.S. manufactured bicycles fall into the affected
price range, and 95 percent of U.S. bicycle companies
manufacture their products overseas. U.S. distributors and
U.S. chains retailing in Canada (such as Walmart) will be
affected


4. If the Canadian government implements CITT's
recommendations, the price of imported bicycles will increase
substantially, which will adversely impact distributors,
retailers, consumers and arguably the environment. At a time
when the Canadian government has issued a "one ton challenge"
for citizens to lower their share of CO2 emissions and urged
petroleum conservation to mitigate Hurricane Katrina's effect
on oil prices, raising bicycle prices seems
counter-intuitive.

Visit Canada's Classified Web Site at
http://www.state.sgov.gov/p/wha/ottawa

WILKINS