Why is everything more expensive in Europe ?

[doc_bean]

The cost of wages, taxes, social ebnefits, etc, all come at an impact on corporate profits. The result is higher prices. A company must raises prices in order to make a marginal profit. If they cannot turn a profit, they will simply cease to exist. Since others in the economy are all experiencing the same impact from social costs (regualtion, wages, you name it), then prices rise across the industry.

It's the price you pay for a heavily regulated socialist leaning mixed market economy.

Now you see, that would make sense if the stuff actually got made in Europe. It doesn't, it's imported, distributed, transported and retailed in Europe, rarely designed or manufactured here. And even if it is, this is a global economy, the cost of development (since I was mostly talking about games, cd's and electronic products) is the same whether it is sold in Europe or in the US.

What you're saying is basic economic theory of course, and is right to a point, but just can't be applied here. The major extra price rise should be due to taxes (about 20%) and retail wages (transport shouldn't be that much), since the rest of the costs are about the same whether something is sold in the US or in Europe. Now a DS game (just to give a comparison) would cost about $30 in the US and $50 over here (really I'm being cheap here). And just for the record, games are normally in english here, most often with english manuals, so they can't claim it's due to translation costs either. Now let's say the good people at Nintendo sell their game at $20 to the retailers (it will probably be more), that would mean the US company makes about $10 on the game (gross), now the same game in Europe gets sold and, after taxes, gives the retailer about $40, minus $20 for Nintendo, gives the retailer 2 times the amount of money the US retailer is getting. Even if retail cost (wages etc) was double what it was in the US, they'd still have more left then the Americans ! (that is twice as much)

So really, what it boils down to is someone is screwing us bigtime, and for once it isn't the EU or the government (whichever one it is) it's either the retailers or the multinationals (Nintendo in my little example). Either the retailers are selling games with $10 profits a game (hey, it must be something like that with cd's nowadays) or nintendo is charging Europe more for exactly the same product (long live globalization !). I'm just wondering which one it is, though it's probably a combination of the two.

[Divinus Arma]

Doc, if your are talking about imports, than you have to take currency exchange rates into consideration.

Look at it this way:

Say I agree to import to Europe at an exchange rate of 1$/1Euro. We sign the contract, but over the course of the year, the exchange rate changes to $.075/1Euro. I just took a 25% hit in revenues because of our agreed upon contract. Now there are ways to mitigate this through currency forward contracts, hedging, etc, but I am likely to still experience some transaction exposure. Of course, conversely if the dolalr should rise against the Euro than the European company takes a hit and I get an unanticipated increase in revenue.

Now that is just currency fluctuation. Let's talk about the general relationship between international transactions. As a European country, there are a host of trade agreement the EU or your individual nation might have with regional players, Asian, North America, etc. If Europe does not have a free trade agreement on ceertain products in certain regions, you may be experiencing the effects of tarriff on imports to your country. This is going to raise distribution costs for the country of origin and this will be passed on to teh consumer: you. Protectionist policy in Europe may contribute to unreasonable tarriffs protecting industries that the governments seek to protect until the domestic industry can become competetive globally. In essence, your government may be attemtping to place an industry in an economic incubator before relaeasing it to the wolves of international free trade.

And let's not forget that even imports to your country will still experience many of the domestic costs, depending on the level of FDI into your country. Imports, while generally cheaper and easier to the importer in the short run than a wholly owned subsidiary, incur enormous transactions costs, distribution costs, etc. On the other hand, subsidiaries suffer from intense local regulation of a semi-socialist economic model.

Sorry. Lot's of spelling errors here that make me look like an idiot. But I hope you get the picture.

Bottom line, if you want to drop the prices of imports to your country, then you need to support deregulation, lower wages, and free trade agreements with competitor nations.

[Papewaio]

Monopolys, Tariffs, Artificial supply shortages (DVD regions), higher wages, retail outlet costs (rent, government regulations, utilities) etc

Lots of factors that will make an item cost more or less dependent on ones locale.

[Csargo]

You can just Come to America it shouldn't be hard just go to Mexico and cross the border illegally it shouldn't be hard people do it all the time.

[Divinus Arma]

Shhhhh. He's listening!

Spoiler Alert, click show to read: 

And so is he!

Spoiler Alert, click show to read: 

(Except he doen't care about the border)

Spoiler Alert, click show to read: 

[spmetla]

How do businesses in Europe manage employee benefits? Is the minimum wage high? Are workers unions pretty strong over there (thinking dock workers truck drivers). Thinking about the transport with higher fuel prices transport prices will be higher has well.

Is it easy to change careers? If not then there'd be a smaller workforce available for speciality jobs driving wages up.

For luxury utilities like broadband think about is it widely used? Are there competing companies, were they just recently set up?

[doc_bean]

How do businesses in Europe manage employee benefits? Is the minimum wage high? Are workers unions pretty strong over there (thinking dock workers truck drivers). Thinking about the transport with higher fuel prices transport prices will be higher has well.

Transport will be higher than they are in the US, certainly per mile, but Europe also has a lot of ports so transporting something for thousands of miles by truck doesn't need to happen. Like I mentioned in my previous post, we import cheap stuff too, I don't see how transport costs can eb that high then.

Is it easy to change careers? If not then there'd be a smaller workforce available for speciality jobs driving wages up.

Retail ? Usually student or kids just out of school and such, I don't see them making too much. Truck drivers and such are paid handsomely, but like I said in my previous point it doesn't account for the huge price difference.

For luxury utilities like broadband think about is it widely used?

Errr... depends on how you define widely used of course, we're a small country, tightly packed. pretty much every town has acces to cable internet if they want it I believe.

Are there competing companies, were they just recently set up?

That's part of what I was complaining about. Despite our major criticisms about the US and chains like McDonalds, I see a lot of oligopolies or even monopolies here. This is true for electricity, cable, adsl, cell phone networks, some retail, etc.

[Flavius Clemens]

How do businesses in Europe manage employee benefits? Is the minimum wage high? Are workers unions pretty strong over there (thinking dock workers truck drivers). Thinking about the transport with higher fuel prices transport prices will be higher has well.

Is it easy to change careers? If not then there'd be a smaller workforce available for speciality jobs driving wages up.

For luxury utilities like broadband think about is it widely used? Are there competing companies, were they just recently set up?

Details of UK minimum wage:

"The minimum wage is a legal right which covers almost all workers above compulsory school leaving age. There are different minimum wage rates for different groups of workers as follows:

The main rate for workers aged 22 and over is currently set at £5.05 an hour. On 1 October 2006 this will increase to £5.35
The development rate for 18-21 year olds is currently set at £4.25 an hour this will increase to £4.45 on 1 October 2006
The development rate for 16-17 years olds. This rate is £3.00 an hour. This will increase on 1 October 2006 to £3.30 an hour"

(As age discrimination legislation comes in later this year, there is some debate about whether having three different rates will still be possible.)

Benefits, employee rights and union strength vary a lot between European countries. For instance, in Britain there is fairly weak legislation that employees can't be required to work an average of more than 48 hours per week. In France they tried a 35 hour maximum (but I think that was revoked at some point). I have colleagues that occasionally have to work in one of our German offices, where there are also regulations on when people can work.

[doc_bean]

Say I agree to import to Europe at an exchange rate of 1$/1Euro. We sign the contract, but over the course of the year, the exchange rate changes to $.075/1Euro. I just took a 25% hit in revenues because of our agreed upon contract. Now there are ways to mitigate this through currency forward contracts, hedging, etc, but I am likely to still experience some transaction exposure. Of course, conversely if the dolalr should rise against the Euro than the European company takes a hit and I get an unanticipated increase in revenue.

Prices went up when the Euro went up though, and they went up when the Euro went down again. I'm not sure how supplier-retailer contracts work over here and how 'set' they are.

Now that is just currency fluctuation. Let's talk about the general relationship between international transactions. As a European country, there are a host of trade agreement the EU or your individual nation might have with regional players, Asian, North America, etc. If Europe does not have a free trade agreement on ceertain products in certain regions, you may be experiencing the effects of tarriff on imports to your country. This is going to raise distribution costs for the country of origin and this will be passed on to teh consumer: you. Protectionist policy in Europe may contribute to unreasonable tarriffs protecting industries that the governments seek to protect until the domestic industry can become competetive globally. In essence, your government may be attemtping to place an industry in an economic incubator before relaeasing it to the wolves of international free trade.

I don't think the electronics sector is being protected much. The only European global player I can think of is Philips, and since their production is almost entirely done by subcontracting I can't see them supporting high import tarrifs. AFAIK we only really protect the agricultural sector to a great degree. We import pretty much all manufactured goods anyway (except cars), so high import tarrifs would have a negative effect on our economy.

And let's not forget that even imports to your country will still experience many of the domestic costs, depending on the level of FDI into your country. Imports, while generally cheaper and easier to the importer in the short run than a wholly owned subsidiary, incur enormous transactions costs, distribution costs, etc. On the other hand, subsidiaries suffer from intense local regulation of a semi-socialist economic model.

Seeing the level of transporting going on for all products I don't think you should overestimate the transport costs. We import millions of tons of fruit from southern africa and still manage to sell them for 2-3€, electornic goods are smaller and lighter (a piece), don't require refrigeration, don't have to be transported as fast, but do require special care of their own. Really, I don't see a 10€ price difference between the US and here due to transport costs, I'm willing to accept 2€ or so, but not more.

Sorry. Lot's of spelling errors here that make me look like an idiot. But I hope you get the picture.

Nah, thanks for giving me a lengthy reponse. there's probably a lot of mistakes in my post too, spellecheck doesn't check above quoted parts it seems.

Bottom line, if you want to drop the prices of imports to your country, then you need to support deregulation, lower wages, and free trade agreements with competitor nations.

I still blame the consumer's willingness to pay first and foremost. Like I mentioned in a previous post, the price difference between 2 stores, less than a mile apart can be nearly 10€. According to 'normal' economic theory the expensive store should go bankrupt almost instantly...