A U.S. decision to slap tariffs on coated paper from China is likely to be the first of several steps to address industry complaints about unfair trade practices, experts say.
On March 30, U.S. Commerce Secretary Carlos Gutierrez announced tariffs known as countervailing duties on imports of Chinese glossy paper, whose value had tripled to U.S. $224 million in 2006 from U.S. $80 million a year earlier.
The specially treated paper is commonly used for such items as advertising circulars, calendars, and annual reports.
In a statement, Commerce said it had determined that Chinese paper manufacturers were receiving subsidies ranging from 10.9 to 20.35 percent for their exports, which compete with U.S. products on the American market.
The new tariffs will be applied in the same amount to offset China’s advantage from the subsidies.
The China of today is not the China of years ago. Just as China has evolved, so has the range of tools to make sure Americans are treated fairly.
“China’s economy has developed to the point that we can add another trade remedy tool, such as the countervailing duty law,” Gutierrez said in a statement.
“The China of today is not the China of years ago. Just as China has evolved, so has the range of tools to make sure Americans are treated fairly.”
‘Open door’ for complaints
In interviews with Radio Free Asia, experts said the paper case may be the first of many brought by industries seeking relief from low-priced Chinese imports.
Gary Hufbauer, senior fellow at the Peter G. Peterson Institute for International Economics in Washington, said he doubts the decision “will set off a trade war.”
“But what it will do is open the door for many other U.S. companies to lodge cases against China, claiming subsidies, claiming that bank loans are in fact grants, or that the interest rate is too low, or that Chinese infrastructure is too generously provided to individual companies, and on and on and on.”
“So, this opens a wide door for U.S. companies to file complaints,” Hufbauer said.
Hufbauer said China could file suit against the duties, either in the U.S. Court of International Trade or in the World Trade Organization (WTO), after the Commerce Department makes a formal “final determination” later this year. But the case could take two or more years to decide.
In the meantime, said Hufbauer, duties on the imports of paper from China would be applied.
“If, at the end of the day, the Chinese firm wins the case, then it gets the money back. But of course, it probably has to count on losing the money while trade is going forward, and therefore it’s a real burden,” Hufbauer said.
Decision ‘not punitive’
Frank Vargo, spokesman for the Washington-based National Association of Manufacturers, said that other U.S. sectors may follow suit by seeking similar duties, but that he does not expect a flood of cases covering a broad range of imports.
“These cases are expensive, and industry does not bring them capriciously because it’s a laborious and time-consuming process,” Vargo said.
Vargo argued that the decision to impose duties is neither protectionist for U.S. industry nor punitive toward China.
“We’re not slapping penalties on China,” Vargo said. “What’s being done here is to measure the effect of the subsidy as closely as possible and offset it so that the price of the Chinese product in the United States is selling for what it would have sold for if the subsidy hadn’t been put there in the first place.”
Currency a ‘different’ concern
China may be able to head off similar actions on steel, textiles, and other products if it takes significant steps to revalue its currency, the yuan, Hufbauer said.
Some U.S. lawmakers have argued that China deliberately undervalues the yuan by as much as 40 percent to make its exports cheaper abroad.
Since July 2005, China has allowed the yuan’s value to rise by only around 6 percent.
“If China moves on its currency, it means there’s a lot less reason for other industries to bring these kinds of cases,” Hufbauer said. “That is correct. But now that the [Commerce] decision on a regulatory basis has been made, it won’t be reversed, whatever China does on its currency.”
Vargo noted that China promised to end its subsidies when it joined the WTO in 2001.
“Currency and subsidies are two different things, and it’s very important that U.S. companies be able to have the legal right to what is owed them under the WTO agreement.”
Original reporting by Michael Lelyveld. Edited for the Web by Richard Finney.