U.S. sanctions China over paper products

By Martin Crutsinger
Associated Press
via Yahoo News
Friday, March 30, 2007

http://news.yahoo.com/s/ap/20070330/ap_on_bi_ge/us_china_trade;_ylt=Au9_...

The Bush administration, facing increasing anger over soaring trade deficits, announced Friday it would impose sanctions against Chinese paper imports, opening up a new avenue for beleaguered American manufacturers to seek government protection.

The action, announced by Commerce Secretary Carlos Gutierrez, reverses 23 years of U.S. trade policy by treating China, which is classified as a nonmarket economy, in the same way other U.S. trading partners are treated in disputes involving government subsidies.

The decision involved a case brought by NewPage Corp., a Dayton, Ohio-based paper company. It contended that its coated paper, used in printing glossy catalogues and annual reports, was facing unfair competition from imports from Chinese companies receiving improper subsidies from the Chinese government.

Commerce imposed penalty tariffs ranging from 10.9 percent to 20.4 percent on imports of glossy paper from China. The tariffs will take effect next week on a preliminary basis and will become final after a further Commerce review is completed in June.

The action was being closely watched by many other American companies, from steel to furniture, that were battered in recent years as Chinese imports flooded into the country.

U.S. companies have always been allowed to file antidumping cases, seeking penalty tariffs on the grounds that the Chinese products were being sold in the United States below cost.

But with Friday's action, they will also be able to seek penalty tariffs, known as countervailing duties, on the basis of improper government subsidies -- everything from favorable loans from state-owned Chinese banks to direct government support.

"The United States today is demonstrating its continued commitment to leveling the playing field for American manufacturers, workers and farmers," Gutierrez said in announcing the decision.

The Chinese government criticized the administration decision.

"This action of the U.S. side goes against the consensus reached by the leaders of both countries to resolve disputes through dialogue," said Wang Zinpei, a spokesman for China's Ministry of Commerce, quoted by the Xinhua News Agency. "China strongly requires the U.S. side to reconsider the decision and make prompt changes."

Daniel Porter, a Washington attorney representing the Chinese government, said no decision had been made yet on whether to appeal a federal court ruling on Thursday that gave the Commerce Department the go-ahead to proceed with the sanctions.

The decision by Commerce represented the latest effort by the administration to adopt a tougher approach to Chinese trade practices as the administration faces growing pressure from Democrats, who now control both the House and Senate.

Earlier this year, the administration filed a case against China with the World Trade Organization alleging that China was violating WTO rules by giving its companies improper subsidies for production of steel, paper and other products.

U.S. lawmakers, businesses and unions praised the action in the NewPage case.

In a joint statement, Ways and Means Committee Chairman Charles Rangel, D-N.Y., and Rep. Sander Levin, D-Mich., called the sanctions a "long overdue change in policy." They said they intended to push forward with legislation that would explicitly change U.S. law to make sure the Commerce actions will withstand any court challenges.

Leo Gerard, president of the United Steel Workers union, said the Commerce action was welcome news for workers at 22 paper mills in 13 states who produce the glossy paper covered by the sanctions. Gerard's union represents 90 percent of the workforce in the U.S. coated paper industry.

Gilbert Kaplan, a Washington attorney representing NewPage, said the Commerce action reflected the reality that China as a major power in the global economy "should not be exempt from the laws that ensure fair trade."

When the Bush administration made it known last year that it was willing to consider cases against China involving government subsidies, it was seen as an effort to bring more pressure to bear on the Chinese to adhere to the rules of the WTO, which China joined in 2001.

Treasury Secretary Henry Paulson is leading an effort to pressure China to let its currency rise in value against the dollar. American manufacturers contend that China is devaluing its currency by as much as 40 percent to give the country unfair trade advantages.

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