Center
US duty could open floodgate for more cases
By Jiang Wei (China Daily)
Updated: 2007-04-13 08:50
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The US Department of Commerce said it would levy a countervailing duty on made-in-China coated paper just before April 1.
It was not an April Fools' Day joke. These paper makers, who exported $220 million worth of products to the US market last year, have become the first Chinese victims of US countervailing charges.
In the past two decades, the US has only allowed its companies to apply for trade remedies likeanti-dumpingand safeguards against goods from so-called non-market economies. The paper case has contravened this long-standing rule, with the US government now allowing countervailing duties to be applied to countries like China.
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China'sMinistry of Commercerequired its US counterpart to "reconsider the decision and make prompt changes", and expressed its "strong dissatisfaction" with the move.
Although countervailing cases require findings from the US International Trade Commission that a material injury has been suffered by the complaining firm and sector, the burden of proof is lighter, as it is for anti-dumping charges.
Insiders worry that the US move is likely to open the floodgate for more countervailing cases.
"Within six months we would guess that a dozen or so new preliminary countervailing findings will be in place against China-based firms," said Stephen Green, senior economist with Standard Chartered.
Matthew McConkey, an expert from US-based law firm DLA Piper, was quoted by the International Business Daily as saying the coated-paper case was a "dangerous signal".
He said a number of US firms are "watching and preparing". For example, the US flooring industry is likely to file a countervailing complaint against its Chinese rivals.
He predicted there would be at least three to four similar cases from the US this year and said the scale of the cases would also increase.
Like anti-dumping actions, these will only affect a tiny share of total US-China trade, but will also serve to ease some of the worst industry tensions, Green said.
Complaining that companies in China, including foreign-funded ones, benefit from various national and local subsidies in a number of industries, the US government has filed the complaint with the World Trade Organization.
It took into account not only preferential bank loans but China's income tax reductions, from which foreign investors get two years complete exemption and three years of paying half of the corporate income tax. China scrapped this preferential treatment at the National People's Congress in March.
Chinese businesses are not the only victims in countervailing cases. Insiders believed the decision would also have negative impacts on US importers, as they will have to bear higher costs.
Preliminary duty
The US government has set a preliminary duty of 10.9 to 20.35 percent on imports of coated paper from China. A dozen or so Chinese companies are involved.
One of the targeted companies, Gold East Paper, a subsidiary of multinational Asia Pulp and Paper (APP), denied it owed its trade share to unfair government subsidies.
Washington has "made a totally political decision that completely ignores the facts", Gold East said in a statement.
Gold East, based in East China'sJiangsuProvince, owes its competitiveness to cheap labor, advanced equipment and cheap wood from Southeast Asia, its statement said.
"We will certainly use every channel and adopt every legitimate means to resist this to the very end," it said. The company is consulting with lawyers in preparation for the US investigation.
The companies involved, as well as the Chinese government, now have two options. They can sue the US Department of Commerce in the Court of International Trade in New York. Or they can file a complaint to theWTOasking for a panel to assess the case.
But preliminary findings usually cannot be appealed, so the companies will have to wait for the final determination in summer.
(China Daily 04/13/2007 page15)
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