China Calls U.S. Paper Duties `Unacceptable,' May Respond

Discussion in 'Wall St. News' started by Cdntrader, Mar 31, 2007.

  1. China Calls U.S. Paper Duties `Unacceptable,' May Respond

    By Eugene Tang and Mark Drajem

    March 31 (Bloomberg) -- China's commerce ministry said U.S. tariffs on imports of coated paper from the nation are unacceptable and it reserves the right to take ``necessary'' action, signaling the dispute may escalate.

    The U.S. Commerce Department, reversing more than two decades of practice, decided yesterday to levy countervailing duties to compensate for alleged Chinese subsidies to exporters. The change of policy opens the way for steel, textile and other U.S. manufacturers to apply for the same protection.

    The tariffs ``have severely damaged the interests of Chinese industry,'' Commerce Ministry spokesman Wang Xinpei said in a statement today on its Web site. ``It's unacceptable and China strongly demands the U.S. to reconsider the decision.''

    The dollar fell on concern the levies will provoke trade tensions with China, the second-largest holder of U.S. debt. The department's action comes as U.S. lawmakers, vexed by a record $232.5 billion trade deficit with China, prepare to consider stiffer measures aimed at fighting what many call the nation's weak currency, subsidies and other unfair trade practices.

    The Commerce Department said Chinese paper producers benefit from government grants, tax incentives, debt forgiveness and other unfair subsidies. China's exports of coated paper more than doubled in 2006 to $224 million from their level in 2005, according to U.S. government data.

    Countervailing Duties

    Secretary of Commerce Carlos Gutierrez announced the tariffs at a press conference in Washington. The decision is preliminary and initial duties will range from 10.9 percent to 20.3 percent. The average tariff on glossy paper, used in magazines and art books, will average 18.16 percent.

    Countervailing duties are tariffs imposed to offset the benefits of government subsidies. They are different from antidumping duties, which apply to goods sold overseas at or below the price they are sold in their home country.

    Under decade-old practices, antidumping duties are the only ones that have been applied on products from ``non-market'' economies such as China because it's difficult to identify subsidies in those nations.

    ``This decision is the most significant step toward a stronger trade policy with China than we have experienced in this decade,'' Republican Representative Phil English of Pennsylvania said in a statement yesterday.

    `Very Dissatisfied'

    The Chinese government lost a U.S. court case on March 29 aimed at preventing this decision. The combination of the court ruling and yesterday's decision may spur other industries to hire lawyers and file similar complaints.

    China is ``very dissatisfied'' with the tariffs, which ``are clearly incompatible with the court verdict which has yet to take effect,'' China commerce ministry spokesman Wang said.

    ``We'll closely monitor and reserve the right to take any necessary action,'' Wang said in the statement, without saying what action the government may take.

    The statement also criticized U.S. insistence on treating China as a non-market economy. Designation as a market economy would make it easier for Chinese companies to fight anti-dumping actions. The U.S. has imposed antidumping tariffs on Chinese televisions, furniture and textiles in the past four years.

    More to Follow?

    The dollar weakened 0.2 percent to $1.3358 against the euro at 4:19 p.m. in New York and declined 0.2 percent to 117.84 yen on speculation the levies will reduce trade flows from China.

    China is the second-largest U.S. trading partner behind Canada and holds more than $400 billion of U.S. debt.

    U.S. lawmakers and manufacturers accuse China of holding down the value of the yuan to spur exports. The nation's trade surplus jumped 74 percent to $177.5 billion last year, helping to power economic growth of 10.7 percent, the fastest in a decade.

    The yuan has gained about 7.1 percent since China ended a decade-old peg to the dollar in July 2005, closing at 7.7302 to the U.S. currency yesterday. The government allows the yuan to move by no more than 0.3 percent either side of a daily reference rate against the dollar.

    U.S. retailers and companies such as General Motors Corp., which import goods from China, oppose countervailing duties, arguing tariffs would be applied twice on many products -- once for dumping and once for subsidies. Any advantage a company in China gets from a subsidy is already offset by steeper antidumping duties levied against non-market economies, they say.

    Steel producers, such as Charlotte, North Carolina-based Nucor Corp., and textile makers say that expanded tariffs are necessary to protect them from unfair, subsidized Chinese competition.

    ``You are going to see a proliferation of these cases now,'' said James Jochum, a partner at the law firm of Mayer, Brown, Rowe & Maw LLP in Washington and the former top Commerce Department official responsible for deciding import complaints. ``This is a significant move. It isn't a one-off thing.''

    To contact the reporter on this story: Eugene Tang in Beijing on ; Mark Drajem in Washington at

    Last Updated: March 31, 2007 03:19 EDT
  2. is it just me or are we pissing off a bank that we owe a cool trillion and change to?
  3. Excellent Commentary..............


    Thus it seems that the idea of globalization is indeed in question...

    And now the whole impetus and reasoning of why have the globalization concept...... is now only another part of the competitive process...

    Thus one pursues the idea of globalization....but only with some warranted protectionism...

    In the meanwhile...some of the initial instigators are backing off the idea that globalization is a good thing....only after some developing countries have adopted complicated legal largesse which in turn is harming high percentages of their populations...

    It is not appropriate for legal largesse to cause harm to the innocent just because of an unproven ideal...

    And in this case...damages are incurred...but the academics get to walk...

    Just another learning process....

    Learning by making a lot of mistakes...................


    Just might see some China goods brokered via the CAFTA countries.....
  4. blast19


    We're pissing them off.

    But it's probably high time that we started doing something. Personally I'd rather see our money go to a country with less human rights abuse cases and more of a care for its people. China isn't exactly the best country to send money and jobs to and I wish more companies would send work to Mexico, Taiwan, Latin America, and other parts of Asia.

    We may owe them money but I'm not sure that's a great reason to not finally do something to pull their you know what out of our you know where.
  5. The Chinese are in a Bind. The US is inflating away their treasury notes at a furious pace. If things get bad economically, the US congress won't think twice to default on the debt the Chinese have purchased. After all, it would be the patriotic thing to do.
  6. how would that work? if we bailed on china - what would the implications be? its an interesting theory...

    i think its a good thing too to be less reliant on china. however, i also think a lot of reason inflation has stayed out of the system is buying things overseas can be done at a fraction of the price locally...
  7. Good theory; but it can not be done in practises, all debts have be treated the same; otherwise; there is less confidence in the market.

    During WWII; Germany had used Switzerland to finance its war machine. Of course; we have better monitor system than before; but it is extremely difficult task to do.
  8. The big question is, given that this change opens the door for any American company to try to get tariffs instituted to protect them against any subsidized competition from China, will it affect the Chinese markets, and in turn ours?

  9. hmm lets see..china mkt at a frothy all time high and china's exporters face new duties and possibly lower demand from USA.

    buckle your seatbelts

  10. blast19


    This is going to be devastating to the Chinese market no doubt. We buy a lot of crapola from them, and the more we buy elsewhere the more they ache. Their economy is fairly well reliant upon us...we're more reliant on their government than on their workforce in my opinion. We could find the same labor, only slightly more pricey, in other nearby countries. It's a shame we don't. Their government has our balls in the wringer(that we gave them to put there.).

    We're due for a huge correction I'd say....our credit spending ways have gotten way out of hand and the RE bubble is proof. Time to take a breather and let reality set in.
    #10     Mar 31, 2007