U.S. sanctions China in paper-subsidy dispute

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U.S. sanctions China in paper-subsidy dispute

Postprzez LeM » 2007-03-31, 01:35

U.S. sanctions China in paper-subsidy dispute
Move is shift in decades-old policy of not sanctioning non-market economies
By Robert Schroeder, MarketWatch
Last Update: 4:33 PM ET Mar 30, 2007

WASHINGTON (MarketWatch) -- In a major policy shift, the Commerce Department announced sanctions against coated Chinese paper imports on Friday, the first time in 23 years that U.S. duty law has been applied to imports from China.
Commerce Secretary Carlos Gutierrez said imports of Chinese coated free sheet paper would face preliminary countervailing duties ranging from 10.9% to 20.3%.
Subsidies enjoyed by Chinese companies put U.S. producers at a disadvantage, said Gutierrez, who emphasized that the sanctions were legal under U.S. trade law.
"It is critical that companies compete on a level playing field," Gutierrez told reporters. "With today's decision we are demonstrating our continued commitment to create an environment of true competition for American manufacturers, for workers and farmers."
The department's decision is a reversal of a policy of not applying U.S. countervailing duty law to non-market economy countries.
"The China of today is not the China of years ago," Gutierrez said. He added that the U.S. would negotiate with China about the subsidies.
The Commerce Department must make a final ruling in the subsidy case before the middle of October. The duties could be adjusted or withdrawn in that ruling.
Markets spooked
The dollar changed course and fell against the yen and other currencies after the announcement. See Currencies.
Stocks also turned sharply lower after the announcement but the Dow Jones Industrial Average recovered in the last hour of trading to close up five points.

Gutierrez said the decision doesn't signal a "retreat" from economic engagement with China. "As economic partners, we must be above all, fair," he said. He also denied the U.S. was turning toward trade protectionism.
In an interview on CNBC-TV Friday afternoon, Gutierrez acknowledged that the government would consider requests for sanctions on other Chinese products if industries petition his department.
"If it is deemed that a company is receiving illegal subsidies then we will go ahead and use the rules that are available," he said. In contrast to the past, the U.S. is now able to quantify the amount of subsidies Chinese industries get from the government, he said.

U.S. lawmakers take aim
Imports of coated free sheet paper products from China rose by about 177% in 2006, valued at $224 million, according to the Commerce Department.
The U.S. trade deficit with China is a major source of irritation to U.S. manufacturers and lawmakers, with businesses blaming what they call a significantly undervalued Chinese currency for the yawning gap.
That 2006 deficit was $232.6 billion in 2006, up from $201.5 billion in 2005. In January, it was $21.3 billion.
The total U.S. trade deficit was $765.3 billion in 2006.
Meanwhile, foreign exchange analyst Ashraf Laidi of CMC Markets US said the U.S. decision may continue to bode ill for the dollar.
"Whether today's decision will be reversed by the WTO or not, it will likely trigger possible retaliatory acts from China such as further diversification of its [foreign exchange] reserves, which will likely hit the US currency," Laidi wrote in an e-mail.
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