EU Hits China With First Anti-Subsidy Duties, Targeting Paper

The European Union imposed anti-subsidy tariffs against China for the first time, targeting imports of paper with levies as high as 12 percent in a case that may spur more complaints about Chinese government aid.

The EU introduced the duties for five years to counter alleged trade-distorting subsidies to China’s exporters of coated fine paper, which is used for books, brochures and magazines. The EU also applied separate five-year levies as high as 35.1 percent to fight below-cost -- or “dumped” -- imports of the paper from China.

The goal is to “restore effective and fair trade conditions on the Union market,” the 27-nation bloc said in a decision today in Brussels. The five-year duties, which four paper makers in Europe including Sappi Ltd. requested, will enter into force after being published in the EU Official Journal by May 17.

The trade curbs in Europe’s 4 billion-euro ($5.8 billion) market for coated fine paper open a new front in the EU battle to prevent Chinese exporters from undercutting higher-cost European manufacturers and may prompt calls by other industries for similar measures. In recent years, European steelmakers have alleged that China subsidizes domestic competitors and have threatened to complain about that to the EU.

Anti-Dumping Duties

Europe imposes anti-dumping duties on Chinese goods ranging from chemicals and steel pipes to bicycles and ironing boards. China faces such EU taxes on almost 60 products, more than any other nation.

Until today, the EU had never imposed anti-subsidy levies against China. The U.S. decided last year to apply anti-subsidy and anti-dumping duties to imports of Chinese paper.

“The EU has wanted to get a subsidy case against China under its belt,” Laurent Ruessmann, a trade lawyer at Crowell & Moring LLP in Brussels who represented EU producers in the paper dispute, said by telephone. “This could well invite complaints by other European industries against Chinese state support.”

China should brace for more subsidy complaints by European manufacturers, Europe’s trade chief said in October while the EU was investigating alleged unfair aid to Chinese paper makers.

“I expect that it will become a trend,” EU Trade Commissioner Karel De Gucht said in an Oct. 4 interview. “What European companies see as unfair competition has to do with subsidization. I expect that there will be more and more complaints.”

Coated Fine Paper

The request for European anti-dumping and anti-subsidy duties against China came from a group that included South Africa-based Sappi, which makes coated fine paper in EU countries including Germany and the Netherlands. Germany’s Papierfabrik Scheufelen GmbH, Spain’s Lecta SA and Italy’s Burgo Group SpA were also in the alliance seeking trade measures.

Chinese makers of coated fine paper increased their combined share of the EU market to more than 4 percent in 2009 from around 1 percent in 2006, according to the bloc, which opened probes in February and April last year that culminated with today’s decision.

The five-year anti-subsidy duties amount to 12 percent against Asia Pulp & Paper Group’s Gold East Paper (Jiangsu) and Gold Huasheng Paper (Suzhou Industrial Park) units and all other Chinese exporters except Shangdong Chenming Paper Holdings Ltd. and the related Shouguang Chenming Art Paper Co., which face a 4 percent levy.

The five-year anti-dumping duties are 35.1 percent against Shangdong Chenming Paper and Shouguang Chenming Art Paper, 8 percent against the two units of Asia Pulp and Paper and 27.1 percent against all other Chinese exporters.

In November, the EU introduced provisional anti-dumping duties as high as 39.1 percent on Chinese coated fine paper. The two Asia Pulp and Paper units faced a preliminary anti-dumping levy of 19.7 percent. The EU refrained from applying any provisional anti-subsidy -- or “countervailing” -- levies.

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