ITC says imports harmed Dayton paper producer

The International Trade Commiss-ion (ITC) took a preliminary step toward imposing the first US import duties in at least four decades on products subsidized by the government of a country with a non-market economy.

The commission ruled that there was a reasonable indication that paper imports from China and two other Asian countries have harmed NewPage Corp, a Dayton, Ohio, paper manufacturer, because of subsidies provided by the Asian governments.

Also on Friday, the US Commerce Department filed notice in the Federal Register asking for public comment on whether it should break with its court-tested policy and impose import duties on products made with government help in non-market economies like China's.

NewPage is the first US company in 15 years to ask the Commerce Department to impose subsidy-countering duties against any imports from China. Last month, the Commerce Department set the stage by agreeing to consider the case, filed against coated-free sheet paper imports from China, Indonesia and South Korea.

"This process takes 12 to 18 months, but this is a hugely important first step," said Frank Vargo, vice president of international affairs at the National Association of Manufacturers. "This is a landmark case."

The significance is that since the 1960s, the US has declined to identify subsidies by foreign governments in non-market economies. The theory has been that fair prices in such economies are impossible to measure, especially when the governments don't tell when they give companies financial aid.

In 1986, the courts upheld the Commerce Department's right not to apply duties against imports from non-market economies.

But NewPage felt times had changed, said lawyer Gilbert Kaplan, who was a deputy assistant secretary at the Commerce Department in the 1980s. NewPage was convinced that subsidies were allowing Chinese paper importers to sell their product in the US for about half fair-market value, and the company was emboldened by China's agreement to adhere to subsidy regulations when it joined the WTO.

"The recent increase in the trade deficit with China has led people to think we have to look very carefully at how the trade laws are applied to China," Kaplan said.

If the ITC had ruled against NewPage on Friday, both the Commerce Department and ITC investigations would have ended.

In many cases, Chinese companies are able to sell finished products in the US for less than US manufacturers pay just for the raw materials to make the same items. However, proving that the Chinese government is helping them do that is another matter.

"We're hopeful the Commerce Department will go through and find subsidies and say countervailing duties can be applied to China," Vargo said. "If they say no, I can almost guarantee you there will be legislation."