The Bush administration, facing increasing anger over soaring trade deficits, said it will impose sanctions against Chinese paper imports, which would open a new avenue for beleaguered US manufacturers to seek government protection.
The action, announced on Friday by Commerce Secretary Carlos Gutierrez, reverses 23 years of US trade policy by treating China, which is classified as a nonmarket economy, in the same way other US trading partners are treated in disputes involving government subsidies.
The decision involved a case brought by NewPage Corp, a paper company. It contended that its coated paper, used in printing glossy catalogues and annual reports, was facing unfair competition from imports from Chinese companies that receive improper subsidies from the Chinese government.
Commerce imposed penalty tariffs ranging from 10.9 percent to 20.4 percent on imports of glossy paper from China. The tariffs take effect this week on a preliminary basis and will become final after a further Commerce review is completed in June.
The action was being watched closely by many other US companies, from steel to furniture, that were battered in recent years as Chinese imports flooded the US.
US companies have been allowed to file antidumping cases to seek penalty tariffs on the grounds that the Chinese products were being sold in the US below cost.
With Friday's action, however, they would also be able to seek penalty tariffs, known as countervailing duties, on the basis of improper government subsidies such as favorable loans from state-owned Chinese banks to direct government support.
"The United States today is demonstrating its continued commitment to leveling the playing field for American manufacturers, workers and farmers," Gutierrez said when announcing the decision.
China's Ministry of Commerce said US 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 tariffs "have severely damaged the interests of Chinese industry," Commerce Ministry spokesman Wang Xinpei (王新培) said in a statement yesterday on its Web site.
"It's unacceptable and China strongly demands the US reconsiders the decision," the statement said.
The statement also criticized the US 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 US dollar fell on concern the levies would provoke trade tensions with China, the second-largest holder of US debt.
The US dollar weakened 0.2 percent to US$1.3358 against the euro at 4:19pm in New York and declined 0.2 percent to ¥117.84 on speculation the levies will reduce trade flows from China.
Daniel Porter, a Washington attorney representing the Chinese government, said no decision had yet been made whether to appeal a federal court ruling on Thursday that gave the Commerce Department the go-ahead to invoke the sanctions.
The decision represented the latest effort by the administration to adopt a tougher approach to Chinese trade practices as the administration faces growing pressure from Democrats, who now control both the House of Representatives and the Senate.
The administration filed a case against China with the WTO this year alleging that China was violating WTO rules by giving its companies improper subsidies for the production of steel, paper and other products.
In a joint statement, House Ways and Means Committee Chairman Charles Rangel and Representative Sander Levin, both Democrats, called the sanctions a "long-overdue change in policy." They said they intended to push forward with legislation that would explicitly change US law to make sure the Commerce actions will withstand any court challenges.
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