On April 17 2010 the European Union's Official Journal announced that the European Union has launched a probe into Chinese subsidies which are apparently being granted to the Chinese coated paper industry. EU Trade Spokesman John Clancy stated: "this is the first-ever anti-subsidy investigation against China." Although the European Union has hitherto imposed anti-dumping duties on dozens of Chinese goods, it had previously stopped short of applying measures to counter government aid.
The EU anti-subsidy investigation was initiated by the European Commission following a complaint lodged on March 4 2010 by the European association of fine paper manufacturers, CEPIFINE, which was mainly acting on behalf of Sappi, International Paper, Arjo Wiggins, Stora Enso Oyj and UPM-Kymmene Oyj and thereby representing more than 25% of the European Union's fine paper output. The commission must determine whether coated fine paper from China is being subsidised (eg, via preferential loans granted by Chinese state-owned banks and government-backed loans), and investigate subsidies being granted to certain forestry programmes.
In addition, the commission must decide whether the alleged subsidization has caused injury to the European domestic coated paper industry. CEPIFINE previously filed an anti-dumping complaint regarding imports of the same product (ie, coated fine paper used in books and magazines), arguing that Chinese exports were being sold in the European Union below cost. Consequently, the European Union opened an antidumping investigation two months ago.
In response to the European Union's anti-subsidy probe, Yao Jian - spokesman for China's Ministry of Commerce - declared on April 17 2010 on the ministry's website that the initiation of an anti-subsidy proceedings regarding Chinese imports of coated paper: "amounted to discrimination against Chinese products and went against the rules of the World Trade Organization [WTO]... the European Union's investigation sends the wrong message of protectionism to the world... China will closely follow this issue and reserves its right to take necessary measures in accordance with the WTO rules."
In March 2010 the United States decided to impose preliminary countervailing (ie, antisubsidy) duties ranging from 3.92% to 12.83% on imports of coated paper originating in China and Indonesia. US coated paper manufacturers argued that the level of the yuan represented a further subsidy, since it is under-valued against the dollar. Indeed, the United States and the European Union have continuously expressed their concerns regarding the yuan's under-valuation and are pressing the Chinese government to allow its currency to strengthen during the global economic recovery.
In any event, the European Union has nine months from the beginning of the probe to decide on provisional anti-subsidy measures and 13 months to impose definitive countervailing duties, which would remain in force for five years. In response, the Chinese Ministry of Commerce officially stated on April 17 2010 that "to create a win-win situation, China and the European Union should settle trade disputes cooperatively", since the European Union is one of China's largest trade partners: bilateral trade volume between the two entities exceeded $360 million in 2009. Indeed, trade and currency issues were key topics on the agenda of European Trade Commissioner
Karel de Gucht during his visit to Beijing at the end of April 26 2010.
Originally published in ILO newsletter on 10th of may. Republished with author's authorization.
