China firm vows to challenge US paper duties

Updated: 2007-04-02 13:53

BEIJING - A Chinese company targeted by Washington with duties on "unfair" state subsidies said on Monday it would fight the move, which state media denounced as a blow to delicate trade relations.

The United States imposed the countervailing duties on Chinese coated paper in a policy shift that opens the door for other US producers who complain that Chinese exporters benefit from state backing in violation of trade rules.

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Washington sought consultations at the World Trade Organisation in February about what it says are illegal Chinese subsidies for steel, computers, clothing and other industries.

Washington announced on Friday a preliminary countervailing duty of 10.90 percent on Shandong Chenming Paper Holdings and 20.35 percent on Gold East Paper, a subsidiary of multinational Asia Pulp and Paper.

The move put pressure on the US dollar because of concern it represented a shift to protectionism.

China swiftly denounced the US decision, and on Monday Chinese media and officials warned that the move would undermine trade ties.

"Such a combative mood will not help solve its problems," an editorial in the English-language China Daily said of the US duties. "Washington has gone against the consensus reached by both countries, which advocates resolving differences through dialogue."

Zhou Shijian, a former trade negotiator for China, said Washington lacked evidence to show the paper companies received low-interest loans, tax breaks or other subsidies.

"The US Department of Commerce hasn't produced substantive evidence," he told the China Business News.

One company in the centre of the trade storm said it was preparing a legal challenge.

"We've been preparing for this for some time," Wang Tianxia, a financial manager at Chenming, told Reuters by phone. China's Ministry of Commerce had warned the company of possible US duties late last year, she said.

"We will challenge the legality and try to reduce the duty as far as is possible, but there may not be much we can do. After all, this isn't aimed at just us or even coated paper. It's about subsidies, not just our companies."

Staff at Gold East Paper referred inquiries to APP's office in Shanghai, which did not give an immediate reaction.

The China Business Times newspaper quoted an unnamed Gold East official as saying the duties would hurt business.

"This outcome will undoubtedly have a big impact on China's coated paper market," the official said, according to the paper. "We may reduce exports to the US and expand them to other countries and regions. At worst, we'll abandon the US market."

Anger over the US trade deficit with China, which hit a record $233 billion last year, has spurred demands for a tougher response to Chinese government subsidies, which many US lawmakers believe boost China's exports.

US glossy paper imports from China rose to $224 million in 2006, from $29 million in 2004.

As well as the duties on the two companies, the United States will impose a preliminary countervailing duty rate of 18.16 percent on all other Chinese glossy paper exports.

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