By Kathryn McConnell
USINFO Staff Writer

Washington - The United States has made a preliminary decision to impose countervailing duties on China's producers and exporters of glossy paper.

The decision alters a 23-year-old policy of not applying countervailing duties, or extra tariffs, to nonmarket economy countries and reflects China's economic development, according to a March 30 Department of Commerce press release.

"China's economy has developed to the point that we can add another trade remedy tool, such as the countervailing duty law. The China of today is not the China of years ago," said Commerce Secretary Carlos Gutierrez.

"The Bush administration will continue to vigorously enforce U.S. trade law with respect to China," he added.

U.S. imports of glossy, or coated free sheet paper from China increased 177 percent between 2005 and 2006 and were valued at an estimated $224 million in 2006, Commerce said.

The U.S. action "provides an additional incentive for China to move away from subsidies and continue pursuing market economics," Commerce Under Secretary Franklin Lavin told the National Association of Manufacturers April 2.

Lavin said the implications of this case on U.S.-China trade could lead to petitions from other "aggrieved" U.S. companies and industries for investigations of China's subsidies. China now represents 25 percent of all U.S. anti-dumping cases, the Commerce official said.

The preliminary decision follows a 2006 complaint from the U.S. corporation NewPage that China's subsidies, in the form of tax breaks, debt forgiveness or low-cost loans to several of its companies, were unfair.

Commerce also has made preliminary decisions to apply countervailing duties to glossy paper products from companies in Indonesia and South Korea.

In June, Commerce will announce final results of all three countervailing duty investigations. Until the final rulings, the three countries' paper exporters must post bonds or deposit cash with U.S. Customs and Border Protection based on preliminary rates.

Commerce found that Chinese paper companies received subsidies up to 20.35 percent, Indonesia subsidized its companies up to 21.24 percent and South Korean paper producers and exporters received subsidies of up to 1.76 percent.

The International Trade Commission now must make final decisions on whether the U.S. paper industry has been harmed by each country’s subsidies.

On other trade matters, Lavin said China took a "significant step forward" by pledging to require that all computers imported into China be preloaded with licensed operating systems.

However, he said, the United States "is considering" challenging within the World Trade Organization China's treatment of intellectual property rights.

Lavin also noted that the United States concluded a free-trade agreement with Korea on April 1. (See related article.)

The deal is the "most commercially significant" free-trade agreement the United States has reached in more than 10 years, according to the Office of the U.S. Trade Representative.

Lavin said that the U.S. free-trade pacts benefit the trade partners because they provide "balance."

The full texts of the press release, Lavin's prepared remarks, and fact sheets on the preliminary investigations involving China (PDF, 30KB), Indonesia (PDF, 29KB) and South Korea (PDF, 30KB) are available on the Commerce Department Web site.