In Shift, U.S. Hits China With Trade Sanctions

By Martin Crutsinger
Associated Press
Saturday, March 31, 2007

The Bush administration, facing heavy pressure to deal with soaring trade deficits, said yesterday it was imposing economic sanctions against China to protect American paper producers from unfair Chinese government subsidies.

The action reverses 23 years of U.S. trade policy by treating China, which is classified as a non-market economy, in the same way that other U.S. trading partners are treated in disputes involving government subsidies.

The decision was announced by Commerce Secretary Carlos M. Gutierrez.

"China's economy has developed to the point that we can add another trade remedy tool," Gutierrez said. "The China of today is not the China of years ago. Just as China has evolved, so has the range of our tools to make sure Americans are treated fairly."

The action means that China's imports of glossy paper will be subjected to tariffs ranging from 10.9 percent to 20.4 percent as a penalty for subsidies that the Chinese government provides its own companies. Those extra duties will be imposed immediately on a preliminary basis pending further review in coming months to set the final penalty margin.

The case, which was brought by NewPage of Dayton, Ohio, is being closely watched by a number of other U.S. industries from steel to furniture.

For two decades, the U.S. government has held that American companies did not have a right to challenge government subsidies granted to their foreign competitors if those companies were in "non-market economies" such as China's. However, last year, the administration let it be known that it was ready to consider reversing that policy.

Officials at the United Steelworkers union, which represents many of the workers at U.S. paper plants, hailed the administration's decision, saying it would help protect jobs for workers at 22 paper mills in 13 states who produce the glossy paper being covered by the sanctions.

China suffered a defeat on Thursday in an effort to derail the administration's change in policy when the U.S. Court of International Trade, a federal court which handles trade matters, ruled that the administration did have the right to proceed with sanctions.

Judge Gregory W. Carman, who heard the case for the trade court, rejected China's request to grant an injunction to stop the U.S. government from proceeding.

© 2007 The Washington Post Company