A U.S. Department of Commerce proposal to impose stiff tariffs on coated free sheet paper imported from China and Indonesia would help save American jobs and allow domestic companies to compete more fairly for business, supporters say.
But the plan could launch an international tariff war, warns a Connecticut printer and other opponents, that could backfire and almost certainly would drive up the cost of printing everything from multicolored catalogs, magazines and books to advertising flyers, menus and greeting cards.
At the heart of the issue is the question of whether the Asian nations are “dumping,” a practice that occurs when a product is sold into the U.S. market for less than the price charged in its home market or when its U.S. price is below the cost of manufacturing the product.
Chinese and Indonesian producers already hold 30 percent of the U.S. market for coated paper. More than 60,000 American jobs have been lost in the paper sector.
“If this decision holds, which I think it will, it will be a very good one for our industry,” said John Williams, president of the Maine Pulp & Paper Association. “It will help level the playing field for U.S. paper makers.”
Williams believes the decision, designed to offset foreign government subsidies, will discourage so-called “dumping” of imported paper on U.S. markets at prices that are lower than the cost to produce it. That would spare U.S. jobs. Whether they make coated free sheet (CFS) paper or not, U.S. producers will benefit from the ruling because it likely will reduce Asian imports worth more than $269 million and drive up domestic sales, said Williams.
Matthew Nightingale, a spokesperson for Twin Rivers Paper Co. in Maine, says production in the U.S. means more jobs for workers and companies. But there’s another view.
Steve Rupe, owner of Bethlehem Printing in Litchfield County, opposes the anti-dumping tariffs and countervailing duties against CFS paper imported from Asia. He believes duties will hurt U.S. printers.
“Duties in this case will lead to reductions, delays and disruptions to the paper supply that will increase business costs for thousands of U.S. printers and related industries,” said Rupe, who operates a full-service printing company in Bethlehem.
“It will jeopardize the competitiveness of U.S. printers as higher costs force many publishers to seek cheaper foreign printing solutions or use other media.”
The dispute came to a head when three paper companies — New Page Corp., Appleton Coated LLC and Sappi Fine Paper North America, the U.S. arm of South Africa’s Sappi Ltd. — joined the U.S. Steel Workers in filing a joint anti-dumping petition with the U.S. Department of Commerce and the U.S. International Trade Commission last year.
The USW represents about 6,000 hourly workers at paper mills in nine states operated by the three paper producers. Miamisburg, Ohio-based New Page Corp., the largest paper manufacturer in the U.S., Appleton Coated in Kimberly, Wis., and Sappi, located in Boston, could not be reached for comment.
In court filings, the companies claim trade conditions have grown more severe in recent years; industry experts estimate three-quarters of coated-paper imports come from China, which has invested in new factories and hired a cheaper workforce.
Court records show the amount of coated paper manufactured in the U.S. declined from 46 percent during the first half of 2008 to 39 percent for the same period in 2009. In China and Indonesia, paper production jumped from 15 percent in the first half of 2008 to 29 percent for the same period in 2009.
“The Asian companies have an unfair advantage over us because they have access to cheap labor, new equipment and government subsidies that we can’t compete with,” said Williams.
“It’s incredibly expensive to upgrade a machine. I know of one company that spent around $100 million a few years back to improve its equipment and it was really just a tune-up,” said Williams. “We haven’t seen any new coated free sheet paper mills in decades.”
As part of its preliminary anti-dumping ruling in March, the U.S. Department of Commerce suggested a rate of 135.8 percent on certain CFS paper products imported from China — up from a range of 30.82 percent to 89.71 percent; the agency proposed a single rate of 10.62 percent for all coated paper products imported from Indonesia.
That means a Chinese company assessed at 30 percent would pay the U.S. Treasury $300,000 in fees to export $1 million worth of coated paper to the U.S. For companies assessed at 135 percent, the import rate would be $1.35 million for every $1 million sent to the U.S., according to the Alliance for American Manufacturing.
But a preliminary finding is just the beginning of a long process.
The paper makers will have to prove to the Commerce Department that the Chinese and Indonesian paper producers received subsidies from Asian government agencies, said Thomas Prusa, professor of economics at Rutgers University.
Prusa, a specialist in international economics and trade policy, has studied the paper industry for more than 20 years. He said the companies will have to show the imports were sold in the U.S. at prices below the market cost of production.
“This is a challenging case,” said Prusa. “It will be up to the companies to show how these imports cause material injury.”
In a similar case brought by U.S. paper manufacturers in December 2007, the International Trade Commission blocked final duties from going into effect because the domestic paper industry had not been harmed.
The Commerce Department will issue more reports on anti-dumping tariffs in the coming months, with a final determination expected from the U.S. International Trade Commission in September.
