EU Hits China with Anti-Dumping Duties on Paper to Aid Sappi

The European Union imposed tariffs as high as 39.1 percent on Chinese paper to counter below-cost imports, curbing competition for producers in Europe including Sappi Ltd. in an unprecedented trade dispute.

The European Commission introduced the "anti-dumping" duties on Chinese coated fine paper in a case that may also lead to the EU's first anti-subsidy levies against China. The paper is used for books, brochures and magazines.

Europe's 4 billion-euro ($5 billion) market for coated fine paper is the latest focal point of trade tensions after Chinese Premier Wen Jiabao snubbed European pleas last month to let the yuan's exchange rate rise faster. To bolster European exporters and narrow its trade deficit with China, the EU says the Chinese government should follow up more ambitiously on its June pledge to ease the yuan off a two-year peg to the dollar.

European makers of coated fine paper suffered "material injury" as a result of dumped imports from China, the commission, the 27-nation EU's trade authority in Brussels, said today in the Official Journal. The levies, due to take effect tomorrow, are for six months and may be prolonged for five years.

The EU taxes on the paper follow similar U.S. measures and are the preliminary outcome of a probe opened in February into whether manufacturers in China including Asia Pulp & Paper Group unfairly undercut European producers. A second inquiry begun in April into alleged trade-distorting Chinese government aid to domestic paper makers may result in the EU's first anti-subsidy duties against the country, a step that would open a new front in Europe's battle to slow imports from China.

Anti-Dumping Duties

Europe already imposes anti-dumping duties on Chinese goods ranging from textiles and chemicals to shoes and bicycles. China faces such EU measures on about 50 products, more than any other nation.

The call for European anti-dumping and anti-subsidy duties against China comes from a group that includes South Africa- based Sappi, which makes coated fine paper in EU countries including Germany and the Netherlands. Germany's Papierfabrik Scheufelen GmbH, Spain's Lecta SA and Italy's Burgo Group SpA are also in the alliance seeking trade measures.

Chinese competitors increased their combined share of the EU market for coated fine paper to more than 4 percent in 2009 from around 1 percent in 2006. The anti-dumping duties amount to 39.1 percent against all producers in China except Asia Pulp & Paper's Gold East Paper (Jiangsu) and Gold Huasheng Paper (Suzhou Industrial Park) units, which face a 19.7 percent levy.

Trade Cases

Two other producers of coated fine paper in the EU are Finland's Stora Enso Oyj and UPM-Kymmene Oyj, both of which declined to give their views on the trade cases when contacted by Bloomberg News on Nov. 3. Stora Enso makes coated fine paper in China as well, while UPM-Kymmene doesn't, the companies said.

Under EU practices, the commission has nine months from the start of a trade investigation to decide on provisional measures. EU governments, acting on a commission proposal, have 13 months from the beginning of a probe to impose "definitive" five-year anti-subsidy duties and 15 months to apply definitive anti-dumping measures.