Paper Industry Hits out Against EU Anti-subsidy Duties on Chinese Products

The European Union (EU) decision to impose dual anti-subsidy and anti-dumping duties on imports of coated fine paper from China was fundamentally flawed, the Asian paper giant APP as saying on May 17, 2011.

"The EU decision is disappointing for APP China. We feel that the case has been fundamentally flawed from the outset with an artificially narrow product scope.

The real reasons of the alleged injury to European producers have been overlooked," APP head of European business development Jukka Kantola said in a written interview with Xinhua news agency.

APP China is among the companies hit with the EU's punitive tariffs, which took effect on Saturday and would last for the next five years.

Kantola said the EU's decision is clearly a "protectionist measure" and would hurt European printers and publishers at a time when they are already being squeezed by the economic situation and inflated prices driven by EU paper producers.

It was the first time that the 27-nation trading bloc slapped anti-subsidy duties on Chinese products and took dual trade defense measures against China.

The anti-subsidy duties ranged from 4 percent to 12 percent, and on top of that, there were anti-dumping tariffs ranging from 8 percent to 35.1 percent.

For APP, which currently has its principal operations located in Indonesia and runs over 20 pulp and paper mills in China, the combined duty is 20 percent, comprising 12 percent anti-subsidy duty and 8 percent anti-dumping duty.

Kantola said the EU decision was particularly problematic with its calculations of land values and interest rate for loans in the anti-subsidy case.

The EU accused the Chinese government of significantly subsidizing its coated fine paper industry by giving cheap loans, allocating land below market value and granting various tax incentives, which had a significant negative effect on the financial and operational performance of European rivals.

"The European Commission has used Taiwan (of China) as a benchmark for land prices, not accepting any similar data from China, and this has created an artificial and distorting perspective for land prices in the EU's calculations," Kantola said. "As every multinational company involved in China today knows, there is a viable and working market for land in China."

The other main allegation of subsidies revolved around the commercial rates charged by Chinese banks to domestic producers of coated fine paper, which is used for high-quality printing such as brochures and magazines.

"For some reason the EU suggests that China-based companies should automatically be classed as BB status for risk, ignoring the fact that when these same companies deal with foreign banks, they are paying regular commercial rates, loan expenses and fees," Kantola said.

By arbitrarily giving low creditworthiness such as BB status to Chinese paper producers, the EU took it for granted that they should pay more than regular when borrowing from banks.

"We do not agree that our operations are subsidized, the value of our sales is based on hard work and an ongoing commitment to the forest industry so we are able to offer cost, quality and environmental products in comparison to many European producers," Kantola said.

As to the anti-dumping duties, Kantola said the Chinese producers hold less than 5 percent of the EU market, which could hardly inflict any injury on European rivals.

Injury suffered by the EU industry is a precondition for the 27-nation bloc to take either anti-dumping or anti-subsidy measures.

"What we expect to see in Europe now is a 'higher than global market' price for coated fine paper. The EU has intervened in market competition and this will harm printers in the region," he said, adding APP's exports to Europe of other grades would remain unhindered.

Beijing has voiced strong opposition to the EU's duties. Yao Jian, a spokesman for China's Ministry of Commerce, said the dual duties contravened world trade rules and seriously impaired the interests of Chinese companies.

He warned that China reserves its right to take legal action against the EU.

China launched its first case against the EU at the World Trade Organization (WTO) in 2009, which was related to anti-dumping duties imposed by the 27-nation bloc on Chinese steel fasteners. A WTO panel delivered victory to the Chinese side in December, which was later appealed by the EU.

Kantola said APP is reviewing the final EU decision and considering what legal options are available.