Investing in China: Protecting Paper Producers
By Ian L. Cooper
That very painful jab to the major U.S. indices was courtesy of a U.S. announcement that it would now apply duties on Chinese imports, particularly on coated free sheet imports. This now reverses a 23-year-old policy of not applying the countervailing duty law to non-market economies, like that of China’s.
Note: The U.S. countervailing law permits an industry, like the paper industry, to seek relief from subsidized imports that cause or threaten injury to a domestic industry. As the law stands, the U.S. Department of Commerce can determine whether a subsidy exists. Should it exist, they also determine the amount of said subsidy. The U.S. International Trade Commission also determines if a domestic industry is being injured or threatened as a result of subsidized imports.
U.S. action now means that China’s importation of glossy paper will now fall subject to tariffs of between 10.9% and 20.4% as “penalty for subsidies that the Chinese government is providing for its own companies,” according to the Baltimore Sun. “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 ‘nonmarket economies’ such as China.”
But as of last year, the U.S. Administration was ready to reverse that policy, amid constant and heavy pressure to contend with soaring U.S. trade deficits, including our $232.5 billion trade imbalance with China. The decision will now protect many paper jobs here in the United States. And you can bet that other industries, like steel and furniture, will follow this closely.
On the paper decision, companies to keep on radar include International Paper, Neenah Paper, and MeadWestvaco Corporation.
Take care,
Ian L. Cooper, Editor, Early Alert Trader
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