April 2, 2007 — The American Iron and Steel Institute (AISI) and the Steel Manufacturers Association (SMA) said they are encouraged by the U.S. Department of Commerce (DOC) decision to impose preliminary countervailing duties on imports of coated paper from China, which is classified as a non-market economy (NME). The duties will serve to offset the unfair competitive advantage that Chinese producers of this product have been receiving as a result of government subsidies.

This decision marks a significant change of course for Commerce—for two decades, the U.S. government has declined to consider countervailing duty cases involving non-market economies such as China.

Although encouraged by this decision, AISI and SMA stress their continued strong support for legislation that would require the DOC to apply countervailing duty law (CVD) fully and strictly to China and other non-market economies. “We are encouraged by today’s announcement, which is a first small step in U.S. trade law enhancement regarding China and other non-market economies, but it remains vital to pass promptly legislation in both Chambers mandating the full and strict application of CVD law to subsidies in NMEs,” AISI President and CEO Andrew G. Sharkey III said. “Along with the WTO filing against China’s prohibited subsidies, this is another positive step in the effort to address the enormous problem of China’s trade-distorting subsidies to manufacturing.

“However, a lot of damage has already been done—in 2006, the U.S. had a record $232 billion trade deficit with China; we saw a surge of imports of steel and steel-containing products from China; and since 2000, we have seen the flight of numerous manufacturing facilities to China.

The announced DOC decision is a preliminary one and, “as recognized by the DOC, important issues of methodology remain to be considered. With regard to steel, China continues to have the world’s most heavily subsidized steel industry. Accordingly, we need every available trade remedy tool to counter these NME subsidies, starting with prompt passage of clear and strong legislation to ensure effective application of U.S. trade law to China and other NMEs.”

Such pending legislation (H.R. 1229/S. 974) would mandate that the DOC apply CVD law fully and strictly to China and other NMEs and require Congressional approval of any DOC decision to change a country’s status from “non-market” to “market economy” under U.S. antidumping law. AISI and SMA also support a modification to CVD law (H.R. 782/S. 796) that would clarify that Chinese and other foreign government currency manipulation or currency misalignment is a countervailable subsidy—an allegation in the heavy paper case that the DOC chose not to pursue.

“Altering the DOC's position on usage of countervailing duties against non-market economies has been advocated for many years, during a period when China tripled its steelmaking capacity thanks in part to massive government subsidies,” added Thomas A. Danjczek, President of the Steel Manufacturers Association (SMA). “While today’s announcement is a positive event, legislation is still required in order to avoid hollowing out how the subsidies are calculated.”