EU slaps anti-subsidy duties on China

Brussels - The European Union (EU) on Saturday imposed a five-year hike in duties on imports of glossy paper from China, the first EU challenge to Chinese state subsidies and a sign of more to come.

In a double swipe likely to anger China, the bloc said it would charge duties worth a maximum of 12% to combat what it says is illegal Chinese state aid that is hurting EU producers, as well as duties of up to 35.1% to counteract what it says is illegal pricing by Chinese exporters.

Both levels were approved by EU capitals in March.

Although the sector is small - Europe imported only about €130m worth of Chinese coated fine paper in 2009 for brochures and coffee-table books - this challenge has been seen as the start of a trend, particularly since the EU has vowed to take on Chinese state subsidies that put European producers at an unfair disadvantage.

"This is the first time ever we have put in place measures against the strategic and targeted subsidisation of a specific industry by the Chinese government," said EU Commission spokesperson John Clancy. He added that China was flouting its obligations under international trade rules.

Late last year, European trade chief Karel De Gucht accused the Chinese state of subsidising "nearly everything" and has repeatedly encouraged EU firms to come forward with evidence of damage suffered as a result.

EU firms have been reluctant to follow that call openly, for fear of retaliation against their operations in China.

Legal challenges

China may challenge the EU's anti-dumping and anti-subsidy duties at the World Trade Organisation (WTO). Beijing scored an important victory there in March, when the WTO ruled that the United States had broken international trade law when it applied dual duties to certain Chinese goods.

Indonesian paper giant Asia Pulp and Paper (APP), which exports paper to Europe from China through two subsidiaries, has been hit by combined duty of 20%. It rejected the EU move as factually flawed and said it would explore legal options.

"This decision is clearly a protectionist measure by the EU and hurts Europe's printers and publishers at a time when they are already being squeezed by the economic situation and inflated prices driven by EU CFP producers," said Jukka Kantola, APP's head of European business development.

The EU Commission, which leads EU trade policy, has insisted its dual duties are legal.

Under global trade law, companies may contest anti-dumping duties, while it is up to states to challenge duties set on findings of state aid.

The dual duties will benefit European paper producers including the European operations of South African paper maker Sappi [JSE:SAP], which participated in the complaint that triggered the duties.