U.S. Paper mill at heart of tariff threat against china

It is a familiar story: a core U.S. industry struggles against globalization. The problems of U.S. paper mills, threatened by imports of cheap paper from China, may set off a new confrontation between the two countries. Many industry leaders and members of the U.S. Congress it could lead to new tariffs on imports not only of Chinese-made paper but also of steel, furniture, textiles and plastics.

If imposed, the duties would set a precedent, reversing 20 years of U.S. trade policy under which the United States refrained from charging “non-market economies” like China with using illegal market subsidies.

Such a change would result in much heavier punitive tariffs than “anti-dumping” provisions, which the U.S. Customs authorities frequently apply against imported goods deemed to be sold at below their true market value.

With the U.S. trade gap with China widening to a record $232.5 billion last year – roughly one-third of the entire U.S. trade deficit – Democrats say that if the Commerce Department does not act, they will pass legislation forcing its hand.

While the Chinese market share in coated paper is still small, rather than wait until Chinese producers dominate the business, as they have in toys and underwear, supporters of the U.S. paper mills hope to block what they see as unfair competition before it is too late.

International Herald Tribune, March 1^st, 2007

№ 16

Beijing fires back at u.S. Complaints

The Chinese government expressed “deep regret and strong dissatisfaction” Tuesday with the Bush administration decision to file two complaints against China with the World Trade Organization, while separately releasing statistics showing that Chinese exports grew last month at the slowest pace in five years.

The Chinese reaction to the trade complaints was slightly stronger than a Chinese statement on March 31, after the Bush administration announced that it would impose duties on imports of coated paper from China in retaliation for alleged government subsidies to the Chinese paper manufacturing industry. China’s customs agency separately released statistics Tuesday showing that Chinese exports to the rest of the world grew last month at the slowest pace in five years, rising 6.9 percent from a year earlier.

The slowing exports were not the result of any sudden move in the value of China’s currency, the yuan. The currency was virtually unchanged against the dollar in March from $23.8 billion in February, the surplus for the entire first quarter doubled to $46.4 billion. Economists predicted that the surplus would continue to rise.

A steep rise in China’s currency would make Chinese exports less competitive in foreign markets and would make imports more competitive in China, so the Bush administration and many members of Congress have made this top priority.

The International Herald Tribune, April 11^th, 2007

Unit IV

№ 17

Honda takes lead with exports from guangzhou

There are signs of overcapacity in the country, so the Japanese carmaker is looking for another avenue for growth, writes Geoff Dyer

For the past decade, foreign carmakers have been scrambling to increase capacity in China simply to feed the expanding local market.

But with signs of overcapacity appearing in the country, multinationals are beginning to turn their attention to the idea of exporting from China.

Last year, Honda opened a plant in the southern Chinese city of Guangzhou to make the Jazz model for the sale in Europe, creating the first case of a multinational using China as a manufacturing platform for cars.

Over the past five years, Honda has built up a tight network of reliable suppliers in the Guangzhou area that can guarantee sufficient quality for its components. However, of the 120 suppliers it uses in China, only 17 are Chinese companies. The rest are either joint ventures or subsidiaries.

In order to meet customers’ requirements, Honda’s export factory has to import more parts than the company’s other plant in Guangzhou, which services the domestic market. The need to import parts and the relatively small scale of the Guangzhou plant mean that making Jazz cars in China has not become a cheaper option for Honda. Labour costs in China are one-tenth of those at Honda’s plant in Japan, but the overall production costs of the Jazz are similar.

The Financial Times, April 17^th, 2006

№ 18