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New Study Said to Detail Chinese Subsidies to Paper Sector

June 30, 2010
MIAMISBURG, OH—June 30, 2010—Appleton Coated LLC, NewPage Corp. and Sappi Fine Paper North America have commended the Economic Policy Institute for its study, "No Paper Tiger, Subsidies to China's Paper Industry From 2002-09," authored by Professor Dr. Usha C.V. Haley.

The Economic Policy Institute's (EPI) report highlights the continuing efforts of the Chinese government to promote the development of its paper producers at almost any expense. The academic study reportedly identified roughly $33 billion in subsidies provided to China's paper producers in a variety of forms that have stimulated enormous capacity increases and jeopardized production and jobs in the U.S.

This study backs up the facts that underlie the trade case that was filed by our companies and the United Steelworkers (USW) union last September. That case alleged that Chinese and Indonesian paper producers benefited from subsidies and were dumping their products in the U.S. market. At each stage of the government's review of the cases, the concerns were validated and relief has been authorized.

Among the study's findings:

• "Since 2000, China has tripled its paper production..."

• "China's rapid rise in the global paper industry has been fueled by over $33.1 billion in government subsidies from 2002 to 2009."

• "China has no natural competitive advantage in papermaking, and lacks the natural resources to fuel the industry...Despite global overcapacity, China's paper industry has added on average 26% of new capacity every year from 2004... (E)xports have led the development of China's paper industry with detrimental effects on the United States and global economies."

• "The U.S. trade deficit with China on paper has been increasing exponentially since 2002. Imports from China are rising faster than those from any other country for this industry. In February 2010, the annualized growth rate of Chinese paper and paper-product imports into the United States approximated 22%."

• "China has no inherent cost advantage in the capital-intensive paper industry. Indeed, labor makes up about 4% of the costs in this industry; in contrast, imported recycled paper and pulp comprise over 35% of the costs. Raw materials, which make up three-fourths of the costs of producing paper, as well as electricity, coal, and transportation, have nearly doubled in price over the last decade. Yet, Chinese paper sells at a substantial discount compared to U.S. or European paper."

"This study shows that Chinese subsidies are pervasive and have fueled the development of their industry. Their policies have damaged production here in the U.S., and cost jobs. Our case seeks to address only a portion of their subsidies that have affected the coated paper sector. But, something must be done to address China's overall subsidies so that other sectors, producers and workers do not become victims as well," said Sandra Van Ert, president and chief executive officer of Appleton Coated LLC.


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