| Author (Person) | Chaffin, Joshua |
|---|---|
| Series Title | Financial Times |
| Series Details | 16.5.11 |
| Publication Date | 16/05/2011 |
| Content Type | News |
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The European Commission announced on the 13 May 2011 that in a 15 month investigation, the EU had found that the Chinese government was significantly subsidising its coated fine paper industry by giving cheap loans, allocating land below market value and granting various tax incentives which are illegal practices under WTO rules. After this first-ever anti-subsidy proceeding launched by the EU against China, the EU would imposes definite countervailing duties ranging from 4% to 12% on this high quality paper imported from China. The investigation also brought to light that Chinese producers of coated fine paper exported their products to the EU at dumped prices, hence the EU will impose anti-dumping duties ranging from 8% to 35.1%, depending on the producer. The case marked the first time that the EU had penalised China for using what it said were illegal state subsidies to boost its industries. The bloc has previously relied on penalties for dumping, when a company exports its goods below cost. The decision to target Beijing’s subsidies reflected a worry among European businesses and policymakers that China’s exports, once confined to industries such as shoes and bicycles, were rapidly climbing the value chain to threaten the continent’s high-end manufacturers. Nevertheless, a paper from the European Centre for International Political Economy (ECIPE) suggested that a new trade war was looming as the EU was now embarking on its first countervailing duty (CVD) against Chinese subsidies over coated fine paper. As the EU gives a significant amount of subsidies to local production, China is not short of sectors to retaliate against – especially as the evidence in the paper case is weak: The share of Chinese exports is yet too small to inflict any injury on EU producers, and China holds less than 4% of the EU market; alleged subsidies through grants, subsidised electricity, VAT and tax rebates have little impact on the final price; and the main argument is based on an assumption that Chinese commercial banks are state owned and are thereby public bodies. China said it would retaliate against the landmark EU decision. |
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| Subject Categories | Trade |
| Countries / Regions | China, Europe |
