June 30, 2010
-- by Dave Johnson
China is cheating again. Yawn... China is subsidizing its paper industry ($33 billion 2002-09) and has tripled their production, and now is the largest producer of paper and paper products. Yawn.
This has cost jobs and approximately 400,000 remaining American jobs are at risk. And the companies they work for. NOT so yawn!
The Economic Policy Institute has released a briefing paper, titled, No Paper Tiger. This paper documents the different government subsidies behind the surge of Chinese paper imports, and look at its implications for the American paper industry.
Some of the subsidies that government provides,
This Briefing Paper estimates that in China’s paper industry, subsidies for electricity amounted to $778 million • (from 2002 to 2009); subsidies for coal, $3 billion (from 2002 to 2009); subsidies for pulp $25 billion (from 2004 to 2009); subsidies for recycled paper, $1.7 billion (from 2004 to 2008); subsidy income reported by companies, $442 million (from 2002 to 2009); and loan-interest subsidies, $2 billion (from 2002 to 2009). Missing data prevented calculation of pulp or recycled-paper subsidies in 2002, 2003, and 2009.
Implications for our own industry,
Cheap, subsidized Chinese paper exports have affected the U.S. paper industry. Despite comparable cost structures, high efficiencies, and plentiful natural resources, U.S. paper companies have failed to compete globally or nationally on price against much-cheaper Chinese imports. In 2010, the United States remains a net importer of paper and paper products. Imports from China are rising faster than those of any other country for this industry, with the value of U.S. imports from China growing at an annualized rate of 22%.
“From 2002 through the end of 2009, U.S. employment in the paper and paper products sector dropped 29 percent, from roughly 557,000 workers to 398,000.”
As the paper shows, China has no competitive advantage or cost advantage that would lead to the lower prices that are powering this surge. Labor is only 4% of the cost, and they import much of the pulp for the paper. They don't have economy of scale. It is only the government subsidies that enable them to take over the industry.
China’s massive subsidies to its paper sector are doing severe damage to the U.S. paper industry, its workers and their families,” said Scott Paul, executive director of the Alliance for American Manufacturing (AAM). “The only way to stop the bleeding is for U.S. policymakers to take action against China’s blatant violations of trade laws, including sweeping subsidies to paper and many other industries.”
We need better trade law enforcement.
Posted by Dave Johnson at June 30, 2010 11:14 AM
This article irresponsibly leaves out key facts about who paid for this briefing paper and why. The Economic Policy Institute receives about one-third of its funding from labor unions and this paper was paid for by the Alliance for American Manufacturing, which was created by the United Steelworkers union in 2007 to influence U.S. policy. The Alliance was even thanked on page 34 of the report for its support.
These are critical facts because the United Steelworkers is a petitioner in a pending trade case against certain imported coated paper from China and Indonesia, so it has a vested interest in generating and promoting reports critical of China.
Without these facts, readers are mislead about the source, independence, credibility and purpose of this briefing paper. It is a one-sided, incomplete report that only serves the political interests of those who paid for it. The union through the Alliance is now using the briefing paper to scare the American public about China’s paper industry with the goal of influencing the ongoing trade case.
Readers deserve to know the facts of who’s behind this report and what their interests are so they can determine for themselves its legitimacy.
Sustainability & Public Outreach Manager, Asia Pulp & Paper
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