By  on December 5, 2006

WASHINGTON — The activities of the paper industry are rarely of much interest to the fashion community, but when it comes to opening a door to higher tariffs on Chinese-made goods, disparate businesses can have mutual interests.

The Commerce Department, responding to a petition from paper producer NewPage Corp., in the weeks and months ahead will decide whether to reverse its long-standing policy of not imposing countervailing duties on China or other non-market economies.

The NewPage petition, which also covers imports from Indonesia and South Korea, should prove to be a useful trial balloon for other industries looking to clamp down on China.

"Nobody's tried it, so who knows what's going to come out of it and whether the numbers could be big or not?" said trade law expert Paul Brinkman, a partner at the Alston & Bird law firm in Washington.

One-third of all apparel and textiles shipped to the U.S. come from China, so policy tweaks that change tariffs and therefore costs can mean big bucks for importers and rearrange sourcing patterns.

Countervailing duties are intended to offset the impact of state subsidies on imports, but the Commerce Department has argued since the Eighties that subsidies are too pervasive in non-market economies for it to bring a meaningful case.

"This is a very important development," said Frank Vargo, vice president of international economic affairs at the National Association of Manufacturers. "If Commerce does impose countervailing duties, then China knows it's going to have to get serious about getting rid of those subsidies."

As part of the normal course of countervailing duty cases, the International Trade Commission will offer a preliminary determination on the NewPage case, on Dec. 15. The Commerce Department is to give its preliminary determination on Jan. 24, and, if the case continues, duties could be imposed over the summer.

Should NewPage succeed, other companies would likely file their own countervailing cases, and while the domestic textile industry lacks standing to bring such cases against apparel imports, it might well find a way. In September, the Bush administration helped textile producers get around the standing issue in a similar case by agreeing to review and possibly self-initiate antidumping cases on Vietnam, another non-market economy.Given the manufacturing prowess and size of China, U.S. manufacturers eventually will find a way to stave off competition from the country, said Brinkman.

"Everybody's waiting to see what the right vehicle is," he said. "Either it's going to be macro and we're going to attack their currency, or it's going to be micro and it's going to be industry by industry or product by product."

Many elected officials and economists contend the Chinese government gives its firms an unfair advantage by depressing the value of its currency by as much as 30 percent, lowering the price of Chinese-made goods. The Commerce Department said it would not consider currency in its review of the antidumping petition.

"There are lots of clever lawyers in town on all sorts of different angles," Brinkman said. "Some of them are working on using existing laws, some of them will work on trying to bend existing laws, like the [countervailing duties], and some of them will be working on writing new laws."

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