U.S. imposes levy on Chinese paper

Job outlook brightens for Luke mill workers

March 31, 2007|By Allison Connolly | Allison Connolly,Sun reporter

The Commerce Department approved duties on imports of coated paper from China yesterday, brightening the future for several hundred workers at the NewPage paper mill in Allegany County and setting a precedent for other industries that have complained about unfair trade with China.

Workers at the plant in Luke just saw 130 colleagues laid off after Dayton, Ohio-based NewPage Corp. permanently shut down line No. 7, blaming China for its woes. The company also temporarily idled a production line in Maine, which affected more than 50 jobs.

NewPage, the largest producer of glossy paper for catalogs, advertising inserts and brochures in North America, said it was losing business because Asian competitors -- which it said were receiving subsidies such as tax breaks, debt forgiveness and low-cost loans -- were selling their product in the United States at much lower prices, and in some cases, charging less than they would at home. It filed the initial complaint in October.

The Commerce Department said yesterday that its preliminary decision "determined that Chinese producers and exporters of coated free sheet paper received countervailable subsidies ranging from 10.90 to 20.35 percent."

Now with duties of as much as 20 percent being levied on imports from China and Indonesia, and less than 2 percent on imports from South Korea, NewPage Chairman and Chief Executive Officer Mark A. Suwyn said the playing field is once again even.

"I think it's very good for us, but it's also very good for our economy," he said.

It is the first time in 23 years that the Commerce Department has imposed duties on China or any other communist or "non-market" country where the amount of government subsidies was unknown.

The move comes at a time when the U.S. trade gap with China ballooned to a record $232.5 billion last year.

In 2006, Chinese exports of coated paper products to the United States shot up 177 percent over the previous year to $224 million, according to the Commerce Department .

John Schulte, president of the Minneapolis-based National Mail Order Association, said his members, which are small and medium in size, try to buy American. He said members may save a couple of hundred of dollars per roll of paper buying from Asia.

"If you have products hung up at Customs, that's a problem," he said.

The duties on coated paper could set a precedent for other U.S. industries, especially steel, which have complained that Chinese companies are undercutting their business.

American auto manufacturers, apparel makers and appliance companies could also have a stake, said Peter Morici, a professor at the University of Maryland School of Business and former chief economist at the U.S. International Trade Commission.

"Anybody who faces significant competition from imports from China would have a gripe," Morici said.

NewPage, which employs about 4,300 workers at four mills, supplies paper to such companies as Time Warner Inc., publisher of Time and Sports Illustrated among others; the Hearst Corp., which publishes more than two dozen magazines; and Williams-Sonoma.

Stay competitive

"Our employees are working extremely hard to keep costs down and stay competitive," Suwyn said. "But when you see the behavior of these three countries, you just want to throw up your hands."

While NewPage declined to estimate how much business the company has lost to Asia, Suwyn said there is no way companies from China could afford to ship the product here and sell it for less yet make the typical margins of between $100 and $150 per ton.

"We're investing in our plants and they're just pricing to get the next business deal," he said.

About 950 workers run two other lines at the Luke plant, producing 550,000 tons per year. The shutdown No. 7 line produced 100,000 tons of paper per year. Suwyn said he'd like to bring back the workers let go late last year, but he said he needs to first gauge the impact of the duties, which took effect yesterday.

The Commerce Department has until October to make the duties permanent. They are subject to approval by the U.S. International Trade Commission.

Tom Caldwell, president of United Steelworkers Local 676, which represents hourly workers at the Luke plant, said he was worried that NewPage would shut down the mill permanently.

"Now that they've taken this action, I think we have a better chance of staying here for years to come," Caldwell said of the import duties.

Allegany County depends heavily on manufacturing, said Matthew W. Diaz, director of economic development.

He said the area is better able to absorb job losses than 20 years ago, when a tire plant closed and put more than a thousand people out of work, sending the county's unemployment rate soaring to 14 percent. Today, he said, it hovers around 5.5 percent.

"This particular issue hit home for us because they [NewPage] are our largest manufacturer," Diaz said. "They're a staple of our economy."

Long commute

Caldwell said the NewPage workers who lost their jobs late last year will probably end up commuting more than an hour each way to Winchester, Va., another manufacturing hub offering jobs with comparable pay.

"The type of jobs we're losing are the ones that buy homes," he said.

allison.connolly@baltsun.com

Sun reporter Lorraine Mirabella contributed to this article.

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