Long-term economic impact of countervailing duties on coated free sheet paper imported by the United States from China, the Republic of Korea, and Indonesia

The international effects of United States countervailing duties on imports of coated free sheet paper from China, the Repuhlic of Korea, and Indonesia were predicted with the Global Forest Products Model, up to the year 2020. The results indicate that the production of printing and writing paper in China, Indonesia, and the Republic of Korea would be lower. The trade balance would worsen in Korea and Indonesia. China, currently a net exporter would become a net importer. Concurrently, production and prices of chemical pulp would decrease substantially in China. However, because of lower prices in China, its domestic consumption of printing and writing paper would increase. In the United States, the duty would induce little increase in production or improvement of net trade. The main effect would be on the United States' source of imports. While the United States' imports of printing and writing paper from Korea, Indonesia, and China would decrease, the imports from Canada, Finland, Germany, and other sources would increase. Moreover, although imports of printing and writing paper from China would be reduced for a few years by the duty, they would start increasing again after less than a decade. The Canadian industry would gain the most from the duty. Canada's production of printing and writing paper would be nearly 9 percent higher. The United States would see some increases in producer revenues, consumer expenditures, and value-added, but they would be small compared to the increases in Canada. LLn 2006, the Republic of Korea was the largest exporter of coated free sheet (CFS) paper to the United States, with exports of 427 thousand metric tons (Table 1). China was second with 264 thousand metric tons. Indonesia, with 50 thousand metric tons was the ninth largest exporter. While the United States CFS imports from Korea increased 50 percent from 2002 to 2006, imports from China increased almost 7-fold, and imports from Indonesia more than tripled. The possibility that this growth was driven by government subsidies in China, Indonesia, and Korea led NewPage Corporation, a United States producer of CFS paper, and the United Steelworkers union, which represents nearly 10 thousand workers in United States CFS mills, to file a series of trade cases with the United States Department of Commerce (NewPage 2007). On April 9,2007, the United States Commerce Department published preliminary countervailing duty (CVD) determinations for coated free sheet imported from China, the Republic of Korea, and Indonesia (Dept. of Commerce 2007a, 2007b, 2007c). The duties are effective from April 9, 2007. For Indonesia, a 21.24 percent (ad valorem) CVD was imposed The authors are, respectively. Assistant Scientist, Dept. of Forest and Wildlife Ecology, Univ. of Wisconsin-Madison ([email protected]); Economist, Scion (New Zealand Forest Research Inst. Ltd.), Rotorua, New Zealand (james.turner@ scionresearch.com); and Professor, Dept. of Forest and Wildlife Ecology, Univ. of Wisconsin-Madison, Madison, Wisconsin ([email protected]). The research leading to this paper was supported in part by the USDA Forest Serv., Southern Forest Expt. Sta., USDA-CREES NRI grant 2003-35400-13816; Mclntire-Stennis grant 4879; Scion (New Zealand Forest Research Inst. Ltd.); the New Zealand Inst. of Forestry John Balneaves Travel Award; and the Foundation for Research Sei. and Technology contract C04X0305. This paper was received for publication in August 2007. Article No. 10389. ©Forest Products Society 2008. ForestProd.J. 58(10):71-77. FOREST PRODUCTS JOURNAL VOL. 58, NO. lO 71 Table 1. — U.S. imports of coated free sheet paper, by main country of origin. Exporter 2002 2003 2004 2005 2006 Korea, Republic of China Finland Canada Germany Japan Italy Austria Indonesia Spain