Rectifying egregious inequalities
for Maine’s paper producers
By U.S. Sen. Olympia J. Snowe
On September 16th, I had the opportunity join with dedicated mill workers from Maine at a U.S. International Trade Commission hearing in Washington where I testified about the exceptionally injurious effects of dumped and subsidized coated paper imports from China and Indonesia that we are witnessing with respect to the American coated paper industry and the thousands of jobs it supports across the United States.
The ITC has been asked to consider whether imports of dumped and subsidized coated paper from China and Indonesia have caused or threatened “material injury” to our domestic coated paper industry. They heard testimony from foreign producers who argued that the level of coated paper imports from China and Indonesia is fair and has little to do with mill closings or layoffs within the American paper manufacturing industry. However, as President John Adams once said, “facts are stubborn things.”
Earlier this year the Commerce Department found that coated paper imports from China and Indonesia are being unfairly subsidized at rates of 20 percent and 17 percent respectively, and according to the Department’s investigation, in 2009, imports of certain coated paper from China and Indonesia were valued at an estimated $213.3 million and $46.9 million respectively.
Let there be no question, this dramatic increase in subsidies and dumped product has served as an accelerant – igniting market distortion and spurring greater underutilization of capacity. This means lost wages and mill closures contributing to thousands of job losses across the entire American paper sector.
It would defy all logic to believe it is mere coincidence that, based on these reports, between 2007 and the first six months of 2009, imports from China and Indonesia jumped from 14 percent of the U.S. market to 20 percent of the U.S. market, at a value of $300 million. Let’s be clear, these imports have undersold U.S. coated paper producers and depressed the value of U.S. coated paper products by margins of 20 percent or more, as I have heard from mill operators in our state.
In Maine, we can attest to the human toll from these inequitable trade practices. Statewide unemployment in Maine remains above eight percent which is slightly better than the national average – but in Oxford and Somerset counties, where Maine’s impacted factories are located, that rate rises to 10.6 and 10.7 respectively. The paper production industry is not just a major employer – with nearly 10,000 Mainers working in the pulp and paper industry and an annual payroll of nearly $1 billion – paper production is an indispensable economic pillar of our state – and across America it is the very heart and soul for many of our rural communities.
As of two years ago, China has managed to overtake the U.S. to become the world’s leading and largest producer of paper and paper products – so much so that in 2009 it produced over 17 percent of the world’s total output. That’s almost one-fifth of the world’s supply.
That begs the question, how is this possible when China has no natural competitive advantage in papermaking, when China lacks the natural resources to propel its paper industry given that its forest base is among the smallest in the world, and when China, according to a recent study by the Economic Policy Institute (EPI), spends three-fourths of its paper-producing costs just on raw materials alone, which it has to import from countries like Brazil – half way across the globe. Yet, with all of these built-in challenges, our own Department of Commerce reports that producers in China still sell the finished product in some cases at rates of over 90 percent less than the fair market value!
And so, how did this happen? It came about because of subsidies. In fact, according to EPI, since 2002, China’s global paper industry has been fueled by over $33 billion in cumulative government subsidies. It’s undeniable, the rise of China’s paper industry is less related to market forces than to a decision by the country’s government to implement an industrial policy that subsidizes and promotes domestic paper production.
Over the years, I have witnessed our state’s paper manufacturers and their workers going to great lengths to improve their competitiveness. These are the types of companies that should thrive in our global economy – but they cannot if the foreign producers are playing with a proverbial stacked deck. Neither the U.S. paper industry nor America itself can continue to countenance destabilizing forces in the global trading system that disadvantage the paper industry and its workers in Maine and throughout the country.
I urge the Commission in the strongest terms possible to make an affirmative determination in these investigations to rectify these egregious inequalities in trade when it announces its final decision on October 19th.
