U.S. imposes trade sanctions on China

updated 11:43 a.m. ET March 30, 2007

WASHINGTON - The Bush administration, facing heavy pressure to deal with soaring trade deficits, said Friday it is imposing economic sanctions against China to protect American paper producers from unfair Chinese government subsidies.

The action reverses 23 years of U.S. trade policy by treating China, which is classified as a nonmarket economy, in the same way that other U.S. trading partners are treated in disputes involving government subsidies.

The decision was announced by Commerce Secretary Carlos Gutierrez.

"China's economy has developed to the point that we can add another trade remedy tool," Gutierrez said. "The China of today is not the China of years ago. Just as China has evolved, so has the range of our tools to make sure Americans are treated fairly."

The action means that China's imports of glossy paper will be subjected to tariffs ranging from 10.9 percent up to 20.4 percent as a penalty for subsidies that the Chinese government is providing for its own companies. Those extra duties will be imposed immediately on a preliminary basis pending further review in coming months to set the final penalty margin.

The case, which was brought by NewPage Corp., was being closely watched by a number of other U.S. industries from steel to furniture.

For two decades, the U.S. government has held that American companies did not have a right to challenge government subsidies granted to their foreign competitors if those companies were in "nonmarket economies" such as China.

However, last year, the administration let it be known that it was ready to consider reversing that policy.

President Bush is facing heavy political pressure from Congress, now in the hands of Democrats, to deal with soaring U.S. trade deficits, including a record $232.5 billion imbalance with China.

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