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British Printing Industries Federation
Farringdon Point 29-35 Farringdon Road
London EC1M 3JF
Telephone 0845 250 7050 Fax 020 7405 7784
[email protected] www.britishprint.com
Chief Executive
Michael Johnson
Susanne Kellner Head of Section Directorate H - Trade Defence Directorate-General for Trade EUROPEAN COMMISSION Avenue des Nerviens 105, B-1040 Brussels (Belgium) Office N-105 06/51 28 June 2010 Dear Ms Kellner Chinese imports of coated fine paper (CFP) in the European Union I am writing to you regarding the anti-dumping and parallel anti-subsidy investigation on Chinese imports of coated fine paper (CFP) in the European Union. We are concerned about the risk of the UK printing industry being adversely impacted by potential trade defence measures. The BPIF is the principal trade association representing printing and printed packaging companies in the United Kingdom. Our member companies are currently facing increases of up to 30% in the price of paper, notified between April and August this year, from a supplier base dominated by just two major paper merchants who have some 80% of the UK market between them. As a consequence our member companies may decide to source some of our paper supplies from more competitive suppliers in China, and any measure that could be taken by the European Union to increase duties on imported coated fine paper, and thereby increase our operating costs, could therefore risk undermining our members’ international competitiveness. An imposition of trade defence duties threatens to result in the highly controversial practice of using anti-subsidy and anti-dumping remedies at the same time on the same product. This could result in the following negative impacts for the sector we represent: • Prices will be driven artificially higher, which would undoubtedly negatively impact the costs associated with our sector and incentivise media buyers to favour electronic communication as an alternative to print • The competitiveness of our sector would be negatively impacted as the price increase will increase our cost of production, other lower-cost markets outside the EU could then become even more competitive • Jobs could be affected if costs have to be cut to remain competitive At a time when we are all facing significant economic constraints due to the state of the economy, any such action by the European Commission would make it far more difficult for our sector to remain dynamic and competitive in a global market. We therefore ask the Commission to reject any calls made to impose anti-dumping and anti-subsidy duties, which we believe would have a devastating effect of such measures on the British printing industry. Yours sincerely
Andrew Brown Corporate Affairs Director Tel ++ 44 207 915 8378 Email [email protected]
For immediate release 19th
April 2010
European Association of Fine Paper Manufacturers (CEPIFINE) supports EU
investigation of subsidies to Chinese coated fine paper producers.
The European Commission published Saturday the notice of initiation of an anti-subsidy
investigation of Coated Fine Paper (CFP) imports from China. This investigation follows the
opening on February 18th of an anti-dumping investigation of imports of the same product.
“These investigations are essential because of strong evidence of dumping which is aggravated and spurred on by
massive subsidies by the Chinese government to build up national champions with huge excess capacity. The EU
industry could not wait any longer to request these investigations due to the pace of the increase in imports of dumped
and subsidized CFP from China and the negative impact they are having in the European market,” said Frank Leerkotte,
Managing Director of CEPIFINE .
CFP is high quality printing paper used primarily for promotional materials, premium magazines, high quality books, and
business materials such as annual reports, company magazines, catalogues and brochures.
“European producers are clearly in the path of an oncoming flood of subsidized imports which are entering the EU
market at industry-destroying prices. The increased Chinese production will continue to pour into the EU, and the
subsidized prices will overwhelm the Union producers unless appropriate anti-subsidy measures are imposed quickly,”
said Frank Leerkotte.
Despite global overcapacity, Chinese producers are set to add nearly 6 million tonnes of capacity in the next three years,
more than doubling current production. That increase alone is equivalent to 120% of EU consumption in 2009.
The rise of unfair imports is jeopardizing European industry and jobs. “Without EU intervention the European Industry
will rapidly be supplanted by Chinese manufacturers. Once domestic competition is eliminated the Chinese would
freely raise prices,” according to Leerkotte.
As already established by the US government on 2 March 2010, Chinese CFP producers receive substantial subsidies
which encourage over-production and exports. The US government is due to issue its findings on the dumping case
within weeks. As a result of the US actions, unfairly traded Chinese products going to the US will necessarily be
redirected to Europe.
“Imposition of anti-subsidy and anti-dumping measures is in the interest of European producers as well as of the
European Union as a whole. Such measures would restore fair competition in the Union and would ensure that end-
users have a long-term and reliable source of high quality supply,” Leerkotte said.
For further information contact: Frank Leerkotte, Managing Director of CEPIFINE
Tel: +32 (0)2 640 04 33 / Email: [email protected]
References: Official Journal Publication No. 2010/c 99/13
First anti-subsidy investigation threatens jobs
in EU paper industry
Shanghai, 21 April 2010 - Asia Pulp and Paper (APP) would like to express its surprise that the
European Commission has launched an investigation into accusations that the Chinese
Government provides subsidies to its domestic paper industries. This is the first anti-subsidy
investigation by the EU against China. It has been initiated by a small number of the members of
CEPIFINE, the European association of fine paper producers, and their allegations are
unfounded.
“We have serious concerns about the validity and legitimacy of the initiation of this subsidy
investigation which the European Commission has recently initiated. This new wave of
protectionism threatens to have negative consequences for EU industry and consumers”, states
Stuart Andrews, APP Europe’s spokesperson.
APP can unequivocally state that it does not receive any subsidies from the Chinese government.
APP will cooperate in a timely and transparent fashion with the European Commission and will
prove that our competitive advantage is the result of long term strategic investments, state of the
art technology and effective processes, fully in line with international trade law and practices.
APP has invested extensively in new technologies and equipment - making production not only
more efficient, but also environmentally friendly and sustainable. Initiating another protectionist
case on alleged government subsidies is a measure designed to try to protect these European
companies’ market share through unfair trade barriers - rather than improving their own
efficiencies and competitiveness.
“With a market share of 5% for Chinese producers in the EU coated fine paper market, it appears
that there is very little chance of injury actually taking place to EU producers by Chinese imports.
Danish shoe manufacturers have been negatively impacted by the investigation on footwear from
China. The same could be the case for EU based companies in the coated fine paper case”
stated Jørgen Ulff-Møller Nielsen, Associate Professor, Department of Economics at Aarhus
University School of Business, Denmark.
The mere initiation of a further investigation against Chinese paper producers can impact the
printing, publishing and other downstream industries based in Europe who will face higher costs
and a decrease in their own global competitiveness, due to the additional market distorting
measures that could be proposed. APP would like to encourage downstream industries to fight
against this allegation by submitting comments on the injury they face from reduced competition
through the European Commission’s users questionnaires before May 25, 2010.
APP strongly supports principles of fair competition – delivering the best prices through the most
effective means – for the benefit of European and global consumers.
# # #
About APP-China Asia Pulp and Paper (APP) is one of the world's leading pulp and paper companies and is ranked
one of the largest vertically integrated pulp & paper producers in Asia. Since APP started
investing in China in the early 1990s, it has over 20 pulp and paper mills in the form of
subsidiaries or joint ventures, and manages forest plantations with a total area over 300,000
hectares. In 2008, APP-China’s total production volume was 6.59 million tons, including pulp,
paper and converted paper products. With 32,000 employees, APP-China has a total assets of
RMB 77 billion (EURO 7.7 billion) and a sales revenue of over RMB 35.8 billion (EURO 3.58
billion) in 2008. For more information, please visit APP-China’s website at www.app.com.cn.
For more information please contact:
APP – Stuart Andrews
Tel: +44 (0)7921 264557
E-mail: [email protected]
www.protectpaperusers.eu
Weber Shandwick – James Watson
Tel: +32 (0)497 581368
E-mail: [email protected]
Briefing Document on EU CFP imports from China - September 2010
1 | P a g e
Dumping and Subsidies of EU imports of Coated Fine Paper (CFP) from China
The European Commission is currently investigating allegations of dumping and the granting of trade-distorting subsidies
to Chinese exporters of Coated Fine Paper (CFP). CFP is normally used for advertising materials, books, annual reports
and high quality catalogues. This investigation was initiated at the request of Cepifine, the association of EU CFP
producers, on behalf of four fine paper manufacturers: Scheufelen (Germany), Burgo (Italy, Belgium), Lecta (Spain,
France) and Sappi Europe (Belgium, Netherlands, Germany, Austria, Finland). Unless the appropriate measures are
imposed quickly to restore fair trade, increased Chinese production will continue to pour into the EU, and their
subsidized prices will overwhelm European producers. The relevant dates for these two proceedings are as follows.
Anti-Dumping Case AD552 - Coated fine paper (Country investigated: People's Republic of China)
By 17 November 2010, the European Commission will have decided whether to impose anti-dumping duties on a
provisional basis. The European Council of Ministers will take a definitive decision by 17 May 2011.
Date of
Initiation
Questionnaire
Replies Due
Latest date for
Provisional
Measures
Comments on
Provisional
Measures
Comments on
Final
Disclosure
Latest date for
Definitive
Measures
18 February
20101
April 2010 17 November
2010
November-
December
2010
March-April
2011
17 May 2011
Anti-Subsidy Case AS557 - Coated fine paper (Country investigated: People's Republic of China)
By 15 January 2011, the European Commission will have decided whether to impose countervailing duties on a
provisional basis. The European Council of Ministers will take a definitive decision by 14 May 2011.
Date of
Initiation
Questionnaire
Replies Due
Latest date for
Provisional
Measures
Comments on
Provisional
Measures
Comments on
Final
Disclosure
Latest date for
Definitive
Measures
17 April 20102 May 2010 15 January
2011
January-
February 2011
March-April
2011
14 May 2011
1 http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2010:041:0006:0012:EN:PDF
2 http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2010:099:0030:0036:EN:PDF
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Key Briefing Points
Briefing Point 1: The Chinese government provides massive subsidies to its CFP industry which causes
overcapacity and underpriced exports.
1.1 Chinese government subsidies to CFP producers are massive
1.2. Chinese producers are scaling up CFP capacity well beyond domestic consumption
1.3. Beyond domestic overcapacity, the subsidies are fueling underpriced exports
1.4. US investigation of Chinese subsidies confirms these facts, but also US measures will divert further exports to EU
market
Key Briefing Point 2: Chinese producers are dumping CFP at EU industry-destroying prices.
2.1 Chinese CFP export prices have dropped very rapidly to undercut significantly the EU producers
2.2 Chinese CFP export prices are well below a normal market price
2.3 Chinese dumping of CFP is driving prices to unrealistic and unsustainable price levels on the EU market
2.4 Findings of the US dumping investigation confirm that the same phenomenon exists there, but also US measures
will divert further exports to the EU market
Key Briefing Point 3: Chinese subsidies and dumping of CFP are destroying European industry and Asian
forests.
3.1 Threat to EU CFP jobs and investment
3.2 Broader threat to EU pulp, paper & printing sector
3.3 Deforestation in Indonesia, a primary source of global environmental damage, is the lifeblood of Chinese CFP
production overcapacity
Briefing Document on EU CFP imports from China - September 2010
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Briefing Point 1
The Chinese government provides massive subsidies to its CFP industry which causes
overcapacity and underpriced exports.
1.1 Chinese government subsidies to CFP producers are massive
1.1.1 China has no natural advantage in the production of CFP, and only the high level of government support explains
the huge capacity buildup and push to export at market-crushing prices. Indeed, according to a June 2010 study
by the Economic Policy Institute (EPI),3 raw materials (primarily pulp) make up three-quarters of the costs of
producing Chinese paper. In contrast, labour makes up only about four per cent of costs in this sector. With
regard to raw materials, China lacks suitable forests, forcing the Chinese paper industry to import a major share
of its pulp. Pulp and other raw materials, as well as electricity, coal and transportation, have nearly doubled in
price over the last decade. Yet the price of Chinese CFP has fallen significantly and it now sells at a substantial
discount compared to U.S. or European paper. This is only possible because certain Chinese companies enjoy
access to massive government funding.
1.1.2. The Economic Policy Institute values Chinese government subsidies to CFP producers between 2002 and 2009 at
$33.1 billion.
1.1.3 There are numerous instances of such subsidies.
� The EPI study cited above lists the following:
o Subsidies for pulp used by China’s paper industry reached US$25 billion between 2004 and 2009.
o Subsidies for electricity used by China’s paper industry reached US$777.8 million between 2002 and 2009.
o Subsidies for coal consumed by China’s paper industry reached US$3.1 billion between 2002 and 2009.
o Subsidies for recycled paper consumed by China’s paper industry reached US$1.7 billion between 2004 and
2008.
� Other examples include the provision of essential goods for Less than Adequate Remuneration (LTAR). The
adequacy of remuneration is determined in relation to prevailing local market conditions (including price,
quality, availability, marketability, transportation and other conditions of purchase or sale), in this instance, in
China, except that in many cases the goods in question are not made available or traded under market economy
conditions. In those circumstances, it is necessary to refer to the prices of goods in a market economy country
at a similar stage of development.
3 Economic Policy Institute, June 2010, Briefing Paper No. 264.
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� Under Chinese law an FIE (Foreign Investment Enterprise) that is “productive” and is scheduled to operate for
not less than 10 years may be exempted from income tax in the first two years of profitability and pay income
taxes at half the standard rate for the next three years. This scheme is known as the “Two Free, Three Half”
programme. APP operations in China are FIEs and benefit from these subsidies.
� In a grant from the Government of China, paper and pulp enterprises that use wood as a raw material are
eligible for 10 - 20 RMB (Renminbi, the official currency of China) per m3 of wood used for construction and
management. This programme takes the form of a direct transfer of funds.
1.2. Chinese producers are scaling up CFP capacity well beyond domestic consumption
1.2.1 China produced about 5.5 million tonnes of coated fine paper in 2008, of which it consumed only 4.8 million
tonnes, leaving an excess of nearly 15 per cent.
Despite this current overcapacity, Chinese producers are set to install more than 3.4 million tonnes of additional
CFP capacity by the end of 2011. In parallel and within the same timeframe, more than 3 million tonnes of new
uncoated fine paper (UFP) production capacity will be installed. UFP production capacity can relatively easily be
converted into CFP production by adding a coating device to the respective paper machine (so called “swing-
capacity”). The CFP capacity increases will increase current production by at least 60%, and CFP production
could double taking the swing-capacity into account. The CFP capacity increase alone is equivalent to around 70
% of EU CFP consumption in 2009.
1.2.2 Domestic Chinese demand for CFP will not rise in line with these known capacity increases. This will lead to a
substantial increase in excess production. For the entire fine paper sector, overall excess production is expected
to reach as much as 6 million tonnes4 in 2012.
1.2.3 Despite no evidence of a corresponding increase in demand, APP has just launched PM 2, the largest CFP
machine in the world, at its mill on China's southern-most island of Hainan. Some industry observers are calling
PM 2 the “Doomsday Machine” for EU industry. According to APP China, PM 2 will be capable of churning out
up to 1.45 million tonnes/yr of paper. The startup of PM 2 will take one company’s (APP China's) total coated
fine paper capacity to over 3.5 million tonnes/yr, and will further aggravate the CFP production overcapacity in
the Chinese market.
4 ”Outlook for the end use markets”, Pulp and Paper Products Council - MPA Meeting, Chicago, USA ,May 9, 2010.
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Furthermore there are two new Asia Pacific Resources International (APRIL) PMs at Guangdong and an Oji Paper
coated fine PM at Jiangsu.
As confirmed by PPI Asia, the Chinese market already has a large surplus of CFP. This means that the additional
production must predominantly be sold to export markets. As reported by the specialized press, Chinese
producers are purposely expanding capacity to take advantage of capacity decreases in North America and
Europe.
1.3. Beyond domestic overcapacity, the subsidies are fueling underpriced exports
1.3.1 EU imports of CFP from China have increased significantly during the past four years: from just below 8 per cent
of all imports in 2005, they had already risen to more than a quarter of all imports in the first half of 2009.
1.3.2 Despite this increase in Chinese exports in recent years, there is no evidence to indicate that this rate of increase
is set to slow down. To the contrary, imports have most recently increased by 43 per cent year-on-year, from
the fourth quarter of 2008 to the fourth quarter of 2009.
1.3.3 Moreover, in combination with the continued increase in Chinese production overcapacity, the continued
increase in dumped and subsidised imports, and corresponding gains in EU market share made by Chinese
exporters indicate the likelihood of increased EU imports. Just as EU consumption started decreasing, imports
from China accelerated their penetration of the EU market at undercutting prices.
The introduction of electronic media has, since 2000, led to a general levelling-off of CFP demand in North
America, Western Europe and Australia. While developing countries in Central and Eastern Europe, Asia and
South America have shown increasing demand for CFP in recent years, even these markets are now showing the
effects of the global economic slowdown.
1.3.4 There is a clear economic incentive for Chinese producers to dump their products in the EU: as their competitors
decrease production and face higher material and energy costs, subsidised Chinese producers can increase their
market shares and even expand capacity with a view to gaining even further market share once demand picks
up. While such strategies would be unsustainable in market economies, state subsidisation makes this possible
for Chinese producers.
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1.4. US investigation of Chinese subsidies confirms these facts, but also US measures will divert further exports to EU
market
1.4.1 The US Department of Commerce has already established that the Chinese government is providing substantial
subsidies to its pulp and paper industry. On 25 October 2007, the U.S. Department of Commerce (USDOC)
published its Final Affirmative Countervailing Duty Determination concerning coated free sheet paper from
China.5 In that case, the USDOC found that producers in China benefited from several countervailable subsidies
including:
o government policy loans;
o tax subsidies for FIEs;
o VAT rebates for domestically produced equipment;
o VAT and tariff exemptions on imported equipment;
o VAT refunds for companies located in the Hainan Economic Development Zone.
1.4.2. In addition to the previous case, USDOC is currently conducting an anti-subsidy investigation of CFP imports
from China. The preliminary findings of the USDOC have led it to adopt a countervailing duty of 7.4 per cent for
APP and all others, and a 44.25 per cent duty for Shandong Chenming Paper Holdings Ltd.
1.4.3 In March 2010 the US Dept of Commerce preliminarily determined that Chinese CFP companies have
received net subsidies ranging from 3.92 to 12.83 percent.
1.4.4 The US findings corroborate the EU complaint that Chinese companies are receiving subsidies, which in
turn allow them to sell at predatory prices to gain market share.
1.4.5 An expected consequence of the US measures is that Chinese companies will divert their focus to the EU
market where no anti-dumping or anti-subsidy measures are currently in place. Chinese producers are
purposely expanding production capacity to take advantage of capacity decreases in North America and
Europe6. It is highly foreseeable that a major proportion of excess Chinese production will henceforth be
targeted towards the EU.
1.4.6 Moreover the significant decrease in freight costs from Asia to Europe as of the second half of 2008 is expected
to provide further stimulation for Chinese producers to sell their products at unfair prices to the EU market.
5 http://www.gpo.gov/fdsys/pkg/FR-2007-10-25/pdf/E7-21041.pdf
6 ”APP China resumes PM installation at Hainan plant”, RISI, May 1 2009,
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Key Briefing Point 2
Chinese producers are dumping CFP at EU industry-destroying prices.
2.1 Chinese CFP export prices have dropped very rapidly to undercut significantly the EU producers
2.1.1 In 2009, imports from China again radically dropped in price. Despite a fortuitous drop in raw material and
energy costs in the first half of 2009, the subsidized prices of imports from China still do not reflect cost trends
and substantially undercut the prices of EU producers. See Annex Table 1 for the evolution of pricing of the EU
producers in comparison with the Chinese producers.
2.1.2 On this basis of actual quotations, invoices and Eurostat data, it is clear that imports from China are significantly
undercutting CFP of the EU producers - more than 20 percent on average – and even more substantially
underselling – up to 30 percent. This substantial undercutting and underselling by the dumped imports from
China has caused serious price suppression and is a cause of material injury for the EU producers.
2.2 Chinese CFP export prices to the EU are well below a normal market price
2.2.1 To the extent producers in a non-market economy, including China, do not establish that they operate under
market economy conditions, the normal value for determining the dumping margin of imports from those
producers is established on the basis of the price in an appropriate market economy third country. In this case
the U.S. has been chosen as the most suitable due to its open market, the relatively low level of CFP prices in
that country and the fact that the US has production methods similar to those used in China.
2.2.2 Comparing domestic prices in the US with prices of EU CFP imports from China, dumping margins of those
imports range from around 40 per cent to nearly 200 per cent.
2.3 Chinese dumping of CFP is driving prices to unrealistic and unsustainable price levels on the EU market
2.3.1 Despite a surge in the cost of raw materials in recent years, the European paper industry managed to reduce
overall costs, in particular by cutting overheads through restructuring efforts. This restructuring reduced
production capacity as well as expenditures.
2.3.2 In spite of these efforts, the pressure of low-priced dumped Chinese imports has forced EU producers to sell
their products at unsustainably low profit levels and even losses.
2.3.3 Even with the fortuitous drop in the price of raw materials in early 2009, EU producers were unable to reach a
reasonable profit level. Had this drop not occurred, the complainant companies would have incurred a
substantial loss in that period.
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2.3.4 With the subsequent rebound in the prices of raw materials, producers have once again been under extreme
pressure from dumped imports from China. On the one hand, the EU producers are wholly unable to sustain the
current level of low prices necessary to prevent loss of market share. At the same time, any moves to increase
CFP prices to reflect the actual level of input costs would result in further losses of market share to the dumped
imports.
2.3.5 With regard to this last point, it is becoming increasingly common for large merchants and other customers to
demand that European producers match the prices of dumped imports from China. As prices are increasingly at
loss-making levels, this is impossible and the result is an ongoing loss of market share for EU producers.
2.4 Findings of the US dumping investigation confirm that the same phenomenon exists there, but also US measures
will divert further exports to the EU market
2.4.1 Following a complaint by US producers, the US Department of Commerce (DOC) launched an anti-
dumping investigation of CFP imports from China. In April 2010, the DOC preliminarily determined that
Chinese CFP is sold in the United States at dumping margins ranging from 30 per cent to 135 per cent
percent.
2.4.2 Not only does this decision confirm the existence of dumping by Chinese producers in major markets, but
also makes it most likely that the US will impose countermeasures and then that products previously
destined for US markets will be diverted to the EU.
2.4.3 This problem is compounded by the fact that several other countries are also considering trade defence
measures against imports of CFP from China. For example, in 2009 India investigated the possibility of
imposing safeguarding measures on Chinese CFP,7 and Brazil is reported to be investigating anti-
competitive practices with regard to imports of Coated Mechanical Paper from China.
2.4.4 Even just the threat of such measures will further encourage Chinese producers to divert existing stocks to
the European market, exacerbating the existing problem in the EU.
7 www.wto.org/english/news_e/news10_e/trim_annex1_08mar10_e.xls
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Key Briefing Point 3
Chinese subsidies and dumping of CFP are destroying European industry and Asian forests.
3.1 Threat to EU CFP jobs and investment
3.1.1 The Union producers are already experiencing material injury. If the subsidized imports continue to surge,
thanks to dumped prices, the Union producers will be forced to further curtail production, and lay off even more
workers. This is foreseeable and imminent, and can only be prevented by the application of appropriate
countermeasures.
3.1.2 Since 2000, EU CFP producers have undertaken major restructuring efforts, which addressed structural
overcapacity in the EU. Measures have included consolidation, plant closures and the reduction of hundreds of
skilled jobs.
In 2009, EU consumption decreased significantly as a result of the global economic downturn. In 2009, EU
consumption of CFP was thus about 10 per cent lower than in 2005 and about 16 per cent lower than in 2007.
As consumption decreased in 2008 and in 2009, the EU producers started reducing capacity.
3.1.3 Subsidised imports from China, however, have not followed the downward trend in the EU market, and have
instead been increasing at lower prices in a bid to win EU market share. While there was a slight decrease in
2008, linked to the Beijing Olympics, a rapid recovery was made in 2009 to the further detriment of EU
producers.
3.1.4 While total sales of EU production fell by 16%, as shown in Table 2, imports from China rose four-fold.
3.1.5 The increase of CFP imports from China between 2005 and 2009 is in line with a broader trend which saw the
percentage of Chinese imports as a share of total imports to the EU increase to 27.2 per cent in 2009, as shown
in Table 3.
3.2 Broader threat to EU pulp, paper & printing sector
3.2.1 The key interest of the entire EU industry lies in the continued EU production and availability of a reliable long-
term supply of CFP. The risk is that, through unfair trading practices in relation to their exports to the EU,
Chinese producers of CFP may drive European producers out of the market. This could compromise the
availability of CFP for the European print sector in cases of short supply.
3.2.2 The example of the UK is instructive in this regard. In August 2010, Print Week reported that presses in the UK
were standing idle and that printers are at risk of losing business as a result of a shortfall in the import of paper
reels into the country. One merchant complained that foreign suppliers are not always eager to supply the UK
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market and certainly not at the very low prices which originally caused the closure of a number of UK paper
producers.
3.2.3 A reduction in the number of EU CFP producers would also hurt the revenues of EU pulp suppliers and sharply
reduce EU CFP competition. With less supply competition, and thus without the balancing effect of domestic CFP
producers, the European print sector would be at the mercy of a few very large Chinese companies.
3.2.4 It is therefore critical that the appropriate trade defence measures, as prescribed by WTO rules, restore balance
and fair competition in the European CFP market, to ensure the continued access of the print sector to high
quality, competitively-priced CFP on a long-term basis.
3.3 Deforestation in Indonesia, a primary source of global environmental damage, is the lifeblood of Chinese CFP
production overcapacity
3.3.1 The lack of suitable forests for producing pulp means that China, in order to gear up papermaking capacity on
the scale that it has, means that it is now the largest importer in the world of pulp and recycled paper. In sum,
the drive to establish huge production overcapacity in China is feeding off of massive deforestation in Indonesia
and other nearby Asian countries. Put more simply, the increase in EU CFP imports from China is accelerating
the destruction of Indonesian forests. As former EU Commissioner for Enterprise and Industry, Gunter
Verheugen, described the specter of unfairly traded imports causing not only EU industrial job losses but also
environmental damage outside the EU : “The 21st Century doesn’t need a policy that pushes industry and
employment out of Europe just to pollute the environment somewhere else”.8
3.3.2 WWF and many other NGOs have demonstrated that the Indonesian pulp and paper industry is causing serious
damage to Indonesian forests, and is likely to be responsible for a high level of illegal logging. At this point,
nearly 75 per cent of Indonesia's rainforests have now been destroyed. Further, roughly 80 percent of
Indonesia’s greenhouse gas emissions are due to deforestation and degradation, which has pushed Indonesia
into third place on the list of the world’s largest greenhouse gas emitters, despite having only the 16th highest
GDP in the world9.
3.3.3 Most of the environmental damage from CFP overcapacity exported to the EU is the responsibility of one
Chinese producer : 80 per cent of EU CFP imports from China are from one producer, APP. That company has
has been at the center of many environmental controversies, including accusations of being involved in illegal
logging in both Cambodia and Indonesia, and of breaching agreements with major environmental organizations
such as the Forest Stewardship Council, World Wide Fund for Nature and the Rainforest Alliance. This is in
contrast to EU producers in that 95% of the EU pulp and paper companies have a tracing system in place for
8 Speech given by Commissioner Verheugen at the CEPI annual meeting, Brussels, 29 November 2007.
9 http://en.wikipedia.org/wiki/List_of_countries_by_future_GDP_(PPP)_estimates
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their wood and pulp procurement that reduces the risk for illegal timber to be included in the production
process10.
3.3.4 A joint venture company involving APP recently got a license to clear the largest portion of natural forest
remaining outside the Bukit Tigapuluh National Park in Jambi Province, Sumatra. The area is one of the most
endangered forests on all of Sumatra, an island already suffering from what is possibly the fastest deforestation
rate in the world. APP is directly contributing there to the demise of some of the last suitable habitat for
endangered Sumatran elephants and tigers, and is playing a large part in destroying one of the world's most bio-
diverse forests.
3.3.5 WALHI, the national environmental forum in Indonesia which has over 450 member NGOs, claims that “APP and
its affiliates continue to do more damage to Indonesia’s forest dependent communities, wildlife and the world’s
climate than any other single corporate player.”
3.3.6 Ironically, it was only after APP defaulted on a debt of more than U.S. $13 billion and became Asia’s biggest
bankruptcy (in the early 2000’s) that significant social and environmental risks associated with the company’s
pulp production and natural forest clearance emerged. Several large paper purchasers, including Ricoh and
Office Depot, canceled contracts with APP after word leaked about their activities on Sumatra.
10
http://www.cepi.org/Objects/1/Files/CEPI-Report09.pdf, CEPI Sustainability Report, 2009.
Briefing Document on EU CFP imports from China - September 2010
12 | P a g e
Annexes
Table 1: Average prices (2005 – Investigation Period (IP))
Price (EUR/tonne)* 2005 2006 2007 2008 2009
Complainants (Index) 100 98 99 98 98
Chinese imports (Index) 100 94 93 93 84
Chinese imports 768 726 715 719 651
*For comparability reasons, all price data relates to prices of coated woodfree sheets (the product predominantly produced
by the Complainants).
Source: Complainants’ data, Eurostat
Table 2: Actual consumption of CFP in the EU (2005 –2009)
Volume (tonnes) 2005 2006 2007 2008 2009
Total sales of EU production 4,791,064 4,899,654 4,977,370 4,850,184 4,045,986
Index 100 102 104 101 84
Imports from China 43,792 66,791 148,715 128,117 209,196
Index 100 153 340 293 478
Actual consumption 5,349,957 5,466,354 5,726,385 5,538,913 4,814,876
Index 100 102 107 104 90
Briefing Document on EU CFP imports from China - September 2010
13 | P a g e
Table 3: Chinese imports as a percentage of total EU imports (2005 – 2009)
Imports from China as a
per cent of total imports 2005 2006 2007 2008 2009
Import share 7.8 per cent 11.8 per cent 19.9 per cent 18.6 per cent 27.2 per cent
Index 100 151 255 238 349
Source: Eurostat
22 September 2010
1
APP response to CEPIFINE document:
“DUMPING AND SUBSIDIES OF EU IMPORTS OF COATED FINE PAPER (CFP) FROM CHINA”
The arguments put forward by members of CEPIFINE (Burgo Group, Scheufelen, Lecta and Sappi) in the
briefing document entitled “Dumping and Subsidies of EU imports of Coated Fine Paper (CFP) from China”
are factually inaccurate and misleading. The document is a desperate attempt to distract readers from the
real dangers that face printers and publishers through the on - going EU anti-dumping and anti-subsidy
investigations.
This response sets the facts straight and clearly shows how European producers of CFP are deliberately
misleading European downstream industries and stakeholders, for their own gain with little thought or
concern for their customers and dependent European industries.
Allegations of massive subsidies from the Chinese government – FALSE
The CEPIFINE document quotes a study by the Economic Policy Institute (an American think tank set
up and funded by US based trade unions) which plays no part in the EU enquiry. Furthermore, the
quotes do not actually state what the subsidies alleged are. The subsidies remain unidentified and
vague. Therefore APP seriously questions the accuracy of this partisan study and would suggest that
readers should not also be fooled by the comments being made.
European academics from prestigious institutions have commented on the real effects of the
investigations and the dangers for European downstream industries:
Patrick Messerlin - Professor of Economics at the Institut d’Etudes Politiques (Sciences Po) in Paris
and Chairman of the European Centre for International Political Economy – states:
“Such anti-dumping and anti-subsidy investigations will hurt European interests at large in two ways.
First, antidumping and anti subsidy measures, will ultimately affect European consumers, in
particular the European producers of goods using coated fine paper and the European providers of
services using the products derived from coated paper. There is ample evidence that the price
increases imposed by anti-dumping and anti-subsidy measures end up in the creation of costs for
European industries, which are often amplified by collusive behaviour behind closed borders. And
there is ample evidence that all these negative effects do not solve the fundamental economic
problems of the plaintiffs. Second, launching such investigations, especially in anti-subsidy, is a
political decision which will have negative political relations with the Chinese, at a time where
international cooperation is much needed.”
The actions by CEPIFINE pose serious threats to European printers and publishers – as identified by
leading European economists.
22 September 2010
2
Chinese CFP prices are well below EU prices - FALSE
The table in Annex 1 of the CEPIFINE document shows that the price offered by EU paper producers
has not fluctuated at all in the last 5 years, this is a strange phenomenon – this could demonstrate
that there has been no innovation or attempt to reduce the cost of the product or any improvement
in efficiency in this period. Given global competition it is difficult to understand how EU CFP
producers have managed to maintained constant prices throughout such a long period of time in
which the EU economy has been badly hit by the global and financial crisis. This stagnation of EU
price is a concern for all downstream industry users. Chinese products in the EU market place inject a
certain degree of competition with EU producers.
It is also important to note that since the beginning of 2010 the differences between EU and Chinese
CFP prices are not significant. This reflects the market situation that has impacted APP, by price
increases. By contrast, EU producers have maintained the same price consistently – suggesting a
degree of immunity from market price fluctuations (see graph in Annex 1 of the CEPIFINE document).
This should be viewed as unusual in an industry which claims to be subject to global price
competition.
Scaling up of production beyond domestic market capacity – FALSE
CEPIFINE also allege the scaling up of production beyond Chinese domestic capacity – this is again a
complete misdirection of the truth.
The CFP market in China is expanding dramatically and China remains one of the few economies to
still enjoy high levels of economic growth, due to growing levels of domestic demand. Demand for
CFP in China is outstripping supply. Old mills have been closed in China, as they do not meet strict
pollution criteria. This has also reduced the available production capacity of CFP in China. APP
expects growth in the Asian market, and leading market research by RISI projects that Asian demand
growth in 2011 and 2012 will average a substantial 5.4%. These regional markets are natural targets
for Chinese CFP producers.
Chinese CFP imports represent less than 5 percent of the EU market and such a small share cannot
be considered to be a threat. Thus this accusation is simply more smoke over a clearly protectionist
measure.
Chinese CFP production is also state of the art, and innovations due to investment have seen
improved efficiencies. This leads to improved production.
Leading European academic Duncan Freeman, Senior Research Fellow at the Brussels Free University
states:
“Exports are not the sole cause of Chinese economic growth, in fact Chinese investment in their
production facilities is the main factor that drives the Chinese economy. Much of the factory
equipment used in China is imported from Europe. Therefore it is important to recognize that trade
with China benefits Europe as a whole. The EU anti-dumping and anti-subsidy investigations on
coated fine paper from China will have a political impact. Europe needs to focus on its own
competitiveness and cannot rely on protectionist measures to save domestic industries. Europe
cannot hide behind protectionist barriers.”
22 September 2010
3
Deforestation in Indonesia driven by Chinese industry – FALSE
The CEPIFINE document also makes some unfounded allegations about the source of pulp for
Chinese CFP. The paper claims that most of the pulp used for Chinese CFP comes from Indonesia –
this is simply wrong. APP sources its pulp from all over the world, as well as from China. Much of the
imported pulp is from PEFC and FSC certified sources and this is reflected in the PEFC certifications
our products receive. Therefore the claims about environmental degradation in Indonesia being
caused by Chinese CFP are simply false and opportunist.
To set the record straight, APP's plants in Indonesia operate as follows: In Indonesia, the government
allocates only 3 percent of its total landmass for pulpwood plantation development, consisting of
land that is defined by the government as wasteland and low value or degraded forest. These areas
are still subject to third party Eco-Socio and High Conservation Value Forest (HCVF) assessments to
ensure that high conservation value areas, including critical peat land areas, remain protected.
APP adheres to this system and APP's sustainability practices are endorsed by independent audits
and studies. In August 2010 Mazars, a French independent audit company, reviewed the
environmental claims made by APP and found them to be reliable and verifiable. APP operations
have CoC certification from PEFC and LEI. APP products also carry the European eco-label symbol
having met European Commission standards for production.
The accusations made by CEPIFINE about APP are disgraceful and we would expect more from fellow
industry players. These despicable lies should be ignored as the propaganda that they are.
Threat to paper industry jobs – MIS-LEADING
The CEPIFINE document also tries to create a distorted picture of threat to jobs in the EU. The only
real threat to jobs in the EU will come from increased duties on CFP brought in from China.
In this case the EU producers will be able to charge any price they see fit and are unlikely to engage
in real competition. This will push prices up for EU printers and publishers – these are the people
who will feel the negative effects of these investigations, this is where jobs will be lost and
companies forced to close. Can this really be justifiable? The answer is no – leading European
academics testify this.
Jørgen Ulff-Møller Nielsen - Associate Professor, Department of Economics at Aarhus University
School of Business, Denmark - explains that:
“The EU anti-dumping system leads to market distortions. With a market share of less than 5% for
Chinese producers in the EU CFP market, it appears that there is very little chance of injury actually
taking place to EU producers by Chinese imports. In the past the European Commission
investigations have lead to downstream EU companies being severely harmed by anti-dumping
duties, Danish shoe manufacturers have been negatively impacted by the investigation on footwear
from China. The same could be the case for EU based companies in the CFP case.”
This shows that European economic experts can foresee hardship for printers and publishers IF the
EU imposes anti-dumping and anti-subsidy taxes.
22 September 2010
4
Conclusion
Thus it can be seen that the claims of CEPIFINE are in fact based on mis-truths and unsubstantiated
allegations. APP is fully cooperating in the EU investigations and is confident that the outcome of the
investigations will demonstrate that Chinese CFP imports which represent a minor share of the EU
market did not harm CEPIFINE's members. Furthermore, leading European economic voices are
calling out to halt the investigation – recognising the real threat to EU industry. Thus we ask you to
look at the facts outlined in the document above and take action against this protectionist and
distorting action. It is only EU printers and publishers who will lose out from closing the market to
international competition, leaving room for EU CFP suppliers to charge prices they see fit.
For more information please visit
WWW.PROTECTPAPERUSERS.EU
