received the highest C VD duty rate of 44.25 percent in the final DOC determ ination (Table 8).<sup>66</sup>

# **C. Implications for China and Other NMEs: A Preliminary Discussion**

Even though the US ITC found that no injury has been caused by im ports of CFSP from China, the US DOC CVD decision has opene d a flood gate of CVD petitions by U.S. manufacturing firms. By the end of 2007, there were eight CVD a nd AD cases against imports from China. Other NME countries will face broad challenges.

**1. Expanding CVD to Other Industries?** The application of CVD duties to CFS paper is likely to be followed by other com panies and industries to litigate the im ports from China. The sectors that the US has highligh ted as a concern on the subsidy front include steel, petrochemicals, high technology, fore stry and paper products, textile, hardwood and plywood, m achinery and othe r non-ferrous m etal industries.<sup>67</sup> The Am erican Iron and Steel Institute (AISI) and the Steel Manufactures Association (SMA) stressed their continued strong support for legislation that would require the DOC to apply CVD law fully to China and other NMEs. With regard to steel, they said that China has the world’s most heavily subsidized steel industry.<sup>68</sup>

Another possible sector is textile and appa rel industry. According to Inside US-China Trade report, the National C ouncil of Textile Organizations (NCTO) is having active discussions with lawyers about the possibili ty of filing its o wn countervailing duty case against imports of Chinese apparel. NCTO believes it is possible that a CVD case on apparel might lead to even higher margins than the 10 to 20 percent Commerce found in CFS paper case.<sup>69</sup> U.S. Department of Agriculture has recently released a Glo bal Agriculture Information Network (GAIN) Report. The report argues that China has implemented a variety of VAT exceptions for Chinese farmers and agricultural processors. China’s applied VAT rate to farmers and processors is 13 percent; the e ffective VAT actually collected is 5.8 percent, or less than half the official rate. There appears to be “a disparate impact” on imports. They also argue that China’s agricultural exporters are offered an effective export subsidy between 7.2 and 9.77 percent through VAT rebate s. The report says that these policies will continue to hurt U.S agricu ltural exports and are inconsistent with th e WTO principles of “National Treatment.”<sup>70</sup>

**2. Is Everything a Subsidy?** Since 1978, China has undertaken comprehensive reforms, which have progressively transform ed the central planned econom y into a m arket

> 66 Ibid.

> 67 US Trade Representative’s Office, “National Trade Estimate Report on Foreign Trade Barriers,” 2007. 68 AISI, “AISI and SMA Welcome Commerce Ruling against Chinese Subsidies; But Groups Say next Step Must be Prompt Passage of CVD/NME Legislation.” March 30, 2007. American Iron and Steel Institute. 69 Pete Kasperowicz, “NCTO Actively Talking to Lawyers about CVD Cases against China,” Inside USChina Trade, April 25, 2007.

> 70 USDA, “People’s Republic of China Trade Policy Monitoring VAT Protections: The Rest of the Story 2007,” GAIN Report CH7018, March 19, 2007.

30