US panel to vote on landmark trade case vs. China

WASHINGTON, Dec 13 (Reuters) The US International Trade Commission will vote on Friday on a landmark case that could open the door to a flood of anti-subsidy complaints against China, US business experts said.

In a move that seems to signal a departure from long-standing policy, the U.S. Commerce Department accepted a petition last month asking it to investigate whether to slap countervailing duties on coated paper from China.

While China is a frequent target of US anti-dumping investigations, no company or industry group has filed a countervailing duty petition against China since 1991 because of the Commerce Department's refusal to accept them.

The issue in anti-dumping cases is whether foreign producers are selling their goods in the United States below ''fair market value.'' Countervailing duty investigations examine whether foreign producers are receiving government subsidies that help them undercut U.S. prices.

Commerce's long-standing policy, upheld by a 1986 court ruling, has been it is impossible to determine subsidies in a ''non-market economy'' like China.

US manufacturers disagree and have been pushing for a change in US law to make Commerce accept the cases.

When it accepted the petition on November. 21 from NewPage Corp., a Dayton, Ohio, coated paper manufacturer, the Commerce Department noted it was the first it had received in 15 years. It said it would decide within the course of the investigation whether to change ''its long-standing policy of not applying the (countervailing duty) law to non-market economies.'' That decision is expected in January. However, the US ITC first must vote to approve the investigation. That is set for Friday, which also is the second day of high-level US-China talks in Beijing on trade and economic issues.

Gilbert Kaplan, an attorney representing NewPage, said Commerce's willingness to accept the petition was ''a very important step,'' even though it has not made a firm commitment to change its policy.

The company alleges ''a whole host'' of subsidies for Chinese paper producers, including government grants, preferential loan programs and tax breaks, said Kaplan, a partner with the King and Spalding law firm.

''We think there are substantial subsidies and I think that is what the department will ultimately find,'' Kaplan said.

NewPage is also seeking anti-dumping duties against China and anti-dumping and countervailing duties against Indonesia and South Korea.

Frank Vargo, vice president for international economic affairs at the National Association of Manufacturers, said the case was ''huge'' no matter how it turns out.

If the department changes policy and decides the countervailing duty law applies to China, ''that will provide a safety valve for a lot of US companies that feel they are really being hit by subsidies,'' Vargo said.

If it doesn't, that will strengthen efforts to change the law to require Commerce to accept the cases, he said.

REUTERS DKS PM0150