The federal government announced today that it will be imposing economic sanctions on Chinese paper imports to offset the subsidies that China gives to paper makers. China has been classified as a 'non-market' economy for 23 years and therefore not subject to sanctions, but this action reverses that policy (full story).
It is somewhat disheartening, but not surprising, to see the government give in to obvious special interests. If the Chinese government wants to subsidize part of our paper consumption, more power to them. It will be interesting to see how much trade protection against China the US puts up in the near future. I hope it is not much.
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Hey John! Nice blog. Good point. If we really want to dissuade the Chinese government from subsidizing paper, we should not retaliate so that US consumers buy as much as possible. The more paper that is bought from these Chinese companies, the more the subsidy costs their government.
We also need to consider the politics, though. If these tariffs eliminate the trade advantage that these Chinese companies enjoy due to the subsidy, and the Chinese government is primarily motivated by some mercantilist sentiment (rather than by pressure from the paper industry, as in our own lovely democracy), then perhaps the Chinese will decide to eliminate the subsidy, as long as the US is guaranteed to retract its tariffs.
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