I recently testified before the International Trade Commission (ITC) in Washington, D.C., about how Chinese and Indonesian subsidies are hurting Maine's paper industry. I urged the ITC to find that these subsidies were causing injury to our domestic paper industry and our communities.
In Maine, we have an abundant supply of the primary renewable resource-timber-which produces very high quality pulp for paper production. We have ample hydroelectric power to run our mills, and we have the best trained, the highest skilled, and most dedicated paper workers in the world. With this winning combination, we should easily succeed in this market, but instead we have suffered losses in market share to countries like China that don't even produce their own pulp.
In 2006 and 2007, the ITC conducted an investigation on behalf of the NewPage Corporation, which operates a mill in Rumford. This investigation focused on unfair subsidies to the coated free sheet paper industries in China, South Korea, and Indonesia, as well as injurious dumping by producers in those countries. Although a separate investigation by the Department of Commerce showed that these countries were engaging in unfair dumping practices and receiving government subsidies, the ITC determined that U.S. manufacturers had not been injured.
Unfortunately, the governments of China and Indonesia have viewed this determination as a green light to increase their dumped and subsidized exports to the United States. Between 2007-when the ITC's determination was made-and the first half of 2009, imports of coated paper from China increased from 13 percent to 21 percent.
The Department of Commerce found in a recent investigation that China has used a number of subsidies deemed illegal under WTO rules including: loans to the paper industry; income tax reductions for foreign-invested companies; exemptions and reductions of local income taxes for foreign-invested companies; value-added tax rebates on purchases of domestically produced equipment; tariff exemptions on imported equipment; and grants to state-owned enterprises. The Department of Commerce found that the Indonesian government was subsidizing its domestic paper industry by providing timber below cost, forgiving government loans, and banning the export of logs.
If that were not enough, the Department of Commerce has also found both nations guilty of dumping their paper.
Unfair trade practices in China and other countries have had a negative effect on many industries in Maine. The pulp and paper industry in Maine has often been referred to as the "backbone" of our economy, and with good reason. Last year, the industry put nearly $900 million into the state's economy. In total, the pulp and paper industry accounts for 22 percent of all manufacturing wages in the state. In some communities, the mill can represent 60-80 percent of total tax revenues.
NewPage's mill in Rumford, Sappi's plants in Westbrook and Skowhegan, and Verso's mills in Jay and Bucksport all produce coated paper. These mills are efficient and up-to-date. They employ sustainable forestry practices that help ensure a viable long-term supply of timber, while protecting our environment. Altogether, some 4,000 workers in Maine derive their employment from the production of coated paper. These workers are highly skilled, with average salaries of $60,000. Nevertheless, I am worried. When machines or mills are shut down, it is devastating to the local and state economies. Some of Maine's mills and paper machines have been idled for weeks or months at a time, leaving workers without a steady paycheck. These shutdowns and the lost wages associated with them, even if temporary, can cause lasting damage to communities.
Mills in the United States need to have a healthy rate of return not only to allow them to stay in business, but also to be able to invest in upgrades and the latest production technologies. In a capital-intensive industry like this, continued capital investment is critical. These workers and their communities rely on the economic benefits of the mills.
The ITC's decision is scheduled to be released the first week of November. I have strongly urged the ITC to find that these violations of international trading rules and practices injure our state's mills. If these violations are not addressed, Maine's proud tradition of producing pulp and paper could be lost to foreign manufacturers who have benefited from unfair government subsidies and assistance.