European Union governments on March 31, 2011 endorsed a five-year import tariff on imports of glossy paper from China, the EU's first challenge to Chinese state subsidies, diplomatic and industry sources said.

Representatives from EU capitals gave majority backing to the duties, worth up to 39.1 percent, during a meeting in Brussels, the sources said. The duties are to be launched by May 17, replacing provisional duties in place since late last year.

The European Union's executive Commission proposed the long-term duties after it ruled that China gives illegal subsidies to its paper makers, and that exporters dump paper on the EU market at artificially low prices. China has denied this.

Although the sector is small — Europe imported about 130 million euros' worth of Chinese coated fine paper in 2009 for brochures and coffee-table books — its challenge could trigger similar moves in other areas.

"There is a general feeling that the Chinese are subsidizing a lot, so there is an interest in sending a political signal that this will be tackled," said one source.

"Now the question is whether China will start a legal challenge," the source said.
China may challenge the EU's anti-dumping and anti-subsidy duties at the World Trade Organization. Beijing scored an important victory there earlier this month, when the WTO ruled that the United States had broken international trade law when it applied dual duties to certain Chinese goods.

The EU Commission, which leads EU trade policy, has said its dual duties are legal.
The Chinese operations of Indonesia's Asia Pulp & Paper (APP) face a duty of 20 percent, the sources said.