Commerce Determines Indonesian Paper Companies Benefitted from Improper Subsidies

The BlueGreen Alliance, Sierra Club and NRDC welcomed a Department of Commerce decision to level the playing field, but urged consideration of subsidies resulting from illegal logging in Indonesia.

September 22, 2010

BlueGreen Alliance, Sierra Club and NRDC Welcome Commerce Decision to Level Economic Playing Field But Urge Consideration of Subsidies as a Result of Illegal Logging

WASHINGTON, D.C. (September 22, 2010) The BlueGreen Alliance, Sierra Club and Natural Resources Defense Council today welcomed a decision from the U.S. Department of Commerce (DOC) issuing its final determinations in the antidumping and countervailing investigations of coated paper imports from Indonesia and China. However, the Commerce Department failed to determine that illegal logging practices by Indonesian paper producers have contributed to those unfair subsidies.

“We welcome this decision because it will help to level the playing field for American workers,” said David Foster, Executive Director of the BlueGreen Alliance. “But current conditions have manufacturers across the U.S. struggling to compete against imported, illegally-harvested, low-priced wood and wood products. The economic devastation faced by U.S. workers should not be mirrored by environmental devastation and worker mistreatment in Indonesia. While we are pleased that DOC recognizes the severity of China and Indonesia’s violations of trade law, we not only have to ensure that there is a level playing field for American companies and their workers, but also ensure that we reduce the negative environmental impact of deforestation.”

The Department of Commerce announced antidumping and countervailing duty margins that will be applied to unfairly traded imports of coated paper from China and Indonesia that benefited from subsidies or were dumped in the U.S. market, pending final approval by the U.S. International Trade Commission (ITC). The overall finding supports a preliminary determination from the U.S. ITC that unfairly traded imports of the paper from China and Indonesia are injuring the U.S. paper industry and workers. However, this final determination fails to put an economic value on the grave environmental and economic impacts of illegal logging. The case, filed by the United Steelworkers and several paper companies in 2009, launched a Commerce investigation into whether unfair trade and harvest practices, including illegal logging, may be subsidizing paper production in Indonesia.

“We are glad the Department of Commerce’s decision will help to level the playing field for American workers, but it does not account for true economics of illegal logging,” said Michael Brune, Executive Director of the Sierra Club. “There is an unmistakable connection between the Indonesian pulp and paper industry, unfair trade subsidies and the climate-disrupting deforestation caused by illegal logging. It is vitally important to recognize the true costs of global trade.”

The Indonesian pulp and paper industry is notorious for illegal logging and deforestation practices – Chatham House, a British-based think-tank, estimates that 40-61 percent of wood from Indonesia is illegally logged. Illegal logging is directly linked to unfairly-priced imports because it allows companies to pay less than market prices for timber. The Bureau of Labor Statistics reports the logging, wood, paper, and cabinetry industries have lost 242,000 jobs, or roughly 23 percent of its workforce, since 2006, and the American Forest and Paper Association showed that more than $1 billion is lost in exports and depressed wood prices.

Deforestation, in large part due to illegal logging, has made Indonesia the world’s third largest emitter of global warming pollution. According to the World Resources Institute, approximately 25 percent of Indonesia’s forests have been cleared since 1990. Endangered species such as the Sumatran tiger, orangutan, rhinoceros and elephant are on the brink of local extinction as their habitats continue to disappear. These practices have also led to grave human rights violations of workers and communities in harvest countries.

“International action on climate change must address deforestation, to which a significant contributor is the practice of illegal logging,” said Jake Schmidt, International Climate Policy Director for the Natural Resources Defense Council. “This decision is a step in the right direction, but unfortunately fails to take into account the environmental harm of illegal logging.”