The People's Republic of China (PRC) recently implemented trade policies to artificially discount soda ash exported from that nation. With the special tax subsidy Chinese soda ash will be more in line with the price of Wyoming soda ash and could negatively impact world market prices.
On April 1, China implemented a nine percent rebate on soda ash to Chinese exporters. U.S. Senators Mike Enzi, John Barrasso and Representative Cynthia Lummis, all R-Wyo., urged U.S. Trade Representative Ron Kirk in a letter today to take action to stop China's rebate policy and ensure Wyoming's environmentally friendly soda ash and the jobs it generates remain competitive. The letter, signed by the Wyoming delegation and eight others, points to the economic downturn and environmental health reasons foreign governments should stop unfairly taxing products.
"Hands down Wyoming's soda ash is a better product than synthetic Chinese produced soda ash. But value added taxes and rebates offered by the Chinese government discount their soda ash enough that it distorts global prices and woos buyers. We shouldn't let China leave Wyoming soda ash in the dust. We are asking the U.S. trade representative to eliminate tax hurdles and allow the best product to win without price distortions," said Enzi.
"It is critical the USTR sends a clear signal to China that we will stand up for America's soda ash producers at home and abroad. The rebate that China is offering domestic producers tilts the export market in their favor. Wyoming soda ash producers can successfully compete throughout global markets when the playing field is level," said Barrasso.
"As is the case with nearly every Wyoming product, the trona industry in our state produces a superior product that has proven its worth in the global marketplace," Lummis said. "Wyoming's trona industry has been an integral part of our state's economy for decades, but it simply cannot compete with an unfairly subsidized Chinese product. I am eager to work with my House and Senate colleagues to level the playing field for Wyoming trona."
Wyoming is responsible for nearly 90 percent of the world's soda ash production. The U.S. supply of soda ash could meet world demand for 1,000 years. U.S. soda ash from Green River, Wyo. and California is the most economically efficient and environmentally friendly in the world. The synthetic process used by many other countries costs twice as much and generates five times the amount of waste as natural U.S. trona. Soda ash exports totaled $1.4 billion in the U.S. in 2008 and the industry comprises nearly 20,000 jobs in Wyoming, Oregon, Connecticut, New Jersey and Georgia.
Text of the letter is below.
May 5, 2009
The Honorable Ron Kirk
U.S. Trade Representative
600 17th Street, NW
Washington, DC 20508
Dear Ambassador Kirk:
We are writing to express our serious concern over the decision by the People's Republic of China (PRC) to begin offering, effective April 1, 2009, its soda ash exporters a 9% rebate on the 17% VAT. We strongly urge you and others in the Administration to convey the U.S. government's concern over this development and request that the rebate offer be promptly eliminated.
U.S. soda ash, which is a primary raw material in the manufacturing of glass and detergents, is the most competitive and environmentally friendly in the world due to a unique natural deposit of the raw material, trona, located in Wyoming. Over 40% of U.S. production is exported. With U.S. exports in 2008 reaching $1.4 billion, soda ash is the second largest export from the Port of Portland, and thousands of jobs are dependent on this industry in a number of other U.S. states, including Connecticut, New Jersey, Georgia and Texas.
In 2003, China became the world's largest producer and consumer of soda ash. Roughly 45% of China's soda ash production is done through a synthetic process, the major byproduct of which is calcium chloride, a well-known contributor to environmentally-harmful toxic sludge emissions. This process generates five times the amount of waste as naturally-sourced U.S. soda ash. Moreover, Chinese synthetic soda ash production is highly energy intensive. About 13.6 million BTUs per metric ton are required to produce China's synthetic soda ash, compared to 6.3 million BTUs per metric ton needed to produce U.S. natural soda ash.
The recent PRC decision to offer the 9% VAT rebate to its exporters will further stimulate excessive capacity expansions in China. Chinese export prices, helped by the artificial incentive to export, will decline at the expense of U.S. exports, particularly in the Asia-Pacific region. This will happen in the midst of a major decline in global demand for soda ash. The new rebate is nothing short of irresponsible during this troublesome economic period.
Moreover, the export rebate represents an unfortunate policy shift in China that is harmful to China's own interests. In July 2007, PRC eliminated the 13% VAT rebate on soda ash exports. The decision to do this was, according to a WTO Report, designed to limit the export of products deemed to have an adverse effect on the environment and to reduce exports of highly energy intensive products such as soda ash. Consequently, the recent decision to reintroduce a VAT rebate on Chinese soda ash exports is a setback both for China and U.S. soda ash exporters.
Therefore, we urge you and others in the Administration to immediately consult with the appropriate senior Chinese government officials in an effort to achieve the elimination of the April 1 9% VAT rebate on soda ash.
We greatly appreciate your consideration of this important matter to the U.S. soda ash industry and look forward to your response.
Senator Mike Enzi Senator John Barrasso
Representative Cynthia Lummis Senator Ron Wyden
Representative Phil Gingery, M.D. Representative David Wu
Senator Joe Lieberman Representative Jim Himes
Senator Jeff Merkley Senator Robert Menendez
Senator Frank R. Lautenberg
cc: The Honorable Gary Locke