Stop the presses — U.S. paper mills are upset over what they see as subsidized Canadian newsprint used by American newspaper publishers.
While the softwood-lumber dispute has strained Canada-U.S. trade relations, another struggle is brewing over other products that Canadian forestry mills sell south of the border, especially uncoated groundwood paper, such as newsprint.
Groundwood from Canada is subsidized and being dumped at below market value, based on U.S. manufacturer North Pacific Paper Co., also called Norpac.
Norpac complains that U.S. paper manufacturers are being hurt by Canadian groundwood: Newsprint, book pages and other uncoated products used in commercial printing.
The U.S. Department of Commerce is expected to issue its preliminary ruling on imposing countervailing duties by Jan. 8 and anti-dumping responsibilities by Jan. 16.
The groundwood battle comes as Canada requires an increasingly hard approach to renegotiation talks for the North American free-trade agreement. One of the main sticking points in NAFTA talks is Canadian support for and U.S. resistance to Chapter 19, which divides trade panels to settle disputes.
Norpac, the operator of a paper plant in Longview, Wash., whined about Canadian groundwood into the Commerce Department in August, and since that time, it’s requested Commerce officials to dig deeper into the business in Canada.
On Nov. 15, for example, Norpac stated Montreal-based paper manufacturer Kruger Inc. enjoys power subsidies through Hydro-Québec. Kruger has confessed its interruptible energy arrangement with Hydro-Québec, stated Norpac, which is owned by hedge fund One Rock Capital Partners LLC of New York.
Norpac stated other subsidies in Canada comprise the Ontario government supplying Resolute Forest Products Inc. with what amounts to breaks on power prices and also unfair financial help.
Canadian paper manufacturers and U.S. newspaper publishers assert that the dispute is not about trade. They point out that demand for newsprint has dropped sharply over the last decade, particularly as readers change to electronic alternatives such as notebooks, tablets and cellphones.
The News Media Alliance, whose members represent over 1,350 U.S. papers like the New York Times and The Washington Post, has sought unsuccessfully to have the U.S. International Trade Commission dismiss Norpac’s case. The commission issued a preliminary ruling in September that the U.S. groundwood industry has been hurt by Canadian imports, clearing the way for the Commerce Department to continue its own investigation.
“But clearly, print is declining through this digital transformation,” the alliance warned the commission in September. “Since print subscriptions have declined by more than 30 percent during the previous 10 decades, our industry is necessarily using less paper. This is merely a fact of life in the digital ecosystem. It’s nothing whatsoever to do with trade problems, but what to do with the electronic reality of publishing in 2017.”
The groundwood case is after the softwood pattern, with the Commerce Department contemplating countervailing responsibilities to punish Canada for what Norpac calls subsidies for uncoated groundwood paper. Anti-dumping duties would be levied on Canadian manufacturers selling their groundwood below market value.
Kruger, Montreal-based Resolute and Catalyst Paper Corp. of Richmond, B.C., are the three mandatory respondents in the countervailing investigation. Resolute and Catalyst are both mandatory respondents in the anti-dumping probe. Connecticut-based White Birch Paper Co., which has three Quebec paper mills, is the voluntary respondent in both the countervailing and anti-dumping instances.
In a filing to the Commerce Department, Norpac stated that there are five manufacturers of uncoated groundwood paper in the United States: Norpac, Resolute, White Birch, Inland Empire Paper Co. of Washington State and Maine-based Twin Rivers Paper Co..
Norpac said the Commerce Department should dismiss the views of Resolute and White Birch since “the firms’ interests lie in their Canadian manufacturing operations.”
However, Resolute warns that if the U.S. imposes punitive tariffs on Canadian imports, it is going to worsen economic hardships for American publishers.
“Demand for newsprint was in decline,” Resolute spokesman Seth Kursman said in a statement. “It’s the dominant business reality facing the newspaper market. However, it’s market erosion, not trade practices, causing the competitive turmoil.”
Norpac is targeting products such as newsprint, directory paper, book-grade newspaper and groundwood printing and writing paper. About 80 percent of newsprint is sold directly to newspaper publishers, Norpac estimates.
Catalyst and the B.C. authorities have asked the Commerce Department to exclude other paper goods in the U.S. countervailing and anti-dumping probes. “As written, the scope of the investigations covers additional programs like packaging, food and hygiene,” the B.C. authorities said in its submission in support of Catalyst.