Michaud calls for investigation into Nova Scotia paper mill subsidies

Rep. Mike Michaud sent a letter to the U.S. trade representative Wednesday to request a formal investigation into whether Nova Scotia violated any trade treaties when it agreed to provide $124.5 million in assistance to help a company restart a paper mill.

The letter, addressed to U.S. Trade Representative Ron Kirk, asks that all available details be gathered on the $124.5 million financial aid package Nova Scotia is providing as an incentive for Pacific West Commercial Corp. to purchase and restart the Port Hawkesbury paper mill, and then determine whether it runs afoul of Canada’s commitments under the North American Free Trade Agreement or the World Trade Organization.

Pacific West is scheduled to close on its purchase of the paper mill on Friday and says it will begin producing paper in early October. The aid package includes more than $60 million in forgivable loans, as well as funds to train workers, support forestry management in the region and purchase land.

“Maine’s paper industry believes the size and scope of Nova Scotia’s assistance is likely to lead to a decreased market share for the state’s mills,” Michaud wrote in his letter to Kirk.

Michaud, who once worked at Great Northern Paper’s mill in East Millinocket, is concerned the government assistance will give the Port Hawkesbury mill a competitive edge over Maine mills that produce similar types of paper. Port Hawkesbury has the capacity to produce nearly 400,000 tons a year of supercalendered paper, which is used in magazines, catalogs and newspaper inserts. Adding that much supercalendered paper, which is as much as 30 percent of the existing market, will put downward pressure on prices and force other higher-cost producers to close.

“Nova Scotia’s support of the Pacific West Commercial facility will disadvantage Maine’s mills at a time when the U.S. paper industry is already facing challenges from countries like China who do not play by the rules,” Michaud wrote.

If Nova Scotia’s financial assistance “is not consistent with their trade obligations, I urge USTR to raise the issue with the Canadian government as quickly as possible in all available forums,” Michaud wrote.

The U.S. paper industry can petition the U.S. International Trade Commission to impose tariffs on imports that are subsidized by foreign governments, but in order to make a case they must demonstrate harm has been done.

“It is my hope that any violations by Canada of its trade agreement obligations resulting from the Port Hawkesbury deal can be worked out expeditiously and without having to engage through protracted, formal procedures that require Maine’s mills to first demonstrate injury before they can be initiated,” Michaud wrote.

The Maine mill that could be affected most by the reopening of the Port Hawkesbury mill is UPM’s mill in Madison, which produces 220,000 tons of supercalendered paper a year and employs about 240 people.

Michaud asked Kirk to remember his tour in August 2010 of the Verso mill in Bucksport, which produces a similar type of paper that will be produced in Port Hawkesbury. “You … saw firsthand the importance of that mill to the surrounding community and to the state’s overall economy,” Michaud wrote.