US to investigate Nova Scotia paper mill deal for ‘possible subsidies’

UPM's Madison paper mill.
Courtesy Wikipedia/Creative Commons license
UPM's Madison paper mill.
Posted Oct. 04, 2012, at 10:47 a.m.
Last modified Oct. 04, 2012, at 1:52 p.m.

The United States will investigate the government aid package that helped a Nova Scotia paper mill reopen last week, prompted by “troubling questions about potential injurious and/or WTO-inconsistent subsidies.”

Pacific West Commercial Corp. last week reopened the Port Hawkesbury paper mill in Point Tupper, N.S., thanks to a $124.5 million aid package from the provincial government. Paper started rolling off the mill’s production line yesterday, according to the Chronicle Herald.

Those in Maine’s paper industry say the Nova Scotia mill, with the help of government assistance, will have a negative effect on Maine mills that produce similar types of paper.

U.S. Trade Representative Ron Kirk wrote in a Oct. 1 letter to Rep. Mike Michaud that his office would, “on an expedited basis,” confirm information provided in news reports about the paper mill deal and would request details from the Canadian and Nova Scotian governments on the type of assistance they “have agreed to provide or plan to provide.”

“I can assure you that we will work speedily to obtain the facts of this matter,” Kirk wrote in response to a Sept. 26 letter from Michaud requesting such an investigation. “Based on what we find, we will consider all feasible and effective options — doing so aware that this is a time sensitive matter.”

Kirk added that the United States also would raise the matter of the Port Hawkesbury mill deal later this month at meetings of the World Trade Organization’s Committee on Subsidies.

Michaud, who once worked at Great Northern Paper’s mill in East Millinocket, thanked Kirk for his prompt response to the issue.

“We need to get to the bottom of this deal to ensure that no current trade laws have been violated,” Michaud said in a statement. “This deal could have a significant impact on our paper mills and the critical jobs and small businesses they support.”

The Maine mill that could be most affected by the newly reopened Port Hawkesbury mill is UPM’s paper mill in Madison, which employs about 240 people and produces 220,000 tons of the same grade of supercalendered paper a year. Supercalendered paper is the type used in magazines, catalogs and newspaper inserts.

Russ Drechsel, manager of the Madison paper mill, told the Bangor Daily News he was “very pleased” with Rep. Michaud’s efforts in pursuing the matter, “and with the response he has received.”

“It is reassuring that we’re well represented in Washington with this case,” Drechsel said, “and that the Congressman is looking out for the jobs at Maine’s pulp and paper mills.”

There had been talk about a potential trade dispute if the Port Hawkesbury mill reopened. Separate from any formal federal investigation, U.S. paper manufacturers could petition the U.S. International Trade Commission to impose tariffs on the Canadian paper imports, as some companies successfully did in 2010 in regards to cheap paper imports from China and Indonesia.

But the process of arguing for tariffs on subsidized imports is slow and often comes too late for manufacturers, Drechsel said. “Usually in those cases you have to wait until the damage is done before you can file, so there’s very little preparation to be done until you can demonstrate the damages.”

As far as Drechsel knows, this is the first trade dispute the United States has had with Canada over paper imports.

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