U.S. opens probe into Canadian paper mill subsidies

23 March 2015

The U.S. Department of Commerce has opened an investigation into Canadian government subsidies of a paper mill that competes with a Maine paper mill.

U.S. Sens. Angus King and Susan Collins of Maine and U.S. Rep. Bruce Poliquin of Maine’s 2nd District announced the investigation Friday. They said subsidies provided to the Port Hawkesbury paper mill in Canada are unfair and harm operations at the Madison Paper Industries mill in Maine.

The Madison mill closed for two weeks in late January and early February; management said that unfair competition from Canada caused the layoffs.

Both mills make supercalendered paper, which is used to print magazines, catalogs, newspaper inserts, direct mail materials, brochures, fliers and directories.

The U.S. International Trade Commission is scheduled to make a preliminary decision by April 13 on whether the Canadian mill is being unfairly subsidized. If it decides the Canadian actions are harming American workers, it could decide in May whether to impose a duty on paper from the Canadian mill.

In a Jan. 13 letter to members of Maine’s congressional delegation, Madison Paper President Russ Drechsel cited high energy costs and unfair government subsidies provided to Port Hawkesbury Paper in Nova Scotia as reasons for the temporary shutdown of the mill. The Port Hawkesbury and Madison Paper mills are among just eight mills in North America producing glossy supercalendered paper.

Port Hawkesbury, which is owned by Vancouver-based Pacific West Commercial Corp., is the largest producer of supercalendered paper in North America. It reopened in 2012 with $125 million from the Nova Scotia government, a package that included loans as well as money for training and marketing.

The Madison mill first contacted U.S. government officials about investigating Canada’s alleged subsidies in October 2012. The U.S. trade representative at the time, Ron Kirk, agreed to look into whether Port Hawkesbury aid conforms with international trade agreements such as those outlined by the World Trade Organization and North American Free Trade Agreement. The latest efforts could result in a case against the Nova Scotia government before the WTO.

In 2013, the Canadian mill said U.S. concerns about possible violations of WTO rules were “completely false.”

Dreschel’s letter said nothing had come of the efforts by the U.S. trade office, and it asked Maine’s congressional delegation to contact Secretary of Commerce Penny Pritzker. King, Collins and Poliquin sent a letter to Pritzker urging the Commerce Department to put a stop to “unfair Canadian trade practices in the paper market.”

U.S. government assistance to the mill in Madison has been minimal and nowhere near the financial benefit received by the Canadian mill, Drechsel said.