U.S. newspapers are sounding the alarm that they face having to raise subscription prices, reduce the frequency of publication or even be forced to shut down in some cases after the Department of Commerce imposed duties on Canadian newsprint.
The U.S. Commerce Department will be slapping preliminary countervailing duties averaging 6.53 per cent on most Canadian producers of uncoated groundwood paper, such as newsprint, likely effective next week. The countervailing rate could increase in mid-2018 and there will also be a determination by the department in March on whether to place anti-dumping duties on Canadian groundwood.
The News Media Alliance, which changed its name in 2016 after being known as the Newspaper Association of America, noted in a statement on Wednesday that newsprint consumption in the United States has plunged 75 per cent since 2000. The industry's turmoil is due to readers turning in droves to digital devices and away from printed copies, so it is wrong for a paper mill in Washington State to blame Canadian newsprint for hurting the U.S. manufacturing sector, said Paul Boyle, the alliance's senior vice-president of public policy.
"The well-documented decline in the U.S. newsprint market is not due to unfair trade, but to a decade-long shift from print to digital distribution of news and information," Mr. Boyle said.
Groundwood from Canada is subsidized and being dumped at less than fair value, according to complaints filed to the Commerce Department in August by U.S. producer North Pacific Paper Co., also known as Norpac. Based in Longview, Wash., Norpac argues U.S. paper makers are being hurt by Canadian shipments of groundwood south of the border.
Norpac played down the countervailing tariff's impact, estimating that it would amount to less than 5 U.S. cents on average for a copy of printed newspaper.
Mr. Boyle criticized Norpac, owned by hedge fund One Rock Capital Partners LLC of New York, for minimizing the ripple effects of the duties. "Not only does it appear to be fuzzy math, it shows the hedge fund's complete ignorance of the business of their customers," he said. "Faced with increased costs for newsprint, there are several potential scenarios. The cost of duties are passed on to print subscribers, which accelerates the movement to digital platforms; some newspapers decide to move from seven-day to three-day delivery of printed newspapers, which has happened in roughly a dozen markets already; and some small newspapers – striving to survive – will close."
The News Media Alliance has almost 2,000 members, including large dailies such as The New York Times and The Washington Post, but the main concern of publishers and newsprint producers is the fate of newspapers in towns and small cities across the United States. More than 1,100 small and mid-sized newspapers – members of the alliance – signed a letter in December to warn Commerce Secretary Wilbur Ross that punitive duties on Canadian newsprint would have a devastating impact.
Despite such warnings, the Commerce Department decided on Tuesday night to impose countervailing duties. The move will harm 21 Canadian mills, including 12 in Quebec and three in British Columbia, according to the Forest Products Association of Canada. There are two groundwood mills in Ontario while Newfoundland, Nova Scotia, New Brunswick and Alberta each have one mill.
On Wednesday, a wide range of individuals and groups in Canada slammed the duties, including Foreign Affairs Minister Chrystia Freeland and Natural Resources Minister Jim Carr; Unifor, Canada's largest private-sector union; the Forest Products Association of Canada; and Canadian Manufacturers and Exporters.
Seth Kursman, a spokesman for Montreal-based Resolute Forest Products Inc., said One Rock Capital is effectively driving the trade agenda in newsprint on behalf of Norpac. "This is about a hedge fund's own narrow self-interests," Mr. Kursman said in an interview. "This is an effort to perversely manipulate trade laws for short-term gain, putting in jeopardy the communication lifeline of so many small and rural communities in the United States."
Resolute, Montreal-based Kruger Inc. and Catalyst Paper Corp. of Richmond, B.C., are the three mandatory respondents in the countervailing investigation. Resolute and Catalyst are the two mandatory respondents in the anti-dumping probe. Connecticut-based White Birch Paper Co., which has three Quebec paper mills through its Canadian unit, is the voluntary respondent in both the countervailing and anti-dumping cases.