October 4, 2012

U.S. to review Canada paper mill subsidy

By Kevin Miller kmiller@pressherald.com
Staff Writer

WASHINGTON -- The Obama administration's top international trade official has agreed to look into whether a Canadian financial package to restart a Nova Scotia paper mill violates trade agreements and threatens Maine papermaking jobs.

U.S. Trade Representative Ron Kirk said recent news reports about the Canadian government's $125 million rescue package for a mill in Port Hawkesbury raises "troubling questions about potential injurious" subsidies to the mill.

In a letter to U.S. Rep. Mike Michaud, D-2nd District, Kirk said he has directed his staff to look into the terms of the deal to ensure they are compliant with Canada's commitments under the North American Free Trade Agreement and the World Trade Organization.

Kirk said U.S. officials also will raise the issue later this month at a WTO Committee on Subsidies meeting.

"I can assure you that we will work speedily to obtain the facts of this matter," Kirk wrote. "Based on what we find, we will consider all feasible and effective options -- doing so aware that this is a time sensitive matter."

Michaud had raised questions about the Canadian aid package to Pacific West Commercial, the company that bought the former NewPage mill in Port Hawkesbury and recently began paper production.

The Canadian mill makes the same type of paper as produced at the UPM mill in Madison. Many of Maine's other major mills -- including Verso Paper's facilities in Bucksport and Jay -- also could be affected by a surge of new product onto the market at a time when many papermakers are struggling financially.

"The package reportedly includes millions of dollars in forgivable loans, more than a million dollars for worker training, reduced energy costs, funds to maintain the supply of wood fiber, land purchases, among other forms of assistance," Michaud wrote in a letter dated Sept. 26. "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."

Maine is the second-largest papermaking state in the nation after Wisconsin, and the industry supports thousands of jobs directly. So representatives from paper companies in Maine and across the country had expressed concern that loans, lower electric rates and other subsidies from the Canadian government could allow the Port Hawkesbury mill to sell paper at artificially low prices.

This also comes at a time when lower market demand already has suppressed the price for the type of magazine and catalogue paper produced by mills in Maine and at Port Hawkesbury. NewPage closed the Nova Scotia mill in September as the company entered bankruptcy.

The incident also illustrates the sometimes tenuous relationship between the forest products industries in Maine and adjacent Canadian provinces where mills, loggers and contractors both work with and compete against each other.

"I don't begrudge Nova Scotia for trying to keep the mill going. We would do the same thing for our mills here," said John Williams, president of the Maine Pulp and Paper Association, "but it has to be fair and it has to meet international trade agreements."

Williams stressed that he is not sure whether the financial package violates any trade agreement. He and others across the country simply want Kirk's office to review the deal to make sure nothing is amiss that could affect American jobs.

"This is a big producer of that kind of paper, and it is a substantial aid package that the Canadian government is offering," Williams said.

A representative from the Port Hawkesbury mill could not be reached for comment Thursday.

Meanwhile, the deal to restart the mill also is encountering backlash in Canada.

The Canadian Broadcasting Corp. reported Thursday that an environmental organization, the Ecology Action Centre, is blasting provincial officials for allowing the mill potentially to drop its certification under the Forest Stewardship Council. The council certifies that wood used in the mill was managed sustainably.

Provincial officials acknowledged to CBC that the new language would allow the mill to switch from Forest Stewardship Council certification to another type of certification, but they said the government would have the final say.

Kevin Miller -- 317-6256

kmiller@mainetoday.com

On Twitter: @KevinMillerDC

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