01/10/2018 06:53 EST | Updated 01/10/2018 07:21 EST

U.S. newsprint duties will accelerate shift to digital, says Resolute

MONTREAL — The American government's imposition of duties on exports of Canadian newsprint will only accelerate the transition from print to digital and threaten thousands of U.S. jobs, says North America's largest newsprint producer.

"There are 600,000 workers in the newspaper publishing sector as well as the commercial printing sector who are at risk," said Resolute Forest Products spokesman Seth Kursman.

"And we know as a manufacturer of this product that if demand continues to go down over time this has an impact on our ability to operate facilities."

The U.S. Department of Commerce slapped an overall preliminary countervailing tariff of 6.53 per cent on about 25 Canadian plants, mostly in Quebec and Ontario, following an investigation that began in August 2017.

Canada is the largest exporter of newsprint in the world, with a market dominated by Resolute Forest Products (TSX:RFP), Kruger and Catalyst Paper Corp. of British Columbia.

Resolute faces a preliminary duty of 4.42 per cent while the Catalyst Paper duty is 6.09 per cent. The duty against Kruger is 9.93 per cent and the preliminary penalty against White Birch is 0.65 per cent.

It's the third time the U.S. has slapped duties on Resolute. The Montreal-based company expects to pay $185 million in duties from trade disputes over softwood lumber and supercalendered paper. The countervailing newsprint duty is expected to result in another $45 million a year in deposits.

"Today's preliminary decision allows U.S. producers to receive relief from the market-distorting effects of potential government subsidies while taking into account the need to keep groundwood paper prices affordable for domestic consumers," stated U.S. Commerce Secretary Wilbur Ross.

The U.S. Department of Commerce will make another decision on anti-dumping duties in March and the U.S. International Trade Commission will be asked to rule on the two measures in August.

The U.S. government began investigating Canada's newsprint industry after Washington-based North Pacific Paper Co., complained Canada was dumping newsprint into the American market and unfairly subsidizing its industry at home.

It is the same argument made regarding Canada's softwood industry, which led to the imposition of both countervailing and anti-dumping duties on most Canadian softwood exports to the United States.

"What the U.S. uncoated groundwood papers industry wants is a level playing field, and this decision is an important step forward for American producers, workers and their families that have been the victims of unfair Canadian trade practices for too long," stated Norpac chief executive Craig Anneberg.

The company estimates the ruling will raise production costs by less than five cents per newspaper.

Anneberg said that's a "small price to pay to preserve American manufacturing jobs" in Washington, Mississippi and Georgia.

However, Kursman said Norpac is referring to three states where Resolute operates paper mills.

By contrast, Norpac has just one mill and is owned by a New York private equity firm.

"Now they are perversely manipulating trade law in an effort to satisfy their own personal greed. This is about lining their own pockets with cash at the expense of hundreds of thousands of American jobs."

Kursman said Norpac was alone in its challenge because production margins are "razor thin."

In a joint statement, Foreign Affairs Minister Chrystia Freeland and Natural Resources Minister Jim Carr called the duty rates "unjustified."

"Any duties will have a direct and negative impact on U.S. newspapers, especially those in small cities and towns, and result in job losses in the American printing sector," the ministers said in a statement.

"We will continue to work with our forest industry, provinces and territories, and communities across Canada to defend this vital sector against unfair and unwarranted U.S. trade measures and practices."

The government said it has launched a wide-ranging complaint against the United States over its trade practices. It has asked the World Trade Organization to examine the American use of punitive duties, alleging that they violate international law.

The complaint was filed last month but was released Wednesday.

Joel Neuheimer, vice-president of international trade and transportation for the Forest Products Association of Canada, said the U.S. trade remedy system is a politically-motivated mess.

"This is not really based on sound objective methods," said Neuheimer. "This is political."

Neuheimer said about 5,000 jobs across Canada are directly linked to the newsprint business, and unlike softwood, where the industry had high prices to help offset the hurt of the U.S. duties, newsprint margins are already so low that the impact of this is going to be felt immediately.

The union representing workers at Resolute, White Birch and Kruger said jobs will be hurt because producers won't likely be able to turn to other foreign markets.

"We will be very lucky if we maintain the status quo with regard to layoffs," said Renaud Gagne, the Quebec director of Unifor. "Maybe we are going to experience plant shutdowns for a few weeks."

— With files from Mia Rabson in Ottawa and Julien Arsenault in Montreal