Canada unleashes attack against U.S. trade practices
U.S. duties imposed on newsprint blow to B.C. papermaker
WASHINGTON — Prepare for a tense moment in Canada-U.S. relations — with hard bargaining on NAFTA on the horizon prompting nervous glances at Donald Trump to see whether he cancels the agreement, now compounded by a bitter, wide-ranging trade dispute.
Canada launched a broad attack against American trade practices in an international complaint about the superpower’s use of punitive duties, eliciting a caustic counter-swipe from the Trump administration when the document was made public Wednesday.
“[This is an] ill-advised attack,“U.S. trade czar Robert Lighthizer said. ”Canada’s claims are unfounded and could only lower U.S. confidence that Canada is committed to mutually beneficial trade.“
Two weeks from now, the unstated backdrop to the dispute will be squarely in the foreground. The countries will gather in Montreal for a high-stakes round of NAFTA negotiations, with no additional talks scheduled beyond March. Canadian officials say they know full well that Trump could invoke NAFTA’s withdrawal clause during this January-March period.
What would happen then? For starters, the Canadian dollar and Mexican peso would take a quick plunge, just as they did Wednesday after news reports emerged saying the Canadian government is more convinced than ever that Trump is poised to invoke NAFTA’s withdrawal clause, perhaps around the time of the talks in Montreal Jan. 23-28.
Two Canadian government sources insist that’s not true. Rather, they say there are different points of view within the Canadian government about whether Trump will pull the plug — as he’s repeatedly threatened to do — and, if so, when.
One official said the uncertainty could last several months, or even longer: even if Trump issues a withdrawal notice, the agreement provides six months before a country can actually leave.
Some U.S. observers also predict court fights over whether a president can abandon a trade deal without congressional approval.
Speaking of court fights, more are on the way.
Canada has launched a World Trade Organization complaint about the U.S. system for imposing punitive duties, alleging that they violate international law.
The complaint was launched in December but made public Wednesday — the very day, coincidentally, that the U.S. announced its latest trade action against Canada. The U.S. is imposing duties of up to nine per cent on Canadian paper, following similar penalties against Bombardier and softwood lumber, over what the U.S. alleges to be unfair Canadian trade practices.
Canada is now arguing that the entire American process for imposing anti-dumping and countervailing duties violates global trade rules. It cites five reasons, saying the U.S. levies penalties beyond what’s allowed by the WTO, improperly calculates rates, unfairly declares penalties retroactive, limits evidence from outside parties, and has a tilted voting system in domestic trade panels that, in the case of a 3-3 tie, awards the win to American companies.
The complaint holds global consequences. Canada cited 122 cases where the U.S. unfairly imposed duties on foreign countries, not just Canada.
“It’s saying: ‘The entire way in which the U.S. — you — are conducting your anti-dumping, countervailing procedures, is wrong,”’ said Chad Bown, a trade expert at Washington’s Peterson Institute.
”This is effectively Canada bringing a dispute on behalf of all exporters in the world.”
Some critics questioned the timing. Edward Alden of the Council on Foreign Relations called it a precarious moment for NAFTA and the global trading system, both of which are under threats and criticism from Trump: “Canada has just detonated a bomb under both.”
Canada-U.S. trade lawyer Mark Warner said Canada is well within its rights to take action on complaints that may have merit. But he questioned the strategic logic of antagonizing the Trump administration on the cusp of the potentially pivotal Montreal talks when it’s already unhappy with both NAFTA and the WTO.
VANCOUVER — Punitive duties on newsprint sales to the U.S. pose a threat to B.C.’s biggest papermaker, though its mills have other export options to mitigate the impact.
The U.S. Department of Commerce ruled Tuesday in a preliminary decision that Canadian producers of uncoated papers used to print newspapers, directories and catalogues are subsidized, acting on the complaint of a single American mill in Washington state.
“We’re obviously disappointed with this preliminary determination and we’re going to continue to defend ourselves against what we believe is an unwarranted trade action,” said Catalyst spokeswoman Eduarda Hodgins.
Catalyst faces countervailing duties of 6.1 per cent on its U.S. shipments. Quebec’s Resolute and Kruger face duties of 4.4 per cent and 10 per cent, respectively, and all other producers in Canada face duties of 6.5 per cent.
Catalyst is a private company, having been bought by a private entity and delisted from the Toronto Stock Exchange last year, so Hodgins wouldn’t disclose how much of its newsprint it ships to the U.S.
She allowed however, that the duty will apply to a “substantial portion of our overall Canadian production.”
Catalyst produces newsprint at its Crofton mill near Duncan, which employs 578, and its Powell River mill on the Sunshine Coast, which employs 441.
Catalyst does have other export options to mitigate the impact, said industry analyst Kevin Mason with the firm ERA Forest Products Research, but argued the trade action is a selfserving move that will only hurt U.S. newsprint consumers in the long run.
“Catalyst is in a reasonably good position because they can export to Asia,” where customers in India and other countries are scrambling to secure newsprint supplies. In North America, however, newsprint prices are high and companies are making profits, in the short term, Mason said.
In the longer term, however, Mason forecasts that the industry will face tough times due to dropping demand that will likely be sped along by higher prices for its customers, largely struggling U.S. newspaper publishers.
Craig Anneberg, CEO of North Pacific Paper Co. (Norpac), the company that launched the complaint, said it only seeks to “compete on a level playing field” against Canadian mills that get cheap fibre and preferred rates for electricity.
However, Mason said Norpac, which is owned by the New York hedge fund One Rock Capital and operates a single mill, isn’t being backed by any other American newsprint producers.
Higher prices for newsprint will just speed up the decline of newsprint use, which is falling at 10 per cent a year as it is, Mason said.
He predicted that this will result in more mill closures, and said the decision on duties benefits only Norpac.
“There’s nothing against anyone making money, but when you’re doing it and throwing a whole larger industry under the bus, speeding its demise for one small player, it seems definitely unfortunate,” Mason said.
Newsprint demand has decreased by 75 per cent since 2000 and is falling by about 10 per cent a year. Anything that further reduces demand is a blow to the newspaper industry, say trade associations in Canada and the U.S.
“We’ve seen papers like La Presse move to full digital, and if the cost of newsprint goes up, it’s one of those factors that’s going to accelerate a move to digital,” said John Hinds, CEO of News Media Canada.