January 18, 2018

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

MONTREAL - The imposition of duties on U.S. imports of Canadian newsprint will accelerate the transition from print to digital and threaten thousands of jobs on both sides of the border, say industry players including 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.

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.

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Newspaper front pages are displayed at the Newseum in Washington on July 10, 2017. Newsprint is the latest Canadian product to be hit with preliminary countervailing duties from the United States. The U.S. Department of Commerce slapped an overall 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, Kruger and Catalyst Paper Corp. of British Columbia. THE CANADIAN PRESS/AP, Carolyn Kaster

Newspaper front pages are displayed at the Newseum in Washington on July 10, 2017. Newsprint is the latest Canadian product to be hit with preliminary countervailing duties from the United States. The U.S. Department of Commerce slapped an overall 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, Kruger and Catalyst Paper Corp. of British Columbia. THE CANADIAN PRESS/AP, Carolyn Kaster

MONTREAL - The imposition of duties on U.S. imports of Canadian newsprint will accelerate the transition from print to digital and threaten thousands of jobs on both sides of the border, say industry players including 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.

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.

Paul Boyle of News Media Alliance said higher newsprint costs will be devastating for the industry.

"There's some really attractive options for readers to just go online and this is going to facilitate that. The problem is that in many small communities, local towns, newspapers still rely on print subscriptions and distribution," he said in an interview.

Boyle said he's hopeful that duties will eventually be overturned because they would result in "massive job losses" in the tens of thousands.

"If there's one message I do want to get to our friends in Canada is that the U.S. newspaper publishing industry is going to fight this."

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, exporting product valued at $1.6 billion in 2016. It is 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 a total of US$190 million in duty deposits by the end of 2018 from trade disputes over softwood lumber, supercalendered paper and newsprint.

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."

Boyle called Norpac's move a "Hail Mary pass" designed to help the mill. But he can't understand how a small producer with just 260 employees and little market share can damage an entire industry.

Quad Graphics, the largest commercial printer in North America, said higher prices caused by duties would be doubly painful since it would raise the price of advertising inserts that account for 20 per cent of its business, while hurting newspapers where these inserts are placed.

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.

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. U.S. trade czar Robert Lighthizer blasted the move as a "broad and ill-advised attack" on the American trade remedies system.

Joel Neuheimer, vice-president of international trade and transportation for the Forest Products Association of Canada, labelled that system a politically-motivated mess.

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

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

Note to readers: This is a corrected story. An earlier version incorrectly stated the impact of the duties on Resolute Forest Products.

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