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The International Trade Commission has determined that American producers of newsprint weren’t harmed by imports from Canada, reversing tariffs imposed by the U.S. Commerce Department.
Unfortunately, the damage already was done to newspapers across the United States over the past several months when the cost of the paper they are printed on shot up 19-28 percent, forcing layoffs and reductions in publication days.
The tariffs were blamed for cutbacks, including the Nevada Appeal in Carson City, which laid off employees and reduced its print distribution to two days a week.
The Nevada Press Association was among newspaper representatives nationwide who protested to the ITC last month (see letter below) that the tariffs would only harm the industry — not help protect it. Sales of newsprint from U.S. mills was falling because of dropoffs in print circulation and the shift to digital subscriptions, and a rise in paper prices just made it worse.
Although that seemed like a fairly simple equation to people in the newspaper industry, the Commerce Department seemed to consider only that the Canadian paper industry was benefiting from policies that promote forest products there. In short, the mills in Canada get cheap access to trees on public lands.
The market has been operating across the border for decades in a reasonable facsimile of free trade, with stable prices and dependable supplies, until one company in Washington state cried foul. The Commerce Department responded by throwing an entire industry into crisis.
Because this is one facet of international trade into which I have some insight, it certainly seems to confirm doubts about the long-term strategy of the Commerce Department on tariffs and free trade: That there is no long-term strategy, nor is there a fundamental understanding of the consequences of its actions on domestic markets.
It also appeared to be a triumph of lobbying on behalf of one U.S.-side company: One Rock Capital.
The Wall Street Journal reported:
The tariffs represent a remarkable success by a relatively little-known private-equity firm at pulling the levers of power in Washington for advantage. For that, industry observers credit John A. Georges, an 87-year-old veteran of Washington and Wall Street, and a former paper industry executive with a history of working the nexus of policy, business and finance.
The result of Georges’ request: Newsprint prices shot up more than 20 percent when Commerce enacted the tariff. The Norpac mill said it hired back 50 employees in May.
Around the rest of the country, though, printers, newspapers and a variety of other publications were forced to lay off employees and scramble to come up with enough paper to keep printing. Are those publications likely to rehire people, or add back their print days? Not many, if any.
[embeddoc url=”https://nevadapress.com/wp-content/uploads/2018/08/Tariff-letter-trade-commission.pdf” download=”all”]Here’s a good explainer on the situation from the National Newspaper Association:
The Case of the Crippling Newsprint Tariff What just happened?
Escalating printing costs driven by tariffs on Canadian newsprint caught many newspapers by surprise this year. Comments about a system where one company could deliver such a blow to an entire industry ranged from wry to outraged. Now the International Trade Commission has said the tariffs will stop. Here is a quick explanation.
Q. Where did the tariffs come from?
A. NORPAC, a Washington State mill purchased by One Rock Capital Partners in 2016, asked the Commerce Department and International Trade Commission to impose them. NORPAC said Canadian suppliers were being unfairly subsidized by their governments and were dumping paper into the U.S. below fair value. Commerce did that on a preliminary basis in January and March, 2018. Canadian paper companies have been paying at the border since then. Deposits have been held by the U.S. government awaiting final determination.
Q. How were they stopped—or were they?
A. Not yet. But soon. The ITC on Aug. 29 voted 5-0 against imposing permanent tariffs. We will know the reasons by mid-September. Then, the Commerce Department instructs the Customs and Border Patrol to stop collecting the tariffs. Money paid in by the producers thus far will be sorted out and returned. The whole process takes a couple of months.
Q. Is this the end of it?
A. NORPAC has the right to appeal the decision. Because the case is not final until Sept. 17, its decision may not be known until then. But tariffs would not be re-imposed during an appeal, barring some unusual action.
Q. Could the White House reverse this decision?
A. The tariff petition did not come from the White House. It came from a single company using existing trade laws. The ITC is an independent commission, with five members appointed by the previous two presidents. President Trump has the right to appoint a sixth commissioner but his nominees have not yet been seated. The president does have some power to impose tariffs under his national security authority, as he did in the steel/aluminum cases, but there has been no indication that such an action is considered in the newsprint cases.
Q. What will happen to paper prices?
A. The market will determine that. Once the tariffs are gone, the heavy weight of these sanctions will no longer be on the producers. But decisions by some producers to get out of the market because of the tariffs could still affect the supply/demand balance.
Q. So some damage is already done?
A. Yes. Many decisions made across the paper-reliant industries have occurred over the past seven months that may be permanent. Some newspapers have folded. Many have trimmed pages or paper sizes. Lots of jobs went unfilled. Whether removing the tariffs will enable any of these decisions to be modified is unknown.
Q. Why did the ITC lift the sanctions?
A. We will know in mid-September when its final determination report comes out. ITC had two jobs to perform: 1) to decide whether the domestic paper producers had been injured by the alleged uncompetitive practices of Canadian producers; and 2) whether sanctions would cure the injuries. Its decision could have been based upon analysis of either of these questions. National Newspaper Association and others in the STOPP (Stop the Tariffs on Printers and Publishers) Coalition, had argued that any injury to domestic paper companies had come from falling demand for paper. NNA’s incoming president Andrew Johnson, publisher of the Dodge County (WI) Pionier, was one of two publishers to testify to ITC in July 2018. The other was Paul Tash, publisher of the Tampa Bay Times. Many, including the News Media Alliance’s consultant Charles River Associates, provided economic analysis of the allegations.
