Tariff tactics | Maine paper makers see survival in proposed 'dumping' rule
Photo/Amber Waterman
John Williams, president of the Maine Pulp and Paper Association
A U.S. Department of Commerce proposal to impose stiff tariffs on coated free sheet paper imported from China and Indonesia would help save American jobs and allow domestic companies to compete more fairly for business, supporters say. Among the proposal’s advocates are Maine’s paper manufacturers, who hope the tariffs will help stem the loss of jobs in the state.
The tariffs, proposed in March, would tax certain types of paper from the two countries at rates ranging from 10.62% to more than 100%, designed to prevent the Asian nations from so-called “dumping,” a practice that occurs when a product is sold into the U.S. market for less than the price charged in its home market or when its U.S. price is below the cost of manufacturing the product. Supporters say the tariffs would offset foreign government subsidies that allow the countries to sell paper at prices lower than the cost to produce it in the United States.
“If this decision holds, which I think it will, it will be a very good one for our industry,” says John Williams, president of the Maine Pulp & Paper Association. “It will help level the playing field for U.S. paper makers.”
Chinese and Indonesian producers already hold 30% of the U.S. market for coated paper. More than 60,000 American jobs have been lost in the paper sector since 2002, according to the Alliance for American Manufacturing. Maine lost more than 4,100 paper manufacturing jobs during that same time frame, according to data from the Maine Department of Labor.
Whether or not they make coated free sheet paper, U.S. producers will benefit from the ruling because it likely will reduce Asian imports worth more than $269 million and drive up domestic sales, says Williams.
Matthew Nightingale, a spokesperson for Twin Rivers Paper Co., which owns the former Fraser Papers Madawaska mill and lumber mills in Ashland and Masardis, says production in the United States means more jobs for workers and companies.
Taking aim at foreign competition
The dispute between U.S. and foreign paper makers came to a head when three paper companies — NewPage Corp., Wisconsin-based Appleton Coated LLC and Sappi Fine Paper North America, the U.S. arm of South Africa’s Sappi Ltd. — joined the U.S. Steel Workers in filing a joint anti-dumping petition with the U.S. Department of Commerce and the U.S. International Trade Commission last year.
The USW represents about 6,000 hourly workers at paper mills in nine states operated by the three paper producers. Miamisburg, Ohio-based NewPage Corp., the largest paper manufacturer in the United States, operates a mill in Rumford, while Boston-based Sappi operates mills in Skowhegan and Westbrook.
In a joint statement, Mark Gardner, president and CEO of Sappi Fine Paper North America and Tom Curley, president and CEO of NewPage Corp., said the tariffs would allow U.S. paper makers to compete fairly with foreign companies. “Commerce’s recognition of the impact that dumped coated paper products have had sends a message that our government is interested in restoring a competitive market in coated paper,” Gardner said.
In court filings, the companies claim trade conditions have grown more severe in recent years; industry experts estimate three-quarters of coated-paper imports come from China, which has invested in new factories and hired a cheaper work force.
Court records show the amount of coated paper manufactured in the United States of total market share declined from 46% during the first half of 2008 to 39% for the same period in 2009. In China and Indonesia, paper production jumped from 15% in the first half of 2008 to 29% for the same period in 2009.
“The Asian companies have an unfair advantage over us because they have access to cheap labor, new equipment and government subsidies that we can’t compete with,” says Williams. A report from the Economic Policy Institute says China’s paper industry benefited from more than $33.1 billion in government subsidies from 2002 to 2009.
“It’s incredibly expensive to upgrade a machine. I know of one company that spent around $100 million a few years back to improve its equipment and it was really just a tune-up,” says Williams. “We haven’t seen any new coated free sheet paper mills in decades.”
As part of its preliminary anti-dumping ruling in March, the U.S. Department of Commerce suggested a tariff rate of 135.8% on certain CFS paper products imported from China — up from a range of 30.82% to 89.71%; the agency proposed a single rate of 10.62% for all coated paper products imported from Indonesia.
That means a Chinese company assessed at 30% would pay the U.S. Treasury $300,000 in fees to export $1 million worth of coated paper to the U.S. For companies assessed at 135%, the import rate would be $1.35 million for every $1 million sent to the U.S., according to the Alliance for American Manufacturing.
But a preliminary finding is just the beginning of a long process.
The paper makers will have to prove to the Commerce Department that the Chinese and Indonesian paper producers received subsidies from Asian government agencies, says Thomas Prusa, professor of economics at Rutgers University.
Prusa, a specialist in international economics and trade policy, has studied the paper industry for more than 20 years. He says the companies will have to show the imports were sold in the United States at prices below the market cost of production. “This is a challenging case,” says Prusa. “It will be up to the companies to show how these imports cause material injury.”
In a similar case brought by U.S. paper manufacturers in December 2007, the International Trade Commission blocked final duties from going into effect because it found the domestic paper industry had not been harmed.
One of the most outspoken opponents of the tariffs has been, not surprisingly, Asia Pulp & Paper North America, which claims the tariffs would “negatively and artificially restrict competition in the U.S paper market,” according to an editorial piece written by Terry Hunley, acting president of APP. The company also says the tariffs will force prices up, hurting the country’s printing companies and resulting in lost jobs. According to the Printing Industries of America trade association, 73,000 printer jobs have been lost since mid-2008.
So far, however, Maine printing businesses aren’t concerned about the tariffs.
“In fact, we really don’t see that having any impact on us,” says Keith Klein, general manager of Target Marketing Maine, a direct mail company based in Rockland. “That’s probably going to affect more the directory folks, the catalogs and magazine people. It should really have very little impact on us.”
There are few Maine-based catalog printers. One of the country’s largest, Lisbon-based The Dingley Press, could not be reached for comment.
Tim Cochran, division manager in Portland for national paper supplier xpedx, says there hasn’t been much local outcry from printing companies, but imagined nationally there could be. “Probably in the printing world there’s that fear, but I don’t know how widespread it is,” he says.
APP also challenges U.S. manufacturers’ need for the tariffs to level the playing field in light of the billions received last year in an alternative fuel credit. Designed to discourage fossil fuel use, the credit applies to entities mixing an alternative energy source with a carbon-based fuel. Papermakers, already burning a wood byproduct known as black liquor, capitalized on the tax by mixing in diesel.
Some estimates peg the total credits awarded to papermakers at more than $8 billion. NewPage received $304 million in the alternative fuel credit in 2009, according to its U.S. Securities and Exchange Commission filing. Sappi received $152 million in 2009 and expected to receive an additional $45 million in the first quarter of 2010, according to its annual report.
The Commerce Department will issue more reports on anti-dumping tariffs in the coming months, with a final determination expected from the U.S. International Trade Commission in September.
Becky Bergman is a freelance writer based in Connecticut. Mainebiz E-News Editor Mindy Woerter contributed to this report.
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