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Open Letter on U.S. Tariffs on Uncoated Groundwood Paper

There is much talk these days of fair trade and playing by the rules so American workers are not disadvantaged. As the U.S.’s closest ally and trading partner, no one is more invested in the U.S.’s economic success than Canada. Through trade and investment, we are creating good jobs on both sides of the border. Yet it’s clear that one company is not playing fair. This rogue actor seeks to game American trade laws for its own short-term advantage, while putting thousands of U.S. and Canadian jobs at risk.

I’m talking about the billion-dollar private equity firm at the center of the uncoated groundwood paper dispute – One Rock Capital Partners, and its investors. Based out of New York City, One Rock has $1.4 billion in assets and answers to major investors such as Mitsubishi Corporation.

In 2016, One Rock purchased the North Pacific Paper Company (NORPAC) and its mill in Washington State. Less than a year later, the fund claimed it was being injured by imports from Canada, and asked the Department of Commerce to impose tariffs. Today, Canadian paper products – which include standard newsprint – face tariffs of up to 32 per cent.

This one company is not being injured by Canadian newsprint, and its profits are not at risk. In fact, NORPAC’s mill supplies the U.S. Northwest, while the majority of Canadian newsprint is sold in the U.S. Midwest and the Northeast, which has few U.S. supply options.

One Rock’s actions have come at the expense of the American printing and publishing industry.  As a result of these duties, costs for newsprint are rising at a time the industry can least afford it.

The reality is that we are living in a technology-based era and the way we consume media is changing. The demand for newsprint in North America has declined by 75 percent since 2000. This change is caused by the shift towards digital platforms, not because of Canadian imports.

Tariffs on Canadian newsprint only hurt the very industry they are intended to protect. As the cost of newsprint goes up, those higher prices will be passed along to consumers. In turn, newspapers and printers will be forced to reduce their demand. And though tariffs will hurt everyone in the industry, big and small, they no doubt hit smaller local newspapers the hardest.

In early May, the Illinois Press Association conducted a survey of members, representing 250 newspapers throughout the state.  Due to the tariffs, nearly half have reduced page count.  Others have opted to not fill open positions, and reduced free community advertising programs.  After 155 years of continuous operation, one rural publication expressed concern that continued newsprint price hikes could jeopardize its ongoing operation.

In Texas, the Ozona Stockman learned that its newsprint supplier can no longer get newsprint from its regular US plant. Benson, Minnesota’s Swift County Monitor-News reported a 43 percent increase to its newsprint costs. Larger operations are not immune either. Rising costs due to the tariff dispute led the Tampa Bay Times to cut approximately 50 jobs in April.

It’s not surprising to see that the majority of U.S. newsprint manufacturers and the American Forest and Paper Association oppose One Rock’s actions. Publishers, printers, paper suppliers, and distributors have joined together under the Stop Tariffs on Printers and Publishers (STOPP) coalition in a fight to protect their businesses, workers and communities. These companies, which together employ over 600,000 workers in the U.S., categorically reject what this private equity firm is trying to do.

Yesterday, twenty members of Congress testified in opposition to the duties at a U.S. International Trade Commission hearing on the issue, an unprecedented number. In contrast, there isn’t a single American elected representative supporting the duties.

It is simple: this tariff is a tax on American newspapers and printers, and will harm the local communities they serve. The Administration still has time to set this right when a final decision is made in the coming months. I encourage the Secretary of Commerce to use the discretion afforded to him under U.S. trade law and consider the broader impact of One Rock’s actions. Secretary Ross has the chance to stand with the hundreds of thousands of American workers, readers and communities harmed by these duties.

 

David MacNaughton
Ambassador