North American Free Trade Under Attack: Newsprint is Just the Tip of the Iceberg

Abstract

Canada is now getting a good look at just how aggressively protectionist the Trump administration in the U.S. is ready to act. It has hit Canadian newsprint exports with punishing tariffs based on unjustified claims that the Canadian industry is both subsidized and dumping product below fair-market value into the U.S. marketplace. This latest trade skirmish, following President Donald Trump’s demands to renegotiate NAFTA, American-instigated trade challenges to Canadian exports of softwood lumber (yet again) and Bombardier aircraft, and Washington’s initial threats to levy duty on Canadian aluminum and steel (now on hold), should set off alarm bells beyond the newsprint industry. Canada’s policy-makers and exporters should be on notice that the administration is clearly eager to penalize the exports of an ostensibly free-trade partner based on overwrought claims. While newsprint sales have been declining everywhere, Canadian producers have nevertheless been able to gain a larger share of the shrinking market, having grown from controlling 60 per cent of combined U.S. and Canadian production in 1990 to 69 per cent in 2016, while developing new products and innovating to maintain a sustainable industry. Complaints about subsidies and dumping from U.S. competitors are plainly intended to halt and possibly reverse that trend. But in addition to hurting Canadian paper producers, including 21 mills in Canada and impacting thousands of workers, also punished in the process will be already struggling American newspaper publishers who will have to pay more for newsprint. While the U.S. has longstanding arguments about the market distortion caused by government’s role in Canada’s softwood lumber industry, the justifications it now considers as valid for claims of Canadian subsidization of newsprint are much broader and more creative. They include government programs to help the industry manage pine beetle infestations, provincial school tax-credit programs, local municipal revitalization programs and even the construction and repair of public access roads and bridges. It is hard to see how many of the dozens of programs identified by the Americans as subsidies fit the traditional definition. If these are now considered subsidies, then suffice it to say that there is scarcely a Canadian export that could not be accused of enjoying subsidies and become subject to trade disputes and tariffs. The signals are as unmissable as they are distressing. The U.S. government has begun using new laws that have never been tried and dusting off old laws that have not been used in decades to erect protectionist barriers. There was a 62-per-cent jump in the number of anti-dumping and countervailing-duty investigations initiated in the first year of the Trump administration compared to the previous year. The U.S. is leading the world in enacting discriminatory trade measures and its pace is speeding up. Canada’s government must mobilize to fight off these attacks against the country’s exports through the use of NAFTA’s Chapter 19 dispute-resolution panel mechanism, while ensuring it retains that mechanism in whatever form of NAFTA emerges from renegotiations. What is happening to the newsprint industry today could be happening to many more Canadian exporters soon.