While American farmers, carmakers and others worry about the prospect of an escalating trade war between China and the United States, an industry that I know much more about is already feeling the effects of protectionist tariffs.
Since February, the price of newsprint — the paper stock on which the Commonwealth is printed — has been hiked 10 to 17 percent by the two suppliers from which we buy, all because of a trade dispute started by one small U.S. mill in the Pacific Northwest.
We’re lucky it’s not worse. Newspapers in some parts of the country are reporting increases of up to 32 percent.
That mill, North Pacific Paper Co., filed a complaint with the U.S. Department of Commerce and the International Trade Commission, claiming that Canadian mills — which control the lion’s share of the newsprint business in the United States — have been engaging in unfair trade practices. NORPAC claims that these mills are being overly subsidized by the Canadian government and selling their paper in the U.S. at lower-than-market price.
U.S. regulators have issued preliminary findings in NORPAC’s favor and begun hitting Canadian newsprint brought into this country with tariffs, putting the money in escrow until a final determination is made.
This dispute adds to an already challenging time for U.S. newspapers. Not only are they struggling with circulation and advertising declines, and adjusting to the disruptive force of the Internet, now they are being hit with price increases on newsprint that they haven’t seen since the early part of this decade, when they were better able to withstand them.
The tariff-related increases come on top of 11 percent hikes that started last fall when the supply of the commodity shrunk below the demand for it, as mills shut down or converted to making something other than newsprint.
The rationale behind tariffs like this — and it’s the basis for a lot of President Donald Trump’s “tough guy” approach to trade — is that American manufacturers have been decimated by unfair practices of our trading partners and the acquiescence of previous U.S. administrations. In order to create a more level playing field for U..S. manufacturers, America has to make the imports with which they compete more expensive, the argument goes.
The problem is, though, none of this occurs in a vacuum.
When the United States penalizes countries that export steel and aluminum to America, for example, these countries respond by hiking tariffs on the products we export to them. The result can be a double-whammy for some U.S. interests.
Take soybean farmers, for instance. They are worried now that not only will the price of their commodity fall if China replaces U.S. soybeans with Brazilian ones, but that farm equipment will become more expensive due to the higher cost of the metals with which tractors and combines are built.
In a trade war, some parts of the U.S. economy may pick up jobs, but others will lose them. It all depends on whose ox the battling governments decide to gore. In the meantime, prices rise for U.S. consumers, who ultimately shoulder the cost of tariffs or other protectionist tactics.
The other problem is that it’s not easy to correct trade imbalances once they have been established over a long period of time, nor does it happen quickly.
It may be true that the Canadian government has for decades been propping up its timber industry, although I can’t tell that what they do is any worse than how the U.S. government subsidizes row crops.
Be that as it may, whether unfairly or fairly, Canada presently supplies roughly 75 percent of the newsprint consumed in the United States.
For the last several years, the Commonwealth has split its newsprint orders between a Canadian-owned company whose mills are all located in that country, and a Canadian-owned company that operates three of the five remaining U.S. mills, including one in Grenada. The other two U.S. mills don’t deliver this far south.
Now that Canadian-made newsprint is more expensive than its U.S.-produced counterpart, the Commonwealth would love to buy domestically most, if not all, of what it consumes. So would a lot of other U.S. newspapers.
But the U.S. mills can’t handle the volume. Nor are they making any immediate plans to increase capacity because, with the steady shift toward electronic delivery of news, they don’t know how long the current bubble of greater demand for their production will last.
As a result, U.S. operations are overloaded and running way behind schedule. The Commonwealth can place an order that’s made at a Canadian mill 1,600 miles away, and it gets here on time. Place that same order with a mill 30 miles away, and it arrives two weeks late, if we’re lucky.
Donald Trump, who doesn’t like newspapers much these days, probably has little sympathy for our plight. But the inconveniences, higher costs and dislocations our industry is experiencing as a result of tariffs are going to be replicated for a lot of other businesses if Trump continues down his trade-war path.
Contact Tim Kalich at 581-7243 or tkalich@gwcommonwealth.com.
