Tariffs, paper shortage combine for financial pressure on newspapers electricity distribution vs transmission

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Under its new owner, North Pacific Paper Co. claimed that it faced unfair competition from Canadian paper mills. The U.S. Commerce Department agreed, recently slapping stiff tariffs on paper that the Canadian mills ship to American newspapers each year.

The tariffs come at a time when the U.S. newspaper business already has lost roughly 30 percent of its subscribers and more than 230,000 jobs because of the recession and readers’ growing preference for digital sources of news. Moreover, the supply of newsprint has shrunk due to the closing of many paper mills — also casualties of the turn to digital — and an increased demand for newsprint by publishers in China. That shortage is contributing to the steep climb in prices.

"It’s almost like a perfect storm with what’s going on in China and all the capacity taken off the market, and now with these tariffs," said Paul Boyle, a senior vice president of the News Media Alliance. "It’s just whacking the whole newspaper industry."

The alliance, which represents 2,000 U.S. and Canadian newspapers, is among several trade organizations fighting the tariffs. At least three dozen members of Congress have written to Commerce Secretary Wilbur Ross, warning of the impact on the U.S. newspaper publishing and commercial printing industries that together employ more than 600,000 people.

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To counteract the effect of the subsidies, the department in January imposed preliminary tariffs of up to 9.93 percent on Canadian paper companies. In March, it imposed an additional 22.16 percent preliminary tariff for dumping on all but two companies.

"Even if there is some type of reduction, a lot of damage already will be done by then," said John Snyder, CEO of PAGE, a cooperative of small- to mid-sized U.S. newspapers. PAGE partners with Cox Newsprint Supply, a sister company of the chain that owns the Atlanta Journal-Constitution, to negotiate lower prices than its members might otherwise get.

Snyder noted that several Canadian companies began raising their prices even before the tariffs were imposed. Resolute, the cooperative’s biggest supplier, hiked prices in October by $80 a ton and will raise them an additional $44 a ton over the next two months. At the same time, newsprint supplies are shrinking.

"Two things are happening, and both are tremendously detrimental to the small papers," Snyder said. "We have members who are literally running out of paper and nobody to go to for help because most of the mills are sold out. So it’s not just a pricing issue, but people can’t even get paper."

Among PAGE’s Florida members is Sun Coast Media Group, owner of papers in Venice and Port Charlotte. Due to the tariffs, the papers have fewer pages, have raised their subscription prices and expect to raise their ad rates. Staffs have been trimmed, though largely through attrition.

Larger papers also are feeling the squeeze. In a letter toreaders last Sunday, Paul Tash, chairman and CEO of Times Publishing, said the tariffs will increase the Tampa Bay Times’ newsprint costs from $600 to $800 a ton. Because the Times uses about 17,000 tons a year, that will add more than $3 million to the paper’s annual newsprint bill.

Gannett, which owns daily papers in Fort Myers, Tallahassee, Naples and Pensacola, hasn’t considered what steps it might take because of the tariffs, said William Barker, president and publisher of the Fort Myers News-Press and Naples Daily News. The News, though, posted a front-page note last Sunday that succinctly explained why U.S. papers don’t just "buy American," as some readers have suggested.

"You will see fewer inserts," said Patrick Henderson, the company’s director of government affairs. "Our customers are very price-sensitive — even a 2-cent increase in the cost of a postage stamp starts to drop the volume — and a 20 percent increase (in paper) is really going to impact the volume."

NORPAC’s petitions to the Commerce Department were based on "incorrect assessments of a changing market and appear to be driven by short-term investment strategies of the company’s hedge fund owners," News Media Alliance wrote to Secretary Ross.

The alliance disputed NORPAC’s claim that unfair competition from Canada caused the closing of more than 10 U.S. mills and the loss of more than 2,000 jobs. On the contrary, the alliance said, "they’ve closed because of the decline in consumption (of paper) with the switch to digital."

"It’s become a very regional market," said Henderson of Quad/Graphic. "This kind of paper is very, very dense, so trucking it around the country is prohibitively expensive. We do buy from NORPAC for our plants on the West Coast, but to ask them to try to get paper to our plants in the East and Midwest, we would pay more in shipping cost than the tariff would be."

Opponents of the tariff will have a chance to argue their case before the U.S. International Trade Commission, which will decide later this year if the unfair trade practices found by the Commerce Department caused enough harm to NORPAC and other U.S. mills that the tariffs should stay in place.

Jeffrey Schott, a trade expert with the Peterson Institute for International Economics, based in Washington, D.C., said it is not unusual for the trade commission to find no harm to a U.S. producer. The panel recently eliminated a nearly 300 percent tariff on Canada’s Bombardier aircraft company, which Boeing had accused of selling jets at unfairly low prices.

But Schott said such decisions are easier when they involve a narrowly defined industry like steel instead of one like newspaper publishing in which many different groups — journalists, readers, advertisers — could claim they were injured by tariffs.