Canada Seeks NAFTA Review of U.S. Tariffs on Glossy Paper

  • Move comes only hours before Trudeau meets Obama in Manila
  • Canada arguing U.S. erred in calculating subsidy rates

Prime Minister Justin Trudeau challenged a U.S. decision to impose new tariffs on imports of glossy paper, just hours before the newly elected Canadian leader holds his first meeting with President Barack Obama.

Canada has requested a review under the North American Free Trade Agreement of import tariffs of as much as 20 percent on supercalendered paper from four Canadian companies -- Catalyst Paper Corp., J.D. Irving Ltd., Port Hawkesbury Paper LP and Resolute Forest Products Inc. The tariffs were imposed after U.S. producers filed a petition earlier this year claiming the Canadian companies were unfairly subsidized.

“Canada believes that the U.S. Department of Commerce erred in calculating subsidy rates on Canadian exports of supercalendered paper,” Trade Minister Chrystia Freeland said in an e-mailed statement.

The trade skirmish comes even as Trudeau has made it a priority to repair relations with the U.S. that have been tainted by Obama’s rejection of TransCanada Corp.’s Keystone XL pipeline. Trudeau is scheduled to meet Obama at the Asia-Pacific Economic Cooperation summit in Manila on Thursday.

The row also comes as a separate dispute over softwood lumber threatens to heat up for the first time in a decade. The Canada-U.S. Softwood Lumber Agreement that had temporarily resolved the matter expired last month, and the two countries have one year to iron out a new agreement.

Panel Review

According to Wednesday’s statement from the trade department, Canada requested a panel be set up to review whether the glossy paper duties have been applied in accordance with U.S. law. Known in the industry as supercalendered paper, it’s commonly used in magazines and newspaper inserts and flyers. Exports to the U.S. were valued at C$959 million ($721 million) in 2014, according to the statement.

Canada’s response comes one day after Bloomberg reported on the brewing trade dispute and marks Freeland’s first decision as a cabinet minister under the newly-elected Trudeau government. The move is an alternative to a judicial review by domestic courts.

‘Really Pleased’

Resolute Forest is “really pleased to see minister Freeland take a strong stand,” Seth Kursman, a spokesman, said in a telephone interview from Montreal, adding that the company cannot afford to wait for a lengthy dispute over supercalendered paper to proceed through the courts.

“Canada continues to need guaranteed access to the United States’ market,” Kursman said.

Richmond, British Columbia-based Catalyst supports the Canadian government’s move and hopes that it can gain the support of U.S. policymakers to push for a review of the duties, Len Posyniak, a company spokesman, said in a telephone interview.

Port Hawkesbury fully supports Canada in seeking a review of the countervailing duties, which were not applied in accordance with U.S. law, the company said in an e-mailed statement.

“We are confident that the review will reduce the duty or eliminate it entirely,” Shawn Lewis, general counsel to Pacific West Commercial Corp., which owns Port Hawkesbury, said in the statement.

Decision Challenged

In the case of supercalendered paper, U.S. producers Madison Paper Industries and Verso Corp. filed a petition with the American government in February claiming their rivals in Canada were receiving unfair government subsidies. Demand for the glossy paper has fallen by 5 percent annually over the past three yeas as readers switch to digital products, according to Bloomberg Intelligence.

Canadian producers affected by the tariffs say they plan to fight the decision and are asking the U.S. Commerce Department for an expedited review. Catalyst Paper has also filed an appeal in U.S. Court of International Trade.

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