One Washington mill can't supply America's newsprint. But its so-far successful trade case imperils many newspapers.
Therefore never send to know for whom the bell tolls; it tolls for thee. Or in this case, newspapers and their readers.
Lost amid the Trump administration’s tariffs on imported steel and aluminum, as well as billions of dollars more threatened against China, is a hefty duty the Commerce Department imposed on newsprint imported from Canada.
Of course, I will declare an interest here. But so should everyone who subscribes to a newspaper at this perilous time for local news. Or who watches cable television programs whose topics are seeded by newspaper journalism.
This is not an inside baseball story. It’s a cautionary tale of how tariffs are a blunt weapon in a complex environment, create more losers than winners, and often bring bad, even serious, side effects.
Most Read Business Stories
- No good deed goes unpunished — Bezos' gift and its discontents | Jon Talton
- Amazon considering opening 3,000 cashierless Go stores, report says
- In a bitcoin-dotcom-like frenzy, Tilray stock ends a wild day higher after wiping out 94 percent gain
- California: Drugmaker paid doctors to overprescribe Humira
- Nintendo is finally online, but a decade late and with a cheaper product
The trade spat was initiated by a single mill, North Pacific Paper (Norpac) in Longview, southwestern Washington. It employs fewer than 300.
Two years ago, Norpac was acquired by the private equity firm One Rock Capital Partners, which says its “portfolio is comprised of companies from a spectrum of industries, including chemicals and process industries, specialty manufacturing and health care products, and food manufacturing and distribution.”
Private equity can be patient saviors of distressed companies — or suck out their value for short-term gains, leaving dying husks. Interestingly, the latter is to blame for accelerating problems at many newspapers. More than 1,500 smaller (and some large) newspapers were bought by private equity.
Late last year, Robert Kuttner and Hildy Zinger assessed the damage in an American Prospect article:
“The malign genius of the private equity business model … is that it allows the absentee owner to drive a paper into the ground, but extract exorbitant profits along the way from management fees, dividends, and tax breaks,” they wrote. “By the time the paper is a hollow shell, the private equity company can exit and move on, having more than made back its investment.”
Savage cuts to The Denver Post by its owner, the New York hedge fund Alden Global Capital, provoked an editorial in The Post, “As vultures circle, The Denver Post must be saved.”
So even before One Rock entered the scene, this corner of Wall Street had proved an enemy of the press.
To be fair, One Rock says, “We draw on the expertise of our investors and operating partners to handle complex situations like corporate carve-outs, misunderstood companies, management transitions, and under-optimized companies.” It has the deep pockets of Mitsubishi as a partner.
Claiming that Canadian producers of uncoated groundwood paper — including newsprint — were dumping in the United States, selling below production costs and being subsidized by the government, Norpac took its case to the Commerce Department last year.
Most other paper producers didn’t join.
For example, Russ Lowder of White Birch Paper testified that his company’s closing of a mill in Virginia had nothing to do with Canadian dumping. White Birch owns mills in the United States and Canada.
He pointed out that this segment of the paper business has experienced a long-term decline because of falling print newspaper subscriptions. More capacity has been shuttered in Canada than here.
In an intriguing passage, Lowder said White Birch examined buying Norpac in 2016. “Our assessment at that time was that Norpac’s operations faced a number of challenges that had nothing to do with imports.”
Norpac says it has a “world-class manufacturing facility.”
The newspaper trade group News Media Alliance denounced the Commerce Department’s decision. A statement read in part, “We are stunned that a single U.S. mill in Longview, WA (Norpac) has been able to manipulate the trade laws to their gain, while potentially wreaking financial havoc on newspapers and other commercial publishers across the country.”
It’s important to understand that while newspapers often have a robust online presence and are experimenting with new ways to pay for journalism, print advertising and inserts are still the biggest source of revenue for most.
Whether the tariffs become permanent is up to the independent U.S. International Trade Commission. But even if it overturns them later this year, great damage will have been done to already ailing newspapers and other commercial publishers that depend on groundwood paper.
These sectors employ an estimated 600,000 Americans.
To be sure, even under NAFTA some trade disputes can linger for years. One example is the softwood lumber dispute, which goes back to the 1980s. “Advantage” has shifted back and forth between America and Canada.
But the newsprint tariff has much higher stakes. No newspapers, no democracy.
That might suit the Trump administration. The president called journalists “the enemy of the people.”
The people might feel otherwise, as the news deserts of America spread.