New paper tariffs could cost jobs at U.S. publishers
Staff at The Buffalo News in upstate New York can see Canada out their cafeteria window. If traffic is light, it's 10 minutes by car from their newsroom at 1 News Plaza to the Peace Bridge, which, halfway across the Niagara River, becomes Queen Elizabeth Way, Fort Erie.
This proximity to the border is convenient for Bryan Carr, who's responsible for the print edition of the News. Transporting newsprint – the thin, low-grade paper that arrives as thick rolls and leaves as stacks of newspapers – is a major cost. The mills that make this paper for the News are a few hours' drive away in Quebec: east of Ottawa and Montreal, respectively. Big trucks stocked with Canadian newsprint roll into Buffalo most days of the week.
But what used to be a thin gray line on a Google map is turning into a hard paywall for Carr and thousands of other publishers across America. In mid-January, the U.S. Department of Commerce slapped a tariff on Canadian newsprint, which is used by around 75 percent of U.S. publishers and is particularly prevalent in the Northeast. Even though the duty may yet be reversed, American newspapers – already struggling to go to print in an era of rapidly declining circulation – have to pay it in the meantime. Many publishers fear it'll add upward of 10 percent to their print costs, and could even result in job losses. "It's putting a lot of fear into newspaper employees across the country," says Carr. "This is the worst time, probably in newspaper history, to be imposing tariffs."
The tariff will affect publishers of all sizes, from The New York Times and The Wall Street Journal on down. But smaller papers will be hardest hit. The News Media Alliance, which represents many local newspapers in the U.S., says fighting to overturn the tariff will likely be its top campaign priority in 2018. In December last year, more than a thousand papers signed its letter urging Commerce Secretary Wilbur Ross not to levy it.
The tariff was initiated by the North Pacific Paper Company, or NORPAC, a Washington state-based newsprint producer which complained to the Commerce Department that Canadian paper producers have an unfair advantage over U.S. competitors.
Publishers across America have lined up to slam NORPAC's complaint. "With all the issues that we have going on in the world and the country, to see [the government] focusing in one mill which has complained about unfair pricing seems ludicrous to me," says John Johnson, CEO of a family-owned stable of newspapers based in Watertown, N.Y. – just 60 kilometers from the Canadian border. "It's bizarre ... I don't understand it. I don't agree with it. I think this is one of the things that makes people dissatisfied with government."
In a statement shared with CJR, NORPAC CEO Craig Anneberg says: "While we understand the concerns recently surfaced by some newspaper publishers, we strongly disagree with the notion that their industry requires low-priced, government-subsidized, imported newsprint from Canada to sustain its business model. High-quality journalism in communities across the country should not depend on unfairly traded inputs that cause material injury to a U.S. industry and American jobs."
But it's not just publishers that oppose NORPAC's stance – other papermakers do, too. Critics argue NORPAC doesn't speak for the wider newsprint industry, but is instead executing a selfish short-term ploy to line the pockets of its hedge fund owners. They say the tariff won't reverse the sharp decline in U.S.-based newsprint production, and that in the Northeast, in particular, Canada has always been seen as a local paper market – not a foreign one.
While the tariff isn't identical across all Canadian paper producers – it varies from company to company – prices have started to go up across the board. And the situation for U.S. publishers could get even worse in March, when the Commerce Department will decide whether to levy additional "anti-dumping" tariffs on Canadian newsprint.
"The Commerce Department definitely is open for business for these types of complaints," says the News Media Alliance's Paul Boyle. "They wanna push and show that they're trying to protect American jobs and potentially create manufacturing opportunities for businesses in the United States, which is a laudable goal. But anyone who's in the newsprint industry knows that the decline in newsprint manufacturing has everything to do with the shift from print newspapers to digital, and nothing to do with prices on products coming from Canada."
In 2015, the Obama administration put tariffs on the higher-quality paper used by many American magazines. Nonetheless, the new tariffs come as Donald Trump's "America First" rhetoric and pledge to renegotiate NAFTA have amped up tensions between the U.S. and its trading partners (although, since the latest round of NAFTA talks, some advocates are cautiously optimistic that Trump's stance on the pact has softened). Wrangling with Canada, in particular, has covered everything from passenger jets to other dead-tree products, like softwood lumber. Recently, Canada lodged a formal complaint against its southern neighbor at the World Trade Organization.
The U.S. media industry is heavily dependent on Canada for the paper it turns into news – historically, Canadian wood has been better suited to making newsprint than that found in the northern U.S., while the country's newsprint industry has benefited from good transport and energy infrastructure and loose environmental regulations. Today, Canada produces about three times as much newsprint as the U.S., even though the U.S. consumes about five times as much newsprint as Canada, according to data compiled by printing company Quad Graphics. While 25 mills still make newsprint in Canada, only five do so in the U.S. (Newsprint production in both countries has dramatically scaled back since the turn of the century.)
Newsprint sells relatively cheaply but is still expensive to make, so it's only really profitable to produce it at scale. Smaller U.S. mills have long declined to make it, and as newspaper circulation has gone down in recent years, other papermakers have also pivoted away from newsprint toward more lucrative products. "It made better business sense to find alternative uses for your paper," says Nicholas Basbanes, a journalist and author of the 2013 book "On Paper." "Y'know, toilet paper is a booming business."
This means newspapers stung by the new tariffs on Canadian newsprint can't just pivot to domestic suppliers – there aren't enough of them, and the ones that do exist don't make anywhere near enough newsprint. Certain thinner grades of paper – which U.S. publishers started buying to cut costs – meanwhile, can only be found north of the border.
"This [tariff] will have zero benefit for bringing any jobs back to the U.S. in new paper production," says Kevin Mason, managing director of Canadian firm ERA Forest Products Research. "We've seen with this softwood lumber [trade dispute between Canada and the U.S.] recently that U.S. consumers and homebuilders are bearing all the brunt of the duty. Canadians have completely passed it on. And that's gonna be the case with [paper tariffs] too."
Carr says The Buffalo News has never used U.S. newsprint in the 23 years he's worked there. While some papers might look to the tight domestic market for savings, most will likely pinch pennies in-house so their existing print operations can run as normal once the tariff takes full effect. The News, which (unrelatedly, Carr says) already decided to hike its subscription price late last year, will look to cut administrative costs and conserve newsprint, perhaps by outsourcing production of its TV insert.
Tariffs aren't a permanent reality; at least, not yet. Even if the second, anti-dumping levy kicks in in March, both tariffs will have to go through an investigation by the International Trade Commission – the independent federal agency tasked with determining whether complaints of unfair cross-border trade practices have merit – before the Commerce Department reaches a final decision. If the duties are overturned – for example because NORPAC can't prove it's been unfairly injured by Canadian competitors – publishers will get their money back in the form of a rebate. Legislators from both parties are pushing back against the tariff, including New York's Democratic Senator Chuck Schumer.
In the meantime, however, news organizations that can scarcely afford extra expenditure will have to foot significant new costs to keep churning out papers. And if the newfound protectionist vision of U.S. policymakers does win out long-term, then publishers will likely have to make some tough choices in the near future.
"If the tariffs stick and they're of the magnitude they say they're gonna be, then this is gonna drive up my costs where I'm gonna have to lay people off as a result of it," says Johnson in Watertown, N.Y. "It's gonna be really hard when I tell people that they're losing their job so a multimillionaire hedge fund owner in New York City can pocket more [money]. They're gonna be pissed about that."