Behind the Closing of a Maine Paper Mill, a Tale of Tariffs and the Times

As Maine paperworkers and The New York Times shareholders have found out, you can't tax your way to prosperity.

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Just Us 3/Flickr

It's a story that hits so many hot-button issues of the presidential campaign—free trade agreements, energy costs, monetary policy, taxes, income inequality, the loss of middle-class manufacturing jobs to foreign competition and technological change, corporate political influence, and government officials-turned-high-priced-Washington-lobbyists—that you might expect to see it on the front page of The New York Times. Yet in this particular case, the story is about the Times, which earlier this month announced it would take a $41.4 million loss "related to the announced closure of a paper mill operated by Madison Paper Industries." The Times Company owned part of the mill, though not a controlling interest.

The mill's closure means that 214 employees at the paper factory, in Madison, Maine, will lose their jobs. That is a sufficiently big deal that the governor of Maine, Paul LePage, greeted the news by issuing a statement of sorrow: "We are saddened to hear that 214 Mainers will be losing their jobs, and our thoughts go out to them and their families."

Whose fault is it? Gov. LePage attributed the issue in part to technological change. Businesses are increasingly reaching customers with ads on Google or Facebook, not with coupons or display advertisements distributed with Sunday newspapers or in glossy magazines. That means consumers are reading on computers or mobile phones, on glass screens made in China, Korea, Taiwan, Japan, or Taiwan, instead of on paper made in Maine. "With the rapid decline of daily newspapers and other publications, it is not surprising the demand for supercalendered paper is plummeting," the governor said.

Yet the statement from the governor blaming the decline of print for the job losses also mentioned foreign competition—not Asian glass-screen manufacturers, but Canadian newsprint mills. The persistence of the Canadian paper mills undercuts the argument that technology is to blame for the Maine mill's closing. Canadians have smartphones, too, after all.

"Success" in the paper business these days is a relative term, however. One Canadian mill with which the Maine one was competing was itself on the verge of closure before the government of Nova Scotia rode to the rescue with a bailout package to help that mill out of a bankruptcy-style reorganization. The province's Department of Economic and Rural Development and Tourism gave the paper mill tens of millions of Canadian dollars in loans and tens of millions of Canadian dollars more in grants to support "sustainable harvesting and forest land management." The Canadian government also allows the mill to harvest timber at below-market rates on "Crown Lands"—Queen Elizabeth's land, controlled by the Canadian government. Those subsidies from the Canadian government were at the heart of an unfair trade complaint by the American paper-makers, who banded together into a "Coalition for Fair Paper Imports."

That coalition, which included the partly New York Times-owned Madison Paper Industries, hired at least two Washington lobbyists, Gilbert Kaplan and Bonnie Byers, who are former Department of Commerce officials, and paid them $320,000 in fees over five years. The lobbyists, in turn, got the Commerce Department to slap a 20.18 percent tariff on paper imported to America from the subsidized Canadian mill. The government of Nova Scotia reportedly has paid $2.3 million (Canadian) in legal fees to fight the tariff, which costs the Canadian mill more than $3 million (Canadian) a month.

Not even the tariff on Canadian competitors was enough to keep the Maine mill open, however. CentralMaine.com reported that production will cease there the week of May 23: "Workers will stay on until June 12 and be let go in increments after that, according to Mike Croteau, president of the United Steel Workers Local 36 union, which represents many of the mill employees." The dispatch said Maine's papermaking industry had lost 2,300 jobs in the past five years.

Press coverage of the closure also mentioned as contributing factors "the strength of the U.S. dollar against the Canadian loonie" and "high natural gas costs."

One intriguing and not-so-easy-to-answer question these days is what is a foreign company, anyway. Maine's Madison Paper Industries was a joint venture of Finland-based UPM-Kymmene Inc. and of a New York Times Co. subsidiary, Northern SC Paper Corp. The Times Company itself is led by a British CEO, Mark Thompson, and the largest shareholder of its publicly traded shares is a company controlled by a Mexican billionaire, Carlos Slim Helu.

As for the "Canadian" companies hit by the trade tariffs for which the "American" Madison Paper lobbied, Governor LePage notes that at least two of them, Irving Paper and Catalyst Paper, have substantial operations in the U.S. and "together employ 1,200 Mainers."

If this were a New York Times dispatch about the situation, the paper might stress the income inequality angle by noting that Thompson's compensation nearly doubled last year to a reported $8.7 million, which may seem like a lot of money even if one isn't a soon-to-be unemployed union paper-mill worker in Maine.

But since this is not a Times dispatch about the situation, I am free to note that if Queen Elizabeth or the taxpayers of Nova Scotia want to subsidize cheaper paper for the newspaper I read, my own instinct is to say thank you and move on, rather than to try to hire some lobbyists to raise taxes on the stuff so that it is more expensive. As the Maine paperworkers and The New York Times shareholders have found out, you can't tax your way to prosperity, unless maybe you are a lobbyist.

NEXT: The Benedict Option Meets the Free State Project

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  2. The New York Times recently announced it would take a $41.4 million loss “related to the announced closure of a paper mill operated by Madison Paper Industries.”

    It turns out that not even a 20.18 percent tariff on Canadian competitors was enough to keep the Maine mill open.

    We will bring that paper mill back. Just a little more manna from you, good citizen, and 214 people can have unproductive jobs as a millstone around your neck.

    1. Seems like they would have seen the writing on the wall.

      1. To them it must have seemed like pulp fiction

        1. So the lawyers and the lobbyists made millions, and the lumberjacks and paper-makers got laid off. Color me shocked! Government Almighty must DOOOOO Something!!! Like, protect MORE jobs for lawyers, lobbyists, and regulators!

      2. Puns make me homicidal.

        1. So, like a buzzkill?

    2. Isn’t Koch Industries in the paper making business?

      Maybe they can purchase the mill.

      1. They own Georgia-Pacific.

    3. Yeah, they will bring some paper to its competitors.

  3. I can’t have been the only one to read the headline as “Raper Mill”, right? Right?!?

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  6. $320,000 is a lot of money.

    Sort of.

    Spread it out over 5 years: $64,000

    Assume Gilbert and Bonnie shared the cash. That is 32k per year.

    While I doubt it was their only gig, the article seems a bit dishonest to throw all the cash together in one big number, rather than talk about it in annual or “per person” rates.

    Just wanted to mention that…

    (Also worth mentioning, half of the amount B&G were paid was in 2013. Also, I think, worth pointing out.)

  7. The pulp and paper industry has been in decline since before I lived there in the late 70’s resulting from competition (domestic as well as foreign) and a tightening noose of regulations, The loss of another mill is a tragedy for the families involved, and a disaster for the town it’s in, but it’s not really something that new.

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  10. I’m just curious as to whether or not Mike Croteau, president of the United Steel Workers Local 36 union, has came to the realization that whatever United Steel Workers touches turns to shit? And isn’t it a bit ironic that after losing the majority of steel production to the Japanese, that that union would get into another industry and slowly and methodically destroy it too?

    1. Based on my experience as an employee of LTV Steel in 2001, the United Steel Workers’ leadership doesn’t actually give a shit about the plight of steelworkers. They just want those sweet union dues to flow into their coffers so that they can live high on the hog off the sweat of other people’s labor.

      1. I was a steelworker until 1981 at LTV/J&L Aliquippa works. The local economy went to shit when that closed down. I’m surprised that the had a mill open in 2001. I went into the military and it was gone when I got out.

  11. But now that the mill closed anyway the tariff is gone, right? I mean, there’s no reason to keep screwing American consumers now that the one producer they were getting screwed over to protect is gone anyway, right? Right?

    1. You would think so wouldn’t you. =)

  12. Unconstitutional…but no one cares….YET

    Virtually all of the press so far has focused on the implications for Europe. However, the scheming will have major effects on the U.S. regulatory regime as well. Among other changes, the relevant section of the agreement would force the EU to consult the U.S. government before adopting “legislative” or regulatory proposals. It would also commit U.S. authorities to consulting with Brussels before moving forward on legislation or regulatory schemes across a wide array of subject areas. The U.S. Congress and elected European bodies would then be further sidelined as the two executive branches increasingly rule Americans and Europeans by lobbyist-influenced decree.
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  18. The cost of a tree on Crown Lands in Canada is not “subsidized” but it is priced low because of the method of silviculture management using longer-term planning than the US Forest Service permits, and the USFS requires tree-harvesters to build “cadillac” roads suitable for RVs and tourists when the logging is done, on short-term cutting contracts. And the price the USFS sets for trees is actually “subsidized” according to Government Accountability Office studies done in the 1980s. It is cheaper to harvest trees in Canada than in the US, except on private lands in the Southeast.

    There has never been any “dumping” of forest products in the US by Canadian producers. What has been reported are Canadian land-management efficiencies reflected in the lower price of Canadian forest products.

    Certainly now that the Maine mill has closed, the tariff will be repealed? Don’t bet on it.

  19. Horseshit.
    As a non-NS taxpayer I had to pay to keep that crappy, inefficient, should-have-closed mill operational under some pretext of tree management or whatever.
    How is that not a subsidy ?

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