Recessions are complicated business. Demand shrinks. Markets go awry. Jobs are lost. And you want to look for someone to blame. Some domestic paper suppliers in the US have managed to push out some foreign suppliers unfairly using trade rules to their advantage, raised their prices and in the process have hurt many industries in the US that rely on paper, printing, for example. You are looking at a few paper mills intent on pushing many American printing jobs to Mexico and
Canada. Ends up not only are they hurting printers, these paper mills hurt themselves when they push the foreign suppliers out through unfair arguments placed with the
Department of Commerce. Their action has also awakened to
China to contemplate measures that looks like the early signs of a trade war. Trade benefits are across the board. Protectionist tendencies, though sentimentally understandable, are counterproductive.
Forbes: The Asian Paper Chase Economic downturns typically spark a spate of allegations by U.S. companies and unions that foreign exporters engage in pricing and business practices that violate global trade regulations...... Three U.S. paper companies and a union representing 6,000 mill workers filed a petition last fall against Chinese and Indonesian competitors ..... "We will take product and put it into different markets: Mexico, Canada, South America, Southeast Asia. To redirect it to other parts of the world will be relatively simple." .... Printers of glossy brochures, catalogues and viewbooks just across the border in Mexico or Canada would benefit from lower paper prices and pass those savings along to customers, who might be compelled to switch from costlier domestic printers. ..... Coated paper imports from China and Indonesia in 2008 were worth an estimated $228.7 million and $44.3 million ...... only 8% of total shipments from APP's China arm go to the U.S.; and American clients account for 9% of its Indonesian business ..... the reason the petitioners-- Appleton Coated in Kimberly, Wisc., Sappi Fine Paper of Boston and NewPage Corp. in Miamisburg, Ohio--are losing market share is due to declining demand for paper products in the U.S., which is reflected both in the number of catalogs mailed and the number of magazine pages advertisers buy, which have been steadily dropping since 2007
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Trade wars are a very bad idea. Trade wars don't cure recessions, they make them worse. By now that thought is common sense in economics. It is imperative that common sense wins the day in this case. Otherwise there is going to be economic hurt all around. The global economy is too interconnected for
protectionism, however well intentioned, to work. If you act to protect 6,000 jobs, you are going to end up losing 60,000 jobs in some other industries. The market truly is the best force to decide. Protectionism does not even protect the industries it seeks to protect. The "protected" companies end up catching cold. They start performing not so well no more.
Facts
- NewPage overall revenue was better in 2009 than 2010. Foreign coated paper left the US market in 2010.
- NewPage Core Paper Prices have increased $50 per ton.
- Paper supplies are now at an all time low.
- Even though they had better sales in 2010, their debt increased to a whopping $697 million.
As NewPage net income increased foreign paper (specifically coated stock) was present in the market place. When NewPage net income went down foreign coated paper was no longer being imported. NewPage had better earnings and market share when there was foreign coated paper was present. It is better for NewPage if foreign coated is present in the US market.
- As the ability for printers to buy coated paper has decreased, NewPage raises their price when they have no competition.
- With NewPage’s anti-competitive tactics, they have removed much needed paper from the market leaving printers hurting from higher prices.
- As a result of greed, mismanagement and Cerberus’ business model of running up debt and shutting down mills. This is what happened to the NP Plant in Kimberly, WI.
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