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"When your competition has the deep pockets available from their government, the only real way to compete is to get your own deep pockets."

Jun 22, 2007 12:00 AM

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The paper tiger

Responding to a complaint by NewPage Corp., several months ago the U.S. Commerce Department imposed tariffs on two Chinese paper manufacturers. In an "Open Letter to Printers," Mark Suwyn, NewPage's chairman and CEO, explained the company's actions.

“One of the principal reasons for our industry's poor financial performance is the illegal trade practices of producers of coated free sheet in China, Indonesia and South Korea. Our detailed analyses indicate that they are receiving substantial improper subsidiaries from their governments and are selling below their cost into the United States.”

Suwyn goes on to address two potential concerns: coated free sheet capacity in the United States and the impact of removing access to low priced Asian papers. "We believe there is substantial ramp up capacity‚ available at existing U.S. mills, as well as additional swing capacity that can switch from coated groundwood to coated free sheet and from uncoated free sheet to coated free sheet," he writes.

As for the low priced paper question, Suwyn says, in part, "We recognize the printer's need for greater economy, but we do not believe that illegal dumping and subsidies are the answer."

NewPage notes that SMART Papers has gone on the record in support of its actions "and we have reason to believe that others privately support our case."

PIA issues critical statement

We asked InRegister readers to weigh in with their comments. In the interim, Printing Industries of America/Graphic Arts Technical Foundation (PIA/GATF) offered this statement from Michael Makin, president & CEO, characterizing the tariff as, “Yet one more blow to domestic printers sure to be impacted by pricing and supply dynamics of the CFS paper market.”

Makin further said: “PIA is a strong supporter of free and fair trade both at home and globally. As such, we believe that striking an appropriate balance between protecting the domestic producer and the end-user of an internationally traded product is critical. We hope that the full anti-dumping and countervailing duty investigations weigh seriously the impact of the printing industry as it considers the economic ramifications of imposing tariffs on foreign sources of CFS paper, and that it determines such penalties are unwarranted.”

Readers’ comments follow.

How about a little domestic help from Uncle Sam?

"It is common practice to undercut your competitors, even sell at a loss, in the hopes that they will wear down and be forced out of business.

"Once your competition is shut down, you are free to enjoy your monopoly and do whatever you want with prices.

"Deep pockets always win in business. When your competition has the deep pockets available from their government, the only real way to compete is to get your own deep pockets. Instead of trying to influence foreign governments, get our government to subsidize the local producers and level the field. When governments help their citizens, they are doing what they were created for.

"Given the choice, people will always buy from local producers. Price is the only choice most purchasing agents are given. If the competition from China is neutralized with our own subsidies, China will go away or at least charge a fair market price for their goods. They cannot be competitive with the huge additional cost of shipping, even if they are paying nothing for the labor to produce the product.

"People, and especially people with deep pockets, hate to lose money. They will not continue forever down a path that has no chance of success."—John F. Trainor (Montrose, CO)

Too little too late?

"I absolutely support the paper tariffs. I fear it may be too little too late, but I suppose something is better than nothing. I think our country is being slowly coaxed into a dependence on foreign suppliers for many things other than just cheap paper.

"I wish everyone would understand that ultimately, our national security is at stake. This is a clear result of our selfish business and consumer practices. I admit, I shop at Wal-Mart and buy imported paper so I am just as guilty of taking advantage of cheap foreign products as anyone else. The flood of foreign products into our country is clearly no accident, and should not be a surprise to anyone. This country has been too strong for too long in the opinion of many across the globe, they see a chink in our armor. The Asian counties have actually found our Achilles heel and will continue to exploit it as long as we will allow it.

"Our government is asleep at the wheel with respect to foreign trade and immigration just to name a couple of issues. I am not saying that all foreign trade and all immigrants are bad, in fact we need them but we have to remain in control. Our children’s future and options for their freedom of choice with respect to education, careers and possibly even family are being slowly eroded. At this rate, we as a nation will reach a critical point in just a few short years where we will no longer be able to run our country for the good of the country because we will not be calling all of the shots.

"We need discipline and fiscal responsibility now more than ever. We need to continue to lead the world and I believe we are the only ones who can. We have to get back to doing the things that made us the greatest nation on Earth to begin with. We can only accomplish this if we lead by example, spiritually, politically and monetarily. I am convinced the most of the world governments need and want us to remain strong. I believe in this country and I believe in the American spirit. The time has come for us to roll up our sleeves and get to work."—Kevin Clopton, Brothers Trade Printing (Atlanta)

‘Protectionism at its lowest’

"It is ironic that a paper manufacturer has put forth the effort to protect the domestic paper making industry for fine printing papers. We printers have faced the off-shore print dumping for a very long time, yet as a cottage industry (fewer than ten percent of US printers employ more than 20 workers) we are helpless in curtailing the cheap imported printing products we compete with every day. Now, with additional tariffs added to these imported papers, it make even more economic sense for our clients to go offshore as the paper price penalty will only exist here, in our neighborhoods.

"[This is] protectionism at its lowest. It appears the continuation of government tunnel vision is alive and safe in Washington. Was the plight of the United States printing Industry not considered? Have PIA and NAPL been completely ignored? Forgetting the fact that paper pricing will go up and add additional costs to each printing order produced in America, it will also stimulate the foreign markets in pulling even more revenue away from the U.S. economy. This is wrong on many levels.

"As printers, we pay fair and trade wages, with benefits, taxes and insurance. We are subject to the strictest environmental controls, OSHA and a host of local regulations that we face, the offshore production of printed products already has an unequal playing field. This becomes one more significant regulation that will continue to diminish the most important communication media ever known to man. NewPage should be proud. They have saved an antiquated mill and further contributed to the competition of the “World Market.” I wish them much success in their ability to increase their prices and further reduce our important industry."—Name withheld by request

Print is exempt

"As a Canadian paper buyer I have been astonished by the details of the ruling of the Commerce Department. The duty only applies to unprinted paper; printed paper is exempt. While this ruling forces American printers to pay more for their paper, all their international competitors, Chinese, Singapore, Mexican, Canadian, still have access to this cheap paper and will not be penalized by this duty. The only thing that customers have to do to access the cheap paper is to export the whole printing job. Good work, Commerce Department!"—Albert Koppelman, Oshawa, Ontario

A letter to NewPage

Marc Suwyn, Chairman

NewPage Corporation

Courthouse Plaza NE

Dayton, OH 45463

April 27, 2007

Dear Marc,

I am in receipt of your letter regarding the anti-dumping case filed by the NewPage Corporation. You have valid points in your letter. However, there are several important issues not addressed that I would like to bring to your attention.

First, some context. Burton & Mayer, Inc. is a sheet-fed printer and loyal customer of NewPage, tracing back over twenty-five years to the original Westvaco Corporation. For many years we used your sheets as our “house stock”. I have always maintained that I would much prefer to do business with an American mill than buy imported papers. However, as the imported sheets gained in popularity, competitiveness and quality, it became apparent that Burton & Mayer needed to change its philosophy and use imported paper in order to compete with fellow printers.

The first and foremost issue that I want to raise is the fact is that this situation is related mostly to the sheet-fed market. As you are well aware, the foreign producers do not ship a lot of roll stock into this country competitively. This indicates the obvious – if American mills are selling paper at prices that do not earn the cost of capital as you portray in your letter, then the lion’s share of the production – roll stock – is not being priced correctly. One of the reasons that the foreign producers have been competitive in the sheet-fed market is that they are not over-inflating the price on sheeted products in order to support the shortfall on roll stock revenue. To my point, currently the #2 Sterling Ultra web stock is retailed around $49.00 per cwt. in this market, while #2 Sterling Ultra sheet products are marketed at $77.00 per cwt. I understand there are slight variations in the manufacturing process of web and sheet-fed papers, and that sheeting is an additional expense, but this certainly does not equate to a 57% increase in the price. (As a matter of fact, there are local companies that will sheet roll stock for approximately $5.00 to $7.00 per cwt. – a 10 to 14% increase over the roll price.) Presently, I purchase foreign sheets at around $60.00 per cwt, which equates to a 22% increase over the price of your roll stock.

My problem with your position is that by increasing the cost of printing through the tariffs that the government will impose, you will force printing customers to seek alternatives. Contrary to your statements in the letter, Canadian and Mexican printers that are close to the border have no problems competing with American printers in their responsiveness and closeness to customers. An even larger problem that you do not address (and my second issue with your letter) is that rather than forcing the customers to look elsewhere for printing, it will encourage them to find other, more cost effective advertising media altogether – a net loss for both the printing and paper industries.

The printing industry has already suffered tremendous losses in plant closures and business volumes since 2001, and we are just starting to recover. Your stance will help the NewPage Corporation in the short term, but will exacerbate the industry’s problems in the long run. I do not supporting the illegal trade activities of other countries; however, we must be realists and compete on a global basis. My suggestion is that NewPage reconsider its marketing practices and price products accordingly. By increasing roll pricing to cover the cost of capital and decreasing the price of sheet-fed products to compete more effectively with the imports, it would negate the necessity for tariffs altogether and certainly increase the sheet-fed business for NewPage.

Thank you for your time, and I hope you consider this proposal carefully.

Respectfully—Tim Burton, President, Burton & Mayer, Inc.

Consider the source

"I congratulate NewPage Corporation for doing some whistle blowing on China.  NewPage is making efforts to take the environment into consideration with sustainability initiatives and clearly state this directly on their website.  Many Chinese manufacturers are getting pulp from clear cutting tropical rainforests.  For years I have always been aware of this practice and have avoided those products.  I would like to encourage all printers to evaluate their paper sources to encourage sustainability."—Brian Murray, Purchasing, Xerographic Digital Printing, Orlando