Publishers Coping With Higher Costs From Tariffs On Canadian Newsprint

Pittsburgh, Pennsylvania

By: Joyce Gannon
(June 1, 2018)

The Pittsburgh Catholic newspaper, a weekly distributed in six counties that comprise the Diocese of Pittsburgh, hasn’t raised subscription rates in 16 years because it has had a healthy stream of advertising to generate revenues.

But recent federal government tariffs slapped on Canadian newsprint have pushed production costs so high that Carmella Weismantle, the paper’s operations manager, said there may be no choice but to ask advertisers — and perhaps the parishes that subscribe — to pay more.

Two newsprint price hikes since January cost the nonprofit Pittsburgh Catholic Publishing Associates $37,000 and Ms. Weismantle is bracing for another increase in July.

“We’re running on a shoestring as it is. We don’t have $37,000,” she said.

Newspapers across the country are coping with the same problem since the U.S. Department of Commerce imposed tariffs on Canadian imports of the uncoated groundwood paper used for newsprint.

Besides asking newspaper advertisers and readers to pay more, publishers nationwide are laying off workers and shrinking the size of their papers.

The duties vary from company to company but range as high as 32 percent, according to the News Media Alliance, an advocacy group in Arlington, Va.

The tariffs resulted from a complaint by a U.S. paper manufacturer, North Pacific Paper Co. of Longview, Wash., which said government subsidies give Canadian producers an unfair price advantage over domestic mills. Canada has about 25 groundwood producers while only five are operating in the U.S.

In January, the Commerce Department imposed a tariff of 6.2 percent on Canadian newsprint and raised it by 22 percent in March after an investigation found a producer in British Columbia was underselling groundwood.

The International Trade Commission will hold a hearing on the tariffs in July and the Commerce Department later this summer will decide whether to make them permanent.

Since the tariffs were imposed, U.S. newspapers have experienced newsprint price increases ranging from 20 percent to 30 percent, the News Media Alliance said.

The industry group argues the problem stems from the ongoing shift in the news industry from print to digital and a dramatic drop in print advertising and newspaper page counts.

Demand for newsprint has fallen 75 percent since 2000 and more than 70 U.S. newsprint mills have closed since 2007, the News Media Alliance said.

Critics of the tariffs note they were triggered by a single producer, Norpac, which is owned by One Rock Capital Partners, a New York-based hedge fund.

“It’s a totally wacky thing brought to us by a private equity firm out of New York,” said Paul Boyle, senior vice president, public policy at News Media Alliance.

Norpac’s owner, he said, “is taking advantage of a protectionist environment in Washington, D.C.” where the Trump administration also just imposed tariffs on imported steel and aluminum.

“We don’t have the ability to absorb those [tariff] costs,” Mr. Boyle said. “We can’t pass them on to advertisers; they will go to Google or Facebook.”

A survey of members of the Pennsylvania NewsMedia Association found 22 percent of its publications have already imposed staff cuts and 84 percent reduced page counts as a result of the preliminary tariffs imposed earlier this year.

The Pennsylvania group represents 76 dailies and more than 140 non-daily papers in the state.

According to the survey results released this week, the additional annual cost of the preliminary tariffs to newspapers ranges from $5,000 to $2 million depending on the size of the publication, with an average cost increase of 23.4 percent.

If the tariffs become permanent, 72 percent of publications said they would reduce page count, 31 percent may reduce the number of days they publish and 13 percent said they would consider going all-digital.

In a letter to U.S. Sen. Robert Casey, D-Pa., seeking his support to defeat the tariffs, the PNA said the added costs could force newspapers statewide to cut a total 600 workers resulting in nearly $30 million in lost salaries to the state’s economy.

“Any good publisher has to prepare for the expenses,” said Mark Cohen, PNA’s president.

For Pittsburgh Catholic Publishing, paper and printing costs are the second highest annual expense after payroll. The newspaper, with a weekly circulation of about 87,000, is produced at Trib Total Media’s printing plant in Tarentum.

Advertising rates could jump 10 percent, said Ms. Weismantle.

Thomas Northrop, publisher of the daily Observer-Reporter in Washington, Pa., said the paper has produced 200 fewer pages this year compared with the same period in 2017 because of increased costs from the tariffs. It also reduced the width of the newspaper, he said.

Five years ago, the Observer-Reporter outsourced its printing to Ogden Newspapers, a Wheeling, W.Va., chain that owns more than 40 daily papers as well as weeklies and magazines.

Ogden “has a bit more purchasing power than we did” and has been able to stockpile newsprint and delay the price increases somewhat, Mr. Northrop said.

For Block Communications Inc, publisher of the Pittsburgh Post-Gazette and the Toledo Blade, the tariffs will add roughly $1 million to expenses this year, said Bill Southern, director of finance for the company’s newspaper division.

“We, as well as the rest of the industry, remain focused on this issue and hopefully there will be some successful attempts to zing it back,” he said.

Newspaper trade groups have made repeal of the tariffs a priority.

Mr. Cohen of the PNA is among the publishing representatives who will travel to Washington June 13-14 to meet with members of Congress. Legislation has already been introduced to suspend the tariffs.

U.S. Sen. Pat Toomey, R-Pa., is among 17 co-sponsors of bipartisan legislation to suspend collection of the duties. The bill also would force the Department of Commerce to study the economic health of the publishing industry and would require the president to justify any tariffs on imported newsprint by certifying that it is in the country’s best interest.

“American companies must be allowed to adequately and fairly source materials, especially when those items are not produced domestically,” Mr. Toomey said in a written statement.

Mr. Casey opposes the bill because it would establish a new “national interest” standard to the application of trade laws. Commerce Secretary Wilbur Ross, with whom he met two weeks ago, has the authority to negotiate a settlement.

“This is a tool that is currently available, one that has been used in the past for these very circumstances, and seems to be a practical resolution to the issue without undermining our trade enforcement laws,” Casey spokeswoman Jacklin Rhoads said.

Newspapers aren’t the only print product taking a hit.

Books, advertising circulars, and directories will also be impacted, according to Printing Industries of America, a trade group.

“In an industry in which it is difficult to absorb forced cost increases, the effect will likely be less production, fewer pages printed, a faster shift to digital content of news and books, and more diversion of advertising from print to electronic platforms,” Michael Makin, PIA president and chief executive said in a statement.

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