Canada warns U.S. not to rule cheap electricity contract is subsidy

WASHINGTON, Sept 24 (Reuters) - U.S. trade officials would
set a dangerous precedent if they confirm a ruling that a
private contract to provide a Canadian paper mill with cheap
electricity was a government subsidy, a U.S. trade hearing on
paper imports was told on Thursday.
In a preliminary decision, the U.S. Department of Commerce
set anti-subsidy duties on paper from Canada's Port Hawkesbury
Paper (PHP), after a complaint by U.S.-based Madison Paper
Industries of Maine, owned by Finland's UPM-Kymmene Corp
UPM1V.HE , and Verso Corp VRS.N of Ohio. ID:nL1N1083EG
Gilles Gauthier, a senior official at the Canadian embassy
in Washington, told a Commerce hearing the ruling would allow
foreign companies to retaliate against U.S. companies which also
do deals to secure cheap power.
"If not corrected, this will create a dangerous precedent,"
he said.
The U.S. companies argued that Nova Scotia Power, owned by
Canadian energy company Emera Inc EMA.TO , provided electricity
too cheaply to Port Hawkesbury on the orders of the regulator.
Lawyers for the mill said electricity pricing accounted for
more than 70 percent of the duties, preliminarily set at 20.33
percent. The duties aim to compensate for the amount of unfair
government support received by foreign companies.
Lawyer Gary Horlick, representing Port Hawkesbury, said the
implications of the ruling could extend to company share
listings and mergers, which also need regulatory approval.
"It would be ... a radical move by the department. You're
saying that private contracts between private parties, which
require approval by regulatory bodies, are subsidies," he said.
But lawyers representing the Coalition for Fair Paper
Imports said the power company provided the cheap electricity
because it was directed to by the Nova Scotia Utility and Review
Board.
"The consequences of the board's actions were that PHP
received electricity at a subsidized rate," Brian McGill, from
law firm King & Spalding, told the hearing.
The case covers imports of glossy supercalendered paper from
Canada, used to produce such materials as magazines, catalogs,
corporate brochures, flyers and directories, which Commerce
values at an estimated $868.4 million in 2014.
The Department of Commerce is scheduled to announce its
final determination on anti-subsidy duties on or about Oct. 14.
The U.S. International Trade Commission must also rule in favor
of the U.S. companies.