A years-long trade dispute with the U.S. over Canadian paper products used for magazines and newspaper supplements is coming to an end in Canada's favour.
Canadian producers of supercalendered paper could get millions of dollars in refunds after a U.S. company decided to drop its complaint alleging unfair subsidies north of the border.
But the victory doesn't come without a price: under an agreement to resolve the dispute, the Canadian producers will give up as much as $42 million to the U.S. company.
This is the second positive trade development for Canada this week after Canada won another favourable outcome in the Boeing conflict.
"This is good news for Canada's innovative aerospace industry and the thousands of people who depend on well-paying aerospace jobs on both sides of the border," Foreign Affairs Minister Chrystia Freeland said in a statement Friday.
Paper review underway
Tariffs on supercalendered paper produced by Port Hawkesbury Paper Limited Partnership and Irving Paper Limited were introduced by the Obama administration in 2015.
The rate has changed over the years, but at one point it reached as high as 18.85 per cent.
This week, American paper producer Verso announced it would seek what is called a "change of circumstance review" from the U.S. Department of Commerce.
Essentially, that means the company wants to formally drop its complaint.
Since 2015, Freeland has discussed the issue with her American counterparts on multiple occasions — including during a meeting with U.S. Commerce Secretary Wilbur Ross just last week. Global Affairs says approximately 1,500 Canadian jobs depend on the industry.
The U.S. department now has to review and approve the arrangement before Canadian companies can receive a refund for some of the tariffs they have paid over nearly three years.
Millions of dollars are at stake for the firms, which are based in Atlantic Canada and Quebec.
According to documents outlining the decision, submitted to the U.S. Securities and Exchange Commission, Verso will "request that Commerce revoke the CVD (countervailing duties) Order retroactively to Aug. 3, 2015, which, if granted, would result in refunds to Canadian producers of supercalendered paper of all countervailing duties."
But, the document states, Port Hawkesbury and Irving have agreed to pay Verso a percentage of the duties refunded to them "over time, with the total amount payable to Verso capped at $42.0 million."
The two moves come as several significant trade challenges persist between Canada and the U.S.
NAFTA negotiations, which also involve Mexico, are progressing slowly with all sides trying to firm up dates for an eighth round of talks next month in Washington.
The U.S. negotiating team dropped a divisive demand this week that would have required all cars produced under the trade agreement to contain 50 per cent American content.
The development is considered a significant turning point in the talks, with optimistic rhetoric emerging from the highest levels in all three countries.
Still, officials acknowledge there is much more work to be done behind the scenes.