January 12, 2009

Paper Mill Seizure Boosts Populist Premier

Paper Mill Seizure Boosts Populist Premier

by Chris Arsenault

VANCOUVER, Jan 13 (IPS) - The man dubbed "Canada's Hugo Chavez" is in the hot seat again.

Danny Williams, the Progressive Conservative premier of Newfoundland and Labrador, a sparsely populated province on the Atlantic coast, recently expropriated the assets of a paper mill, AbitibiBowater Inc., which had announced hundreds of layoffs in December after receiving generous perks from the provincial government.

"In 100 years of operating in Canada we have never seen anything like this," said Seth Kursman, vice-president of communications and government relations for Abitibi.

"We are working on filing [legal documents] as we speak," Kursman told IPS. The mill is scheduled to close on Mar. 28, 2008 and the government will assume control of its assets on Mar. 31.

The threat of legal action because of the expropriation, in Canadian courts or before a tribunal convened as part of the North American Free Trade Agreement (NAFTA), doesn't worry Gary Healey, a tradesman who has worked at Abitibi's mill in Grand Falls, Newfoundland for most of his adult life.

"Abitbi had a covenant with the government from 1905 to make paper at Grand Falls. If they no longer want to make paper here, that covenant has been broken," Healey, a spokesperson for the Canadian Energy and Paperworkers Union, told IPS.

The 1905 agreement between the province of Newfoundland and the Anglo-Newfoundland Development Company Limited, the firm which preceded Abitibi in controlling the paper mill and connected hydroelectric power generators, says the paper company could "use and enjoy" the province's land and water resources "for its milling and logging business".

"For 100 years, Abitibi and its predecessors have enjoyed the privilege of Newfoundland and Labrador's natural resources," said Premier Williams when he announced the expropriation on Dec. 17. "It simply makes sense that if Abitibi are not going to continue the operation of a pulp and paper mill and renege on their commitment to our province they will no longer have access to our natural resources."

The assets, including forested land, the pulp mill itself and more valuable hydroelectric generating stations, are worth at least 200 million dollars, according to articles in the business press. "We aren't talking about small-time dollars here," Abitibi's Kursman told IPS.

Abitibi may be compensated for power-related infrastructure, according to the provincial government. No figures have been released and a spokeswoman for Newfoundland's Department of Natural Resources refused to comment on the dispute.

With an international recession hindering the market for paper products, Abitibi exported power from the mill's hydroelectric station for a tidy profit. "They [Abitibi] invested money on their hydro assets, but they allowed their paper-making assets to deteriorate," says union leader Healy.

"They were never a power company. The charter that they operated under was under the premise that they'd make paper," Healy told IPS.

As a one industry town built around the paper mill, the economic impacts of the closure will prove devastating for Grand Falls. The provincial government has not announced plans to reopen the mill as a public company or in partnership with another forestry firm.

"If Abitibi wanted to run the mill, we could have found a restructuring deal," said Healy, who thinks the company just wanted to exploit cheap hydropower to sell back to consumers.

While business commentators condemn the expropriation as a reckless threat to future investments, Premier Williams and his take-no-prisoners attitude are wildly popular with average Newfoundlanders.

The historically marginalised province is currently experiencing an offshore oil boom and Williams, a multimillionaire cable TV magnate prior to entering politics, is credited for negotiating a favourable deal with oil companies. This is where the "Danny Chavez" nickname originated.

"Williams has done well playing hardball with companies," said Steven Shrybman, an influential trade lawyer with the firm Sack Goldblatt Mitchell LLP based in Ottawa.

"Canadians don't want to be just hewers of wood and drawers of water. The province gave water and timber rights to the company on the condition that they invest and produce paper," Shrybman told IPS, adding that Abitibi's legal case is "anything but a slam dunk if Canada vigorously defends its interests."

Other legal scholars dispute Shrybman's claim, arguing that the company will have the upper hand if the issue goes before a trade tribunal.

Abitibi plans to sue the federal government under Chapter 11 of the North American Free Trade Agreement, a controversial clause designed to mediate disputes between states and investors. Critics allege that corporations use this Chapter 11 to target legislation favouring human health, workers rights and the environment over private profit.

The federal government, rather than Newfoundland's provincial government, will have to fight the court battle because only national governments can sign foreign trade deals. Ironically, Canadian Prime Minister Stephen Harper, a political enemy of fellow conservative Danny Williams, will be forced to either defend the expropriation or pay Abitibi hundreds of millions of dollars from federal coffers.

Along with preparing lawsuits, Abitibi is "lobbying the highest levels of government on both sides of the [Canada-U.S.] border" according to Kursman. Political maneuvering from the world's eighth largest integrated paper company has included meetings with U.S. Secretary of Commerce Carlos Gutierrez, Canada's Minister of International Trade Stockwell Day, the U.S. Ambassador to Canada David Wilkins and other senior officials in the prime minister's office.

While Kursman says his company will do "everything possible to protect shareholders", Healy the lumber worker thinks the corporation should accept its fate.

"Just because a big company didn't have things go their way, doesn't mean it's wrong," Healy told IPS. "The premier had to take some action to protect these assets; these assets belong to the people."


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