Fresh hope jobs will last

The Baltimore Sun

LUKE, Md. -- China is 7,000 miles away from this speck of a town in the mountains, half a world away. But as a looming economic threat, the country has never seemed so stiflingly close.

The paper mill here that employs 950 is feeling the pressure of cheaper Chinese imports. On New Year's Eve, it shut down one of its three huge manufacturing machines and cut 130 jobs, touching off rumors across the tri-state region where employees live that it was only a matter of time before the plant closed.

But now there's cautious hope that things will get better, or at least no worse. NewPage Corp., the mill's Ohio-based owner, has persuaded the U.S. government to slap tariffs on Chinese competitors for operating with what investigators call unfair advantages.

"Isn't it about time?" asked Donald "Tom" Smith, mayor of Westernport -- a town of 2,100 next to Luke -- and a mill retiree. "Everybody is breathing a sigh of relief."

The decision could have far-reaching consequences. It's the first occasion in 23 years that the Commerce Department has agreed to apply its anti-subsidy trade law to a so-called "nonmarket" economy such as China, and other manufacturers are looking to follow in NewPage's footsteps. Recently, Commerce has begun investigating complaints about Chinese steel pipe and nails.

The U.S. imported about $230 billion more from China than it exported there last year, the biggest trade deficit it has had with any country. Politicians point to this when they decry the loss of jobs to overseas.

But economists say it's not a simple issue of us versus them. Productivity and technology gains are to blame for most of the lost manufacturing jobs, not China, the National Association of Manufacturers says. U.S. exports to China, though low compared with imports, set a record last year. If tariffs multiply, Americans who have saved on cheaper made-in-China products will feel the pinch.

"We sort of have a creeping protectionist mentality right now," said James A. Dorn, an economics professor at Towson University and a China specialist at the libertarian Cato Institute. "The purpose of trade is not to benefit producers, it's to benefit consumers."

Here in the towns around NewPage's Western Maryland paper mill, globalization looks like a threat, not a benefit. Allegany County is pockmarked with closed factories -- textiles, glass, tires -- that once employed thousands. Losing the largest remaining manufacturer, residents say, would be an economic disaster.

"The community was very happy to see that those tariffs were placed," said Bill Kenny, owner of a food market in Westernport.

The Luke mill, which makes glossy paper used for magazines, catalogs and the like, employs one out of every 25 people who work in Allegany County's private sector. It's hot and noisy work laboring alongside the long, ear-splittingly loud paper machines, the air sticky-humid as the papermaking process requires. But the pay averages $22.50 an hour, and that's hard to beat around here.

Dozens of local suppliers count on the mill, too. Every weekday about 300 trucks rumble down Luke's main road, piled high with coal, logs and wood chips.

Luke, tight against the West Virginia line, is not so much a company town as a company. The mill, based here but stretching a mile and a half through three counties and two states, is nearly the sum total of the community. Its 950 workers outnumber residents 12-to-1. Its 623-foot-tall stack, billowing a mix of steam and smoke, towers over houses set into the hills. Founded in 1888 by the Luke family, the mill -- under a series of different names as ownership changed -- has been a mainstay for generations.

With that came years of pollution. The air was heavy with the spoiled-cabbage stink of papermaking. The North Branch of the Potomac River, which splits the complex, ran brown with industrial waste. Officials at the mill say they've spent millions to ease both problems.

For Luke residents, the salient point is this: The mill is the only private employer left.

When Joseph LaRue was growing up in town in the 1930s and 1940s, there were a restaurant, a theater, a foundry, grocery stores and barbershops. But the foundry closed, people left and other businesses faded away. Now there are just the mill, the post office and the city administration building; a single traffic light suffices. At least 90 percent of the town's tax revenue comes from the mill.

"What it means to the town is everything," said LaRue, 78, Luke's mayor.

It's almost as important to nearby towns. Kim Bowers, owner of Vintage Rose Floral & Gift Shop in Westernport, said many of her customers work at the mill. Her husband works there, too, making the long sheets of paper.

"Everything I have depends on if that place stays," said Bowers, 33, a mother of three.

She worries -- how can she not? And she wonders about American manufacturing. Everywhere, it seems to her, plants are closing. "I really do feel as long as the government allows the foreign trade, there's no job safe in the United States, because we can't beat or meet their prices," she said.

Smith, Westernport's mayor, retired from the mill almost a decade ago and remembers his 37 years there as so stable that people didn't worry. "I never lost a day's work because of stuff like this," he said.

Tom Caldwell, president of the local United Steelworkers union, which represents most of the mill's workers, sees the tariffs as a line in the sand.

"In order to be a free country, we have to have manufacturing," he said. "We cannot continue to let jobs go overseas."

The mill has been reducing jobs for years, long before China began gobbling up U.S. market share. About 2,000 employees -- double the current work force -- were based there when Scott W. Graham, now the mill's production manager, joined the day after graduating from college 20 years ago. A retiree told him it was nearly 2,600 in the 1960s. Technology improvements mean fewer workers: The once labor-intensive job of preparing finished paper rolls for shipment is now a largely automated, one-man job.

But NewPage blames foreign pressure for recent layoffs. Between 2004 and 2006, the country's imports of Chinese "coated free sheet" -- glossy paper -- increased tenfold, records show. Indonesia and South Korea also made inroads, particularly Korea.

The countries quickly won 90 percent of the West Coast's coated-sheet market, according to RISI Inc., which tracks the forest products industry.

U.S. producers cut their prices or shut down. NewPage said Chinese companies, pre-tariff, were charging $850 a ton for paper that American firms priced at $1,000.

"The Asians came in with a very competitive product," said John Maine, RISI's vice president of world graphic papers.

Too competitive, the Commerce Department decided. In two rulings this year, it said prices at Asian paper companies were made artificially low by significant government subsidies and "dumping" -- selling products for less than the cost to produce or the price charged domestically. The agency put tariffs on Indonesia and Korea, but China much more so.

The anti-subsidy tariffs, imposed in April, and the anti-dumping tariffs, instituted last month, together pack a wallop. Chinese companies were hit with duties that -- if fully passed on to consumers -- would increase the price of paper anywhere from about 40 percent to more than 100 percent. The effect is to almost completely shut the country out of the U.S. market, Maine said.

Already, prices are rising.

"It's clearly a big benefit to NewPage," Maine said. He doubts it will restart the stilled Luke machine with its 130 jobs, but "what's left of the mill will basically be operating at 100 percent of capacity for the next year or two because of a relatively tight market."

The tariffs are still preliminary. When the Commerce Department makes its final decision in October, it could leave them in place, change the amount or strike them from the books.

Graham, the production manager, feels confident that NewPage's case is strong enough to endure. He's optimistic about the future beyond that, too. His labor costs might be higher than China's, but raw materials are all around in Western Maryland. The mill is more productive now with two paper machines than it was in the days when there were nine.

For Graham, who speaks in the calm drawl of rural Maryland, this is worth getting worked up about. "All we want these guys to do is compete fair," he said, hitting the mill's conference-room table for emphasis.

LaRue, Luke's mayor, wants the mill to survive as much as Graham does -- needs it to.

Even so, he can't help thinking about paper customers paying more because of the tariffs. Maybe those companies will have to cut jobs. Maybe someone, somewhere else, will feel the pain.

"I don't have the answers to this problem," LaRue said. But this time, he added, "it's not going to be our people that has to pay."

jamie.smith.hopkins@baltsun.com

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