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Brian Jones: When corporate welfare backfires

Corner Brook Pulp and Paper is being hit hard by more administrated duties by the United States government.
Corner Brook Pulp and Paper. — Western Star file photo

Some Newfoundlanders might have wondered this week why the provincial government is shelling out $700,000, with more to come, to fight a legal battle on behalf of a pulp and paper company.

Brian Jones
Brian Jones

 

Premier Dwight Ball says the government is supporting the forest industry and saving jobs by opposing tariffs imposed by the U.S.

Stop right there. Back up a bit. Try to find a rationale for why a government should pay for the private battles of a corporation.

Corporate welfare has become so entrenched in Canadian culture that politicians don’t even recognize when they’re giving it.

The U.S. government has said it will tax paper sent from Canada to be sold in the U.S.

That new tariff could cost Corner Brook Pulp and Paper, and its parent company Kruger Inc., $30 million per year.

Admittedly, that’s quite a blow, to the company and its employees. Twelve positions have already been eliminated.

It is a peculiar situation. To fight the accusation that it provides corporate welfare, the Newfoundland government will provide more corporate welfare.

Maybe Ball is right that corporate welfare is called for, that the government should get in the game and hire lawyers to help the company out … except that the U.S. government says it is imposing the new taxes, in part, because of the government assistance Corner Brook Pulp and Paper has received.

It is a peculiar situation. To fight the accusation that it provides corporate welfare, the Newfoundland government will provide more corporate welfare.

If possible, set aside any remnant of Newfoundland nationalism that remains, and ask, “Does the U.S. government have grounds to accuse the Newfoundland government of providing corporate welfare to Corner Brook Pulp and Paper?”

The short answer: yes indeed. The Newfoundland government not only openly admits providing financial assistance to Corner Brook Pulp and Paper, it boasts about it.

The provincial government provided a $110-million loan to the company in 2014.

Is this corporate welfare? It wouldn’t be, if the government were a bank.

Financial assistance from taxpayers went beyond the loan. In its 2014 news release, the government stated, “In addition to the loan announced today, the provincial government has invested approximately $100 million in Corner Brook Pulp and Paper Limited since 2004 for a power purchase agreement, silviculture, training and forest protection.”

Maybe some of the $700,000 of public money spent on lawyers so far can be used to explain how a $100-million expenditure does not amount to corporate welfare.

Governments in Canada have become victims of their own propaganda and manipulative euphemisms. The provincial government boasts, as it so often does, of having “invested” in a venture, in this instance Corner Brook Pulp and Paper.

But governments don’t “invest” in anything. Governments spend. They spend on schools. They spend on roads. They spend on hospitals. And when they spend to help corporations, it isn’t an “investment,” it is corporate welfare — as the Newfoundland government is now finding out, courtesy of the U.S. government.

Of course, anti-Americans and devout Liberals will argue the U.S. offers its own support for corporations, via low tax rates, lax labour laws and so on. But bad policy, even unjust policy, isn’t corporate welfare just because you disagree with the policy.

The Newfoundland government isn’t the only one addicted to corporate welfare. The federal government drops money like a rich kid with holes in his pockets.

Oh, but it’s never “corporate welfare” … until it is. This week, Canada lost a preliminary round in its battle with Brazil about Bombardier. A Brazilian aerospace company, Embraer S.A., has filed a complaint with the World Trade Organization alleging the Canadian government has provided subsidies to Bombardier Inc.

Has it? Of course it has, to such an extent that cartoonists and commentators joke that Bombardier isn’t in the transportation business, it’s in the government subsidy business.

Corporate welfare? It’s made right here.

Brian Jones is a desk editor at The Telegram. He can be reached at brian.jones@thetelegram.com.

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