* U.S. wants Canada to withdraw payments to paper mill
* Canada says working with province to answer U.S. questions
By Tom Miles
GENEVA, Oct 23 Canada found itself lumped
together with China and India on Tuesday as a country that the
United States suspects of paying illegal subsidies that distort
trade, with C$162 million ($163 million) of aid to a Nova Scotia
paper mill under scrutiny.
The United States, which is determined to bring China to
justice at the World Trade Organization over what it claims are
illegal subsidies, said Canada should withdraw payments to the
Port Hawkesbury paper mill, which competes with U.S. producers.
The mill has received tax breaks, grants, energy cost
reductions and timber subsidies that could be challenged under
WTO rules, a U.S. official told the WTO subsidies committee.
A European Union official said the EU also was concerned
about the subsidies and asked for more information.
A Canadian official told the meeting that Canada was already
working with the provincial authorities to answer U.S. questions
and had started a dialogue with the United States which the EU
was welcome to join.
Canada is defending itself at the WTO against a legal
challenge to another provincial policy - Ontario's green energy
scheme which Japan and the EU say illegally discriminates
against foreign companies. A leaked early draft of the decision
in that case shows Canada is likely to lose.
The Port Hawkesbury mill reopened last month after it had
idled for more than a year, following a deal between the
provincial power company and the mill's owner Pacific West
Commercial Corp (PWCC).
PWCC, itself owned by Stern Partners of Vancouver, bought
the mill from NewPage Corp of Ohio, which had filed for Chapter
11 bankruptcy and began restructuring in September 2011.
Nova Scotia Premier Darrel Dexter has said reopening the
mill would bring more than 1,400 jobs to the province.
The U.S. official also reiterated the U.S. demand for China
to provide full information about state and sub-central
subsidies. The U.S. Trade Representative's office says it has
found 191 subsidy programmes that were not notified to the WTO.
The United States also says India has 50 unreported subsidy
programmes run by the central government. Its criticisms of both
Asian countries were backed by the EU, Canada, Japan and Turkey.
The U.S. and Turkish officials also said India should phase
out export subsidies for textiles and clothing, a sector which
the WTO has considered export competitive since 2007.
($1 = 0.9926 Canadian dollars)
(Reporting by Tom Miles; Editing by Stephanie Nebehay and