Government funding for the Port Hawkesbury Paper mill violated free trade laws, a U.S. congressman says.

NewPage shut the plant down in 2011, citing economic conditions. It left 1,000 people out of work. The province eventually stepped in to help it re-open under a different owner. Nova Scotia spent $124 million to do so.

Maine Congressman Michael Michaud complained that violated free-trade law. The Office of the U.S. Trade Representative has begun an investigation.

Maine has a number of paper mills, including one owned by New Page, the company that shut down the mill outside Port Hawkesbury. Michaud argues the government money gave Cape Breton an unfair advantage.

'Not grounds for a trade dispute'

Tina Thibeau of the Nova Scotia Department of Economic Development said the U.S. Trade Representative then raised the issue with the Canadian government:

"Nova Scotia explained how its support is fully consistent with Canada's international trade obligations and the success of the Port Hawkesbury mill is not grounds for a trade dispute," she said.  

Thibeau said the province expects that will be the end of the matter.

But a spokesperson for the Office of the U.S Trade Representative said  it appears the province's funding maintained a capacity that otherwise would not exist.

It feels the money resulted in significant commercial harm to U.S. industry and the paper market. It may ask for trade-remedy action.