The United States trade representative has started an inquiry under the North American Free Trade Agreement to determine if the Nova Scotia government is providing improper subsidies to the Port Hawkesbury Paper mill.

Under a deal struck last month, the Nova Scotia government is providing a $124.5-million aid package on top of the $36.8 million it has spent keeping the Cape Breton mill in a so-called hot idle state.

Ron Kirk said reports about the province's financial aid package for the mill have raised "troubling questions" about potential injury to American businesses.

Kirk also said in a letter to Maine congressman Mike Michaud that he will be seeking information from the Canadian government.

He said the United States plans to raise the matter at meetings this month at the World Trade Organization.

The inquiry was called in response to a letter earlier this month from Michaud, who released Kirk's reply to him today.

The congressman says the Cape Breton deal, struck last month, could have a significant impact on U.S. paper mills and the small businesses they support.

The former owner of the mill, NewPage Corporation, will be one of the new owner's main competitors.

Nova Scotia Premier Darrell Dexter says the province obtained legal advice regarding a potential NAFTA challenge before the deal was struck, and he argues that American paper mills have long benefited from government subsidies.

Dexter said much of the government's funding did not go to Pacific West, but was used to support woodland contractors and silviculture programs.

NewPage Corp. shut down the mill in September 2011, throwing 600 employees out of work.

After almost a year of negotiations, Pacific West Commercial Corp. agreed to buy the mill for $33 million last Friday.

The mill resumed making paper Wednesday with 260 employees.