Emerging as a flashpoint in an upcoming renegotiation of the NAFTA trade deal is a U.S. proposal for Mexico and Canada to vastly raise the value of online purchases that can be imported duty-free from stores like Amazon.com and eBay.
Pressure to oppose the raising Mexican and Canadian duty-free import limits for e-commerce to the U.S. level of $800, from current thresholds of $50 and C$20, in Mexico and Canada respectively, as proposed by the U.S. trade representative, is being exerted by vulnerable industries like footwear, textiles and bricks and mortar retail in Mexico and Canada as they are pushing back hard against the proposal.
A back door for cheap imports from Asia and beyond could be opened by the proposal, is the main worry for the Mexicans. E-commerce companies will undercut their prices, is the fear for Canadian retailers.
As part of the Trump administration’s goals to renegotiate the 25-year-old treaty, the U.S. plan was unveiled in July.
Mexico City is leaning strongly against the proposal in its current form, and Ottawa may not be far behind even while Mexico and Canada are still formulating their responses.
Calling the proposal “a very sensitive topic”, Mexican Economy Minister Ildefonso Guajardo said on Thursday on the sidelines of a NAFTA-related event that the proposed $800 level “opens a completely unnecessary door” to imports from outside the NAFTA trading bloc.
A rare area where the Trump administration is pushing to liberalize trade rules rather than tightening them is highlighted in the growing controversy over how to account for a burgeoning regional e-commerce sector dominated by the United States.
As companies shifted production to Mexican factories with cheaper labor, creating a U.S. trade deficit with Mexico worth more than $60 billion, much of Trump’s criticism of NAFTA stems from his belief it has decimated U.S. manufacturing.
But arguing that unless online retailers can show products are made in North America, they should not be exempted from duties levied on other imports, Mexican and Canadian business leaders fear the rule change could make their industries vulnerable.
“We can’t open the door to inputs from outside the region coming in tax-free when we’re talking about the need to reduce the deficit and create jobs,” said Moises Kalach, who fronts the international negotiating arm of Mexico’s CCE business lobby. “It goes completely against that.”
In order to express concerns about the proposal visits with Guajardo was made last week by Mexico’s retail group the National Self-service and Department Store Association, which includes powerful members such as Wal-Mart de Mexico, he said.
As evidence that violations to the existing limit were already threatening members’ businesses, the group’s representative brought to the meeting a $250 jacket bought on the internet, he said.
“Suppose there was an $800 free limit. Can you imagine how many shirts Vietnam could send to Mexico in a packet below that price? They could easily flood us with packets of 100,” he said, while recognizing the need to smooth customs processes.
It was concerned about “the behavioral shift that would inevitably result if shoppers can buy a far wider range and higher value of goods tax-free and duty-free”, said the Canadian retail industry association which is leading the Canadian opposition.
Expressing confidence Ottawa would fend off such requests, clothes, books, toys, sporting goods and consumer electronics would be among the items most affected, said the Retail Council of Canada in a submission to the government.
(Adapted from Reuters)