U.S. push for freer NAFTA
e-commerce meets growing resistance
Send a link to a friend
[August 09, 2017]
By Sharay Angulo
MEXICO CITY (Reuters) - 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 is emerging
as a flashpoint in an upcoming renegotiation of the NAFTA trade deal.
Vulnerable industries like footwear, textiles and bricks and mortar
retail in Mexico and Canada are pushing back hard against the proposal
by the U.S. trade representative to raise 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, respectively.
For the Mexicans, the main worry is that such a move could open a back
door for cheap imports from Asia and beyond. For Canadian retailers, the
fear is that e-commerce companies will undercut their prices.
The U.S. plan was unveiled in July as part of the Trump administration's
goals to renegotiate the 25-year-old treaty.
While Mexico and Canada are still formulating their responses, Mexico
City is leaning strongly against the proposal in its current form, and
Ottawa may not be far behind.
The proposed $800 level "opens a completely unnecessary door" to imports
from outside the NAFTA trading bloc, Mexican Economy Minister Ildefonso
Guajardo said on Thursday on the sidelines of a NAFTA-related event,
calling it "a very sensitive topic."
The growing controversy over how to account for a burgeoning regional
e-commerce sector dominated by the United States highlights a rare area
where the Trump administration is pushing to liberalize trade rules
rather than tightening them.
Much of Trump’s criticism of NAFTA stems from his belief it has
decimated U.S. manufacturing as companies shifted production to Mexican
factories with cheaper labor, creating a U.S. trade deficit with Mexico
worth more than $60 billion.
But Mexican and Canadian business leaders fear the rule change could
make their industries vulnerable, arguing that unless online retailers
can show products are made in North America, they should not be exempted
from duties levied on other imports.
“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
Guajardo said Mexico’s retail group the National Self-service and
Department Store Association, which includes powerful members such as
Wal-Mart de Mexico, had visited him last week to express concerns about
He said the group’s representative brought to the meeting a $250 jacket
bought on the internet as evidence that violations to the existing limit
were already threatening members’ businesses.
"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.
[to top of second column]
A package of the FedEx courier delivery services company is pictured
in this June 8, 2017 illustration photo. REUTERS/Carlos Jasso/Illustration
Complicating efforts to agree on a common set of rules is a tangle of diverging
regulations on tax and how the restrictions on imports differ in the region
depending on whether they enter by air, sea or land.
Amazon.com Inc and eBay Inc declined to comment for this story.
eBay has previously said it supports an increase to Canada’s low-value customs
‘de minimis’ threshold for ecommerce to promote seamless access to the global
marketplace.” Increasing the threshold "absolutely" is eBay's top priority in
the NAFTA renegotiation, a person familiar with the matter said.
Canadian opposition is being led by retailers, whose industry association said
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
The Retail Council of Canada said in a submission to the government that
clothes, books, toys, sporting goods and consumer electronics would be among the
items most affected, and expressed confidence Ottawa would fend off such
NOT FROM OTHER NATIONS
"eBay in particular has lead this charge to three different finance ministers in
a row - Jim Flaherty, Joe Oliver, and Bill Morneau - and in each case they have
failed," said Karl Littler, a spokesman for the Retail Council of Canada.
"The U.S. raised this quite frequently in the TPP (Trans-Pacific-Partnership
trade) round and they also failed to secure this concession," he added.
There have been hints from Canada's government about a compromise under which a
higher limit would exempt products ordered from e-commerce from duties but not
"When it comes to waiving duties and taxes, we need to carefully consider the
impact that would have on Canadians and on Canadian businesses," said Chloe
Luciani-Girouard, a spokeswoman for Morneau.
Mexican firms could accept a higher import limit for goods produced in the NAFTA
region – but not from other nations, said Alejandro Gomez Tamez, executive
president of the Chamber of Commerce for the footwear industry in the central
Mexican state of Guanajuato, a hub of textile manufacturing.
"When a product comes in, even if it's packaged and sent from the United States,
if it's from a third country, it should pay duties," he said.
(Additional reporting by Dave Graham in Mexico, Jeffrey Dastin in San Francisco
and Alastair Sharp in Toronto.; Editing by Christian Plumb and Andrew Hay)
[© 2017 Thomson Reuters. All rights
Copyright 2017 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.