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 US, from current thresholds of $50 US and $20 Canadian, 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 cannot 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…