August 9, 2017 / 11:02 AM / a year ago

U.S. push for freer NAFTA e-commerce meets growing resistance

    By Sharay Angulo
    MEXICO CITY, Aug 9 (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         
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,
    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
    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
    “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.”
    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 the proposal. 
    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’
    "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. 
    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. Inc and eBay Inc declined to comment for this
    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 duty-free."
    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 requests.
    "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 sales taxes.
    "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.
    ($1 = 17.5806 Mexican pesos)

 (Additional reporting by Dave Graham in Mexico, Jeffrey Dastin
in San Francisco and Alastair Sharp in Toronto.; Editing by
Christian Plumb and Andrew Hay)
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