Retailers in Canada, Mexico seek to push back against freer e-commerce

A U.S. proposal for Canada and Mexico 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 renegotiation of the NAFTA trade deal.

Vulnerable industries like footwear, textiles and bricks and mortar retail in Canada and Mexico are pushing back hard against the proposal by the U.S. trade representative to raise duty-free import limits for e-commerce to the U.S. level of $800, from current thresholds of $20 and $50, respectively.

For Canadian retailers, the fear is that e-commerce companies will undercut their prices. For the Mexicans, the main worry is that such a move could open a back door for cheap imports from Asia and beyond.

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 the Liberal government in Ottawa may not be far behind.

Canadian opposition is being led by retailers, whose industry association said it was concerned about “the behavioural shift that would inevitably result if shoppers can buy a far wider range and higher value of goods tax-free and dutyfree.”

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.

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.”

There have been hints from the Trudeau 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.

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 Mexico with cheaper labour, creating a U.S. trade deficit with Mexico worth more than $60 billion.