U.S. suggests a NAFTA target: freer trade in online, duty-free goods

A new document is providing clues on the Trump administration’s plans entering NAFTA renegotiations


 

WASHINGTON – The Trump administration says liberalizing cross-border online shopping is one of its trade priorities with Canada, according to a document that provides new clues on the administration’s plans entering NAFTA renegotiations.

The statement comes in an exchange of letters between the administration’s nominee for trade czar and the top congressional committee that handles trade, which is considering his nomination.

Canada has one of the lowest allowances in the developed world for online duty-free shopping — Canadian consumers are allowed to purchase $20 worth of goods online from Amazon, eBay or other retailers before duties kick in, compared to $800 in the U.S.

Trade nominee Bob Lighthizer was asked about that by a member of the Senate finance committee, which is one of the congressional bodies that by law must be consulted before, during, and after the U.S. holds trade negotiations.

He received written questions about wine, dairy, softwood lumber and pharmaceuticals, in addition to oral questions and answers at a public hearing this month where lawmakers made it clear they want important changes in NAFTA.

In his written responses, he said the duty-free level, known as “de minimis,” would be an issue.

“I believe that increasing Canada’s de minimis level could be a significant issue in our overall bilateral trade engagement with Canada, as well as in our engagement with Canada in multilateral trade forums,” Lighthizer wrote back, in a 124-page exchange of letters obtained by Inside U.S. Trade.

“I will consult with Congress and domestic stakeholders to develop a strategy that seeks to address concerns with Canada’s low de minimis level.”

MORE: Trump on NAFTA renegotiation: ‘That’s gonna be an easy one’

That debate has also begun in Canada. It’s pitted online retailers against the lobby group for bricks-and-mortar stores, the Retail Council of Canada which represents 45,000 stores including some giants like Walmart, Best Buy and Lowe’s.

Lighthizer dropped hints on other priorities, without committing himself.

— Pharma: A U.S. drug company, Eli Lilly, has just lost a major lawsuit it launched against the Canadian government and been ordered by a NAFTA tribunal to pay millions in court costs. A lawmaker urged Lighthizer to demand stronger patent protections, which have been repeatedly invalidated in Canada. He replied that intellectual property was a high priority.

  • Wine: Asked about restricted access to Canadian grocery shelves, which has already prompted U.S. action, Lighthizer said he would address unfair barriers to U.S. exports.
  • Dispute settlement: A lawmaker complained that the dispute settlement process in NAFTA’s Chapter 19 had been used to weaken punitive actions against the dumping of Canadian softwood lumber. Lighthizer said he would work with Congress and industry on Chapter 19.
  • Supply management: Several lawmakers have asked about Canadian controls over dairy and poultry imports. Lighthizer promised, without getting specific, to enhance export opportunities.

Before opening NAFTA talks, the Trump administration must consult with Congress for at least 90 days.

The president has said he’s eager to start. Donald Trump wants to turn to an economic agenda of tax cuts and trade, after a bruising few weeks marked by scraps over health care, Russian hacking, and partisan delays to nominations like Lighthizer’s.

It’s unclear whether the White House can even start the 90-day NAFTA consultation without Lighthizer in place. It’s his legal role to consult with Congress. But his nomination is being held up in a round of intra-party horse-trading that could take weeks to resolve.

The finance committee chair said Tuesday he could start NAFTA now: “We’re ready to roll,” Orrin Hatch said. He added, however, that it would be easier if Lighthizer was in place: ”It’s gonna be hard to do it without him.”

Hatch is tied up with other issues.

He’s among the senators considering the nomination of Supreme Court Justice Neil Gorsuch, and said, “That’s where my mind is right now.” He would also have a role in health-care reform, if a controversial health bill gets approved by the House of Representatives.

MORE: Why Canada—and its economy—has plenty to fear from Trump

He’s got issues with the health bill: ”The whole thing gives me heartburn,” he joked.

A nailbiter of a vote is coming up in the U.S. capital on Thursday, with potential consequences on the Trump agenda. It appears votes for health reform might fall short, and the president made a trip to Capitol Hill to plead his case Tuesday.

Donald Trump has warned lawmakers that if health reforms fall apart, that could affect tax and trade reforms. In a closed-door speech to Republicans, he personally singled out some of the conservatives threatening to stall the health bill.

Trump made a joke that some interpreted as a threat — to launch 2018 primaries against lawmakers who block him.

Some were unswayed.

”I have a conservative district,” said Walter Jones of North Carolina. ”My calls (from constituents) are running 10 to 1 against this bill.”

In a few weeks, lawmakers could get their chance to confirm Lighthizer with a short-term spending bill up for review. It appears destined to become an omnibus negotiation. A West Virginia Democrat hopes to advance a personal priority — a bill involving coal miners’ pensions.

Lighthizer is a bargaining chit.

”I have nothing personally (against him) whatsoever,” said Joe Manchin, the West Virginia Democrat. ”Bottom line is — he’s the only vehicle I have (to get a pension deal).”


 
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