Donald Trump’s protectionist rhetoric over the North American Free Trade Agreement (NAFTA) – which in the past he threatened to “rip up” and called “the worst trade deal in history” – could deliver some unexpected benefits to Canada’s online retailers, eBay Canada says.
On Tuesday, the e-commerce giant released a statement praising one of the items on the U.S. administration’s renegotiation agenda: namely, that Canada raise its de minimis threshold – that is, the maximum value of goods that Canadian consumers can purchase duty-free – from $20 CDN to $800 USD.
“As an enabler of global commerce and inclusive trade, eBay Canada has long advocated for an increase in Canada’s de minimis threshold as a way of reducing the frictions that prevent small and medium-sized businesses (SMBs) from fully engaging in global trade,” eBay Canada managing director Andrea Stairs said in the statement. “The current threshold – which was set well before the advent of ecommerce – creates an automatic disadvantage for Canadian SMBs, and it is high time that this regulation be updated to reflect the realities of modern trade.”
“We are encouraged to see USTR’s stated NAFTA objectives include increased de minimis values across North America,” she continued “Discussion of an increase to Canada’s de minimis threshold has received wide support on both sides of the border. Academic and consumer research has shown that a meaningful increase will create a win-win-win situation for Canadian SMBs, consumers and taxpayers.”
Other measures sought by the U.S. include the removal of non-tariff barriers to U.S. agricultural exports, including “restrictive administration of tariff-rate quotas, other unjustified measures that unfairly limit access to markets to U.S. goods, such as cross subsidization, price discrimination and price undercutting,” according to the CBC, and the elimination of Canada’s ability to appeal moves such as the anti-dumping and countervailing duties recently imposed by the U.S. commerce department on Canadian imports to a NAFTA dispute panel.
As noted by Stairs, eBay Canada has long campaigned for the reduction of Canada’s de minimis threshold, which is among the lowest in the developed world.
A recent Nanos poll sponsored by the Canadian American Business Council discovered that 76 per cent of Canadians supported raising the de minimis threshold to $200, while a 2016 report issued last year by the C.D. Howe Institute concluded that by refusing to raise the threshold to at least $80, the government collects an additional $39 million in revenue at a cost of $166 million. A recent report from Canada’s auditor general came to a similar conclusion.
eBay’s primary opponent in its advocacy is the Retail Council of Canada (RCC), an industry organization representing more than 45,000 stores which argues that changing the threshold would give American retailers an unfair tax advantage over Canadian merchants.
“De minimis at anything like the $200 level would lead to massive increases in cross-border orders, with the obvious negative consequences for retailers in Canada and their employees,” the organization writes on its website. “Even a seemingly small increase could have a major impact, especially because, as the threshold level rises, U.S. online merchants could start to offer free shipping to Canada as many of them do for their customers in the United States.”
According to the RCC, not only would raising the threshold threaten jobs in an industry that employs more than 2 million Canadians, but the tax and duty losses at both the federal and provincial level would be substantial.
“RCC does not understand why the Government would ever want to confer a tax and duty advantage on a U.S. warehouse seller, who employs few if any people in Canada, at the cost of a Canadian employer who creates jobs and economic activity here, whether in bricks-and-mortar stores or online,” the organization writes. “The consequences for investment and employment could be catastrophic and given that retail employs one-in-eight Canadians, the Canadian economy overall would suffer.”