Canada’s digital services tax (DST) appears to violate the country’s trade commitments with the U.S., the Office of the U.S. Trade Representative said Friday, requesting a review under the United States-Mexico-Canada Agreement. The DST, reflected in a budget passed in June, seems discriminatory toward U.S. companies and is inconsistent with chapters 14 and 15 of the USMCA, the USTR said. The DST imposes a 3% tax on “the sum of revenues deemed connected to Canada from online marketplaces, online targeted advertising, social media platforms, and user data,” according to the filing. It applies to companies with global revenue of €750 million or more and Canadian digital services revenue of more than CAD20 million. The measure violates Canada’s commitments to the USMCA, which requires equal treatment for U.S. and Canadian services, service suppliers and investors, said USTR. The Computer & Communications Industry Association welcomed the filing, citing Canadian Parliamentary Budget Office figures showing American companies will be responsible for the “vast bulk” of the $3 billion estimated for the first payment in June. “We expect that under USMCA, the facts and the law will demonstrate that Canada should remove this measure expeditiously. And, absent compliance, we look to USTR to follow through on its pledge to use all tools available to remedy this trade-distortive measure,” said CCIA Vice President-Digital Trade Jonathan McHale. CCIA, CTA and TechNet joined more than 10 associations in writing a letter to USTR in June opposing the DST.
Tech and creative industries universally hailed Senate confirmation Wednesday of China and trade expert Katherine Tai as U.S. trade representative by a 98-0 vote. Tai inherits the USTR post as three rounds of tariffs on Chinese goods remain at 25%, over the concerns of tech and telecom stakeholders. Overhauling the tariff exclusions to give the process more “transparency and predictability” would be “very high on my radar,” Tai told her Senate Finance Committee confirmation hearing Feb. 25. The levies “disrupted a lot of people’s lives and livelihoods,” she said. BSA|The Software Alliance urges Tai to “promote digital trade policies that facilitate the responsible transfer of data across borders,” said CEO Victoria Espinel. During Tai’s time as lead trade counsel for House Ways and Means, she played “an instrumental role” in the United States-Mexico-Canada Agreement, said TechNet: USMCA “included strong intellectual property protections and a landmark digital chapter that eliminated digital trade barriers and enhanced trade.” MPA CEO Charles Rivkin said Tai “fully appreciates that securing robust copyright protections overseas is fundamental to developing a worker-centric trade policy.” CTA (here), the Information Technology Industry Council (here), the Telecommunications Industry Association (here) and others also commented.
More substance and detail are needed in guidelines the Interagency Labor Committee intends to follow for enforcing the U.S.-Mexico-Canada Agreement's free-trade labor rules, commented retail, manufacturing and business groups as posted Monday in docket USTR-2020-0028. The treaty took effect July 1, giving Mexican workers collective bargaining rights for the first time, plus protecting them against retaliation for joining unions or refusing to join.
Some tech merchandise of Chinese origin sent to Mexico for minimal handling and then exported to the U.S. is eligible for tariff treatment under the U.S.-Mexico-Canada Agreement on free trade, said Customs and Border Protection in a ruling Friday. Jose Fierro, an El Paso customs broker, requested the ruling less than a week after USMCA took effect July 1. The broker said a client contracted with a Mexican maquiladora final assembly facility for logistical services, and inquired if USMCA treatment would apply. Workers at the maquiladora facility will provide sorting, picking and packing services on the goods, which will be exported to the U.S. "in the same condition as they were imported into Mexico," Fierro told CBP. The goods include computing products of various sorts and a broad variety of goods, including smart speakers, Bluetooth headphones, smartwatches and fitness trackers.
Strong enforcement against unfair trade practices “boosts U.S. exports, facilitates innovation, and supports job creation here at home,” the Alliance for Trade Enforcement wrote U.S. Trade Representative Robert Lighthizer Wednesday. The alliance is a coalition of trade associations and business groups, including MPA, RIAA and the Telecommunications Industry Association. To end bad trade behavior, the alliance “supports actions and policies that encourage U.S. trading partners to open their markets, reduce barriers to trade, and provide effective protection and enforcement of intellectual property (IP) rights,” it said. With the U.S.-Mexico-Canada Agreement on free trade now in effect, “we must ensure that Canada and Mexico abide by the commitments that they have made and treat U.S. interests fairly,” the letter said. It hails the “important leap forward” of USMCA’s digital trade provisions,” it said. Mexico has been a “major source of camcorded movies” uploaded to the internet, “facilitating international piracy of American content,” it said. USMCA requires Mexico to impose “enhanced criminal remedies into its national law,” it said. USTR didn’t comment.
The Interagency Labor Committee under the U.S.-Mexico-Canada Agreement on free trade seeks comments by Aug. 15 on the procedures it should use to review complaints about alleged violations of the treaty’s labor provisions, said Tuesday’s Federal Register. USMCA takes effect Wednesday and gives organized labor in the U.S. a process for filing grievances with the Trump administration alleging breaches of Mexico’s new labor laws revamp (see 2006240043). The revisions give Mexican workers collective bargaining rights for the first time and protect them against retaliation for joining unions or refusing to join. The interagency committee, co-chaired by U.S. Trade Representative Robert Lighthizer and Labor Secretary Eugene Scalia, will have 30 days to review a complaint and has the authority to rescind a product's duty-free status or bar its importation if it finds serious violations. The committee will accept comments at Regulations.gov in docket USTR-2020-0028.
The many complicated “provisions” for implementing the U.S.-Canada-Mexico Agreement on free trade plausibly means July 1 is the “absolute earliest” it can “enter into force,” Nicole Bivens Collinson, international trade expert with Sandler Travis, told a Sports & Fitness Industry Association webinar Wednesday. President Donald Trump signed USMCA’s enabling legislation Wednesday, saying the agreement “contains critical protections for intellectual property, including trade secrets, digital services and financial services.”
Tech and business groups hailed Thursday’s Senate 89-10 ratification of the U.S.-Canada-Mexico Agreement. The measure awaits President Donald Trump’s signature. Canada's parliament isn't expected to ratify it until February. Mexico OK'd it in June. Senate approval is an “historic bipartisan victory for all Americans, especially manufacturers, farmers, and service providers,” said the U.S. Chamber of Commerce. The agreement’s digital trade provisions will help the future of the content industry “look brighter, particularly in Mexico,” said the Motion Picture Association. USMCA “will modernize trade among our closest trading partners and pave the way for continued prosperity across the borders of North America,” said the National Retail Federation. The agreement “will help ensure that more products researched, designed, and made in America -- including semiconductors -- can flow to customers" worldwide, said the Semiconductor Industry Association. “Businesses in all sectors rely on the free movement of data across borders, and the USMCA is a strong step towards creating international consensus on how that data should be treated,” said BSA|The Software Alliance. USMCA brings “North American commerce into the digital age with robust rules that will prove critical to the continued growth of the Internet economy,” said the Computer & Communications Industry Association. Sen. Bernie Sanders, I-Vt., (see 2001150080) joined eight Democrats, including Minority Leader Chuck Schumer, D-N.Y., to vote against USCMA. Sen. Pat Toomey, R-Pa., was the only Republican to vote no.
House Speaker Nancy Pelosi, D-Calif., blasted Facebook during a Thursday news conference, calling the company’s behavior “shameful” and claiming the company acted in an “irresponsible” manner. Pelosi announced House Democrats “will be rolling out” a new infrastructure legislative package the week the chamber returns from its Martin Luther King Jr. week recess.
Four Senate committees OK'd the U.S.-Mexico-Canada Agreement, clearing the way for a floor vote Thursday. Those voting no were Bernie Sanders, the Vermont independent running for president; Jack Reed, D-R.I.; and Brian Schatz, D-Hawaii. The chamber's full vote is a "key" action, said the Information Technology Industry Council Wednesday. ITI deems USMCA a "landmark improvement in our relationships with two of our most important trading partners from the perspective of the tech sector," CEO Jason Oxman wrote Senate Majority Leader Mitch McConnell, R-Ky., and Minority Leader Chuck Schumer, D-N.Y. ITI backs HR-5430. USMCA also came up at Tuesday night's Democratic presidential contenders' debate (see 2001150057).