This week and last negotiators from the United States, Canada, and Mexico met in Montreal to update the regional North American Free Trade Agreement. While there has been considerable progress in many areas, there are some issues yet to be resolved. One area that FedEx is extremely interested in relates to the growth of the digital economy and ecommerce, and the free movement of data across borders.
As the founder of FedEx, Fred Smith noted years ago, the information about a package is as important as the package itself. We couldn’t run our global express network, or provide up-to-the-minute tracking without the ability to move data around the world.
Consider all of the data required to process your single ecommerce order: from the data architecture of each website to the data required to place the order, pay for it, select it from a warehouse, place it on the right plane or truck and then deliver it to the right address, and possibly return it. NAFTA gives us the opportunity to enact modern rules that protect the flow of this data across borders.
While US negotiators are working to ensure the free flow of data across borders they are also working to simplify the physical movement of goods by asking Mexico and Canada to raise their de minimis levels. De minimis is the value below which a good enters a country duty free. In the US goods valued below $800 enter duty free. But in Mexico the limit is about $50 and in Canada it is only about $15. That means Canadian residents are charged duty and taxes on very low priced ecommerce products from the US or Mexico.
This huge disparity puts US ecommerce vendors, and FedEx customers, at a significant disadvantage when compared to their Mexican and Canadian competitors. Narrowing this gap will help small businesses in the US export more to Canada and Mexico. It will also help Mexican and Canadian consumers by giving them more choice and better prices. For FedEx, raising de minimis levels and simplifying the movement of low-value goods across borders is a priority in these negotiations.
Now is the time to address this disparity and create a globally competitive North American e-commerce marketplace.
Ralph Carter is managing director for legal, trade, and international affairs at FedEx Express.