Business Monday

Amazon runs through a new NAFTA

When the North American Free Trade Agreement was signed in 1993, Amazon was a river in South America. Now it is a global online retailer, digital services and content behemoth. It is also one of the many companies with a stake in any new North American Free Trade Agreement.

On the campaign trail, Donald Trump pledged to renegotiate NAFTA or leave the trade pact altogether. That journey begins on Wednesday in the week ahead when the U.S., Canada and Mexico meet for formal talks in Washington, D.C. The two make up a third of America’s annual global trade.

More than $1 billion worth of U.S. goods and services move across the borders each day. Fourteen million American jobs rely on that exchange. For President Trump, the chief problem of NAFTA is that more Mexican and Canadian goods and services flow into the U.S. than what we sell to them.

The Trump administration has 13 pages of what it wants out of renegotiating NAFTA. Trump scored political points with voters calling for fairer trade with Mexico. His goals include tighter standards for worker pay and working conditions (aimed at Mexico), and to be able to slap tariffs on Mexican and Canadian imports without asking for permission.

Put simply, the United States wants to cut the trade deficit it has with its two neighbors and closest trading partners.

One strategy to accomplish that is to push Mexico and Canada to allow their consumers to buy up to $800 worth of stuff tax-free online from American companies like Amazon and eBay. Mexican online shoppers pay taxes if they spend more than $50. Canadian shoppers only have to spend $16 to trigger their tax. Those taxes are paid to their home countries. If U.S. trade negotiators are successful in increasing duty-free online shopping, and boosting business for e-commerce companies, it will come at a cost for those governments.

Like lunches, free trade isn’t free.

Financial journalist Tom Hudson hosts “The Sunshine Economy” on WLRN-FM in Miami. Follow him on Twitter @HudsonsView.

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