Cassidy Welcomes Input on FTA Proposal, de Minimis Changes

Senate Finance Committee member Bill Cassidy, R-La., wants the government to greatly expand its tariff liberalization, to cover many South American and Central American countries and to cover goods made in factories that moved from China to the Western Hemisphere.

Cassidy recently released a discussion draft of his ideas (see 2301110045), and although it does not have any Democratic co-sponsors, he said during a phone interview with International Trade Today that he believes it could pass a Republican-held House and a Democrat-controlled Senate, and be signed by the president.

The bill covers diplomacy and aid, tariffs and, in a narrow way, immigration, and Cassidy said some of its provisions were suggestions from the staff of Sen. Robert Menendez, the New Jersey Democrat who leads the Foreign Relations Committee. He said he has not yet talked to Senate Finance Committee Chairman Sen. Ron Wyden, D-Ore., about his ideas, but he said that they have a very good working relationship.

"This is not intended as a 'my way or the highway' piece of legislation," he said. "This is intended as something that will catalyze further discussion."

The 200-page draft would make sweeping changes to U.S. trade policy, suggesting that the Office of the U.S. Trade Representative should negotiate with Mexico and Canada to allow other Western Hemisphere countries into the trilateral trade pact, and, once they agree, negotiate with most countries in South America, Central America and the Caribbean, if they meet certain conditions, to eliminate their tariffs on U.S. exports and U.S. tariffs on their imports.

In the few days since the introduction, Cassidy's staff has heard from the National Association of Manufacturers, which he said was excited about the idea, and is vetting it.

He said there have been diplomats, too, who contacted the senator, saying they were glad attention was being paid to the region.

Panama, Ecuador, Paraguay, Uruguay and Costa Rica all have contacted the office, according to a Cassidy aide, liking the idea, and making some recommendations for changes or additions. Costa Rica had previously said it wanted to join USMCA, though it is already a member of the Central America Free Trade Agreement.

For eligible countries that are not currently parties to an FTA or a trade preference program, they would be able to join the Caribbean Basin Trade Partnership Act, as long as they committed to negotiating the kind of mutual market opening that's in USMCA. Countries in a Boliviarian alliance -- which include some current CBTPA beneficiaries -- would not be eligible for the Americas Act, but would not be kicked out of CBTPA as it currently exists.

No shipping interests have weighed in yet, though the proposal would affect express shippers greatly, as it proposes reciprocal de minimis levels for each exporting country, and that tariffs should be collected on all small packages above that level. China's de minimis level is about $7.50 -- and Rep. Earl Blumenauer, D-Ore., who also wants to change the law covering de minimis, says 83% of packages that enter under de minimis come from China.

Blumenauer has said that no packages from China should qualify; he also said he would be open to setting de minimis at $35 for Chinese goods (see 2203100041).

Although de minimis was originally set with the idea that processing entries of such low value cost the government more than the duties collected, with automation, that may no longer be true. John Leonard, CBP Office of Trade deputy executive assistant commissioner, said taking China out of de minimis could be implemented immediately (see 2205110055).

Cassidy said of the volume of goods coming from China under the threshold: "Everybody sees this as something being exploited. Elminating the China loophole is good for lots of reasons, among them, the ability to fund this."

The Congressional Budget Office estimates this would bring in an additional $10 billion to $15 billion annually in tariffs.

The tariffs collected on packages that were previously below the de minimis threshold would go into an account that would fund trade facilitating infrastructure projects in the region, business parks that could host relocated factories, as well as loans to companies that wish to move from China to the Western Hemisphere. USTR would choose which companies could participate, and the Commerce Department would manage disbursements, government-sponsored political risk insurance and repayments.

They do not expect the tariffs to continue to be that high for years and years, because they expect many countries that send a large quantity of small packages to U.S. customers will negotiate to raise their de minimis levels to a compromise position. For instance, many European Union countries have about $160 de minimis -- perhaps they would raise it to $400, so that the U.S. also would be at that level.

A Cassidy aide said that while there would be a lot of negotiations with CBP and industry stakeholders about how to provide information that would allow a tariff to be levied, he said the technology exists, that in countries with value-added taxes, online sellers like Amazon collect the revenue for the government, and provide refunds if later it's found to be the wrong amount.

"It’s going to require some work up front," he said.

The senator decided that expanding USMCA is better than expanding CAFTA because he feels that the USMCA region has better economic integration than the CAFTA countries do with each other.

His aide said, "The idea is that countries will be able to join USMCA and leave CAFTA behind. Instead of trying to renegotiate, relitigate CAFTA, we already have an amazing mechanism in USMCA" to raise standards. And, he noted, "One of the challenges of CAFTA, is it doesn't have any way to approach these backsliding countries, so you end up with Nicaragua, which is doing all sorts of really awful, awful things, and yet it gets all sorts of benefit by access to the U.S. market.

"That's one of the things we're fixing in the Americas partnership," the aide said.