The Case for Raising de minimis Thresholds in NAFTA 2.0

Gary Hufbauer, Zhiyao Lu () and Euijin Jung ()
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Zhiyao Lu: Peterson Institute for International Economics
Euijin Jung: Peterson Institute for International Economics

No PB18-8, Policy Briefs from Peterson Institute for International Economics

Abstract: The fraught negotiations over revising the North American Free Trade Agreement (NAFTA) have focused largely on US demands to limit imports from Canada and Mexico. But one little discussed step could help the United States increase exports to Canada and Mexico in a way the Trump administration ought to support. US express shipments to its NAFTA partners are far below potential, partly due to what are called low de minimis thresholds in those countries. The de minimis threshold refers to the value of imported goods below which no duty or tax is collected, and the customs declaration is very simple. This Policy Brief reviews the very low de minimis thresholds in Canada and Mexico and argues that substantial room exists for the expansion of express shipments within North America. Under the assumption that express shipments from the United States to Canada and Mexico could exhibit the same relationship to likely household buyers as found in the United States, the share of actual low-value shipments to Canada and Mexico is far below potential. US low-value shipments to Canada and Mexico could potentially increase to about $34 billion annually but have reached less than half that level. The gap suggests that higher de minimis thresholds could boost US exports of low-valued goods and improve consumer choice in Canada and Mexico.

Date: 2018-03
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