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United States-Canada

18 January 2022

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Senate Finance Committee Leaders Call on USTR to Use (USMCA) to Ensure Canada and Mexico Live up to Their Commitments

The U.S. Senate Finance Committee has announced that leaders from both parties have sent a letter to U.S. Trade Representative Katherine Tai calling for the use of the tough new trade enforcement tools created by the U.S.-Mexico-Canada Agreement (USMCA) to ensure Canada and Mexico live up to their commitments, including in relation to digital trade and Canada's planned digital services tax (DST), as well as several other issues. In regard to the DST, the letter includes the following:

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Digital Trade

Discriminatory Taxation: USMCA promised to enhance opportunities for U.S. innovators in the digital industry, but Canada's proposed digital services tax ("DST") would subject these companies to targeted, discriminatory taxation. Canada's actions implicate not only its USMCA obligations, but also its commitments made as part of the G20 and Inclusive Framework in the multilateral agreement on international taxation. Under the terms of this agreement, 137 countries agreed to forbear from enacting new unilateral measures while the global tax agreement is being implemented over the next two years. Efforts by Canada to move forward with a unilateral DST risk setting a troubling precedent that could undermine years of work by negotiators at the OECD. On December 15, 2021, USTR said it would examine all options under USMCA and domestic statutes to address this matter. USTR must be prepared to utilize these measures if Canada implements a DST in violation of these commitments.

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