NORTH AMERICAN TENSIONS TIGHTEN: The Canadian government is pushing ahead with its planned digital service tax on American tech giants, a move Biden administration officials warn could mount a trade fight between the long-standing allies. Ottawa published a 138-page document outlining how that plan would work on Friday. A 3 percent revenue tax on large technology companies like Meta, including corporations with online marketplaces like Walmart and Amazon, “will come into force on a day to be fixed by order of the governor in council, but not earlier than January 1, 2024.” Backlash mounts: USTR filed comments with the Canadian government in February 2022, and criticized the tax for singling out American firms. It also warned that if Ottawa went through with the measure the U.S. would “examine all options, including under our trade agreements and domestic statutes.” Ready to retaliate: U.S. Ambassador to Canada David Cohen said in an interview with Canada’s National Post published last month that USTR Katherine Tai has made it clear that “if Canada decides to proceed alone, you leave the United States with no choice but to take retaliatory measures in the trade context, potentially in the digital trade context, in order to respond to that.” Officials, including Treasury Secretary Janet Yellen, are now furiously lobbying their Canadian counterparts to back off, so far without much progress. Frustration is also mounting in Congress. “The Canadian government has repeatedly been warned,” said Senate Finance Chair Ron Wyden (D-Ore.), per Brian Faler. “If Canada continues to move forward with these discriminatory policies, the Biden administration must examine all options under USMCA [U.S.-Mexico-Canada Agreement] and other domestic statutes to address this matter, and they will have my strong support.” Industry response: The National Foreign Trade Council responded on Friday and said it is “acutely disappointed with Canada’s decision today to move forward with their plans.” The statement said the act is “clearly discriminatory” toward U.S. companies. Quick context: More than 140 countries are yet to implement a 2021 deal that would restructure rules on how governments tax multinational companies. In July, more than 130 countries party to the deal, including the world's largest economies, agreed to hold back DSTs until 2025 to give negotiations more time. But Canada says it has already put off its digital services tax for two years, that it has waited long enough and that it will begin imposing the tax in January "if the treaty to implement Pillar One has not come into force," which is unlikely. Ottawa to remain firm: “Canada’s being asked, again — having agreed to a two-year standstill — to agree to further standstills with no fixed date” on when the process will be completed, Deputy Prime Minister Chrystia Freeland said last month in an interview with POLITICO’s editor-in-chief Matthew Kaminski. “For us, that’s clearly a disadvantageous position.” APEC CONSENSUS WEAKENED: Russia’s decision to pull out of the Black Sea grain deal was among the items that blocked the 21 Pacific Rim economies from issuing a joint statement at a regional food security meeting, per Doug Palmer. Instead, the U.S. host, Agriculture Secretary Tom Vilsack, issued a "chair's statement" summarizing the main points of agreement and disagreement at the meeting on Friday, which took place under the annual forum. "Nearly all APEC ministers expressed deep regret for the decision of the Russian Federation to unilaterally withdraw from the Black Sea Grain Initiative (BSGI) and call on the Russian Federation to reverse its decision, return to negotiations, and extend and fully implement the initiative immediately, stressing the importance of allowing grains to continue to reach those most in need," Vilsack said. A USDA official, speaking on condition of anonymity, confirmed that both Russia and China blocked a joint statement that included the critical language on the Black Sea Grain Initiative. The statement comes as officials from 21 member countries gather in Seattle for meetings on disaster management, finance, food security, health, energy and small and medium-sized enterprises, ahead of the leaders summit in November in San Francisco.
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