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Business Commentary Canadian mayors risk becoming pawns in Amazon’s NAFTA power play

From Vancouver to Toronto, Canadian mayors are falling over each other to persuade tech giant Amazon to pick their city for the company's planned "HQ2."

And why not? The Seattle-based company is promising to create as many as 50,000 jobs and invest up to $5-billion (U.S.) over the next 15 years to build a second corporate campus in North America.

For Toronto's John Tory and the other big city mayors, that's like winning the Powerball lottery.

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Read more: Canadian cities jump at chance to play host to massive Amazon HQ

Read more: Ontario enlists former TD Bank CEO Ed Clark to help with Amazon headquarters bid

It's a long shot that Amazon would locate such a key piece of its business outside the cozy confines of the United States, particularly in the current political environment. Picking Toronto would amount to Amazon founder and chief executive Jeff Bezos spitting on U.S. President Donald Trump's America First economic agenda.

But the headquarters competition creates an intriguing subplot. As long as Canadian cities are in the race to woo Amazon, their mayors will find it hard to resist endorsing everything the U.S. company wants in the ongoing renegotiation of the North American free-trade agreement.

That would naturally include such measures as higher Canadian duty-free thresholds on cross-border purchases, freer movement of data, harmonization of Canadian and U.S. intellectual property rules, unwinding cultural protections and fewer restrictions on locating data farms in this country for privacy and security reasons.

It's a long and controversial list. But for Amazon, securing those protections would likely be a precondition for moving to Canada.

If Toronto, Vancouver, Montreal or Ottawa want a legitimate shot at the prize, they may feel compelled to endorse the key demands of the U.S. tech sector in a NAFTA 2.0.

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This could also put the mayors in an awkward spot. Amazon's best interests are not necessarily the same as those of other Canadians, including some members of the domestic tech industry, traditional bricks-and-mortar retailers and advocates of stricter online privacy rules.

E-commerce is one of the least-discussed, but vitally important pieces of the NAFTA negotiations.

Mr. Trump has had a fractious relationship with Mr. Bezos, who also owns The Washington Post. The newspaper's critical coverage of his candidacy and now his presidency has often enraged Mr. Trump. During last year's election campaign he threatened that Mr. Bezos would have "such problems" if he won the White House.

But Mr. Trump and Mr. Bezos now share some common interests – most notably forcing Ottawa to dramatically raise the value of goods Canadians can buy online from the United States without paying taxes and duties. The current limit is $20 (Canadian). The Trump administration wants that raised to $800 (U.S.), matching its own threshold and providing a lucrative boost for U.S. online retailers, Amazon among them.

Raising the limit would also address Mr. Trump's desire to reduce the U.S. trade deficit, which he blames for killing U.S. jobs.

Canadian retailers have warned the change would devastate their industry.

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The interests of Mr. Trump and Mr. Bezos are also converging in other areas of the new economy. For Amazon and other tech and e-commerce companies, the renegotiation of NAFTA is an opportunity to regain what they lost when Mr. Trump walked away from the Trans Pacific Partnership trade agreement earlier this year. The TPP, which Canada signed, included groundbreaking rules governing e-commerce and intellectual property.

Since then, U.S. negotiators have quietly placed many of the same TPP provisions back on the table in the NAFTA negotiations. Among other things, the TPP prohibited restrictions on cross-border data flows and limited local data storage rules. The agreement also prohibited forced disclosure of computer source codes, barred new duties on electronic transmissions, extended so-called "national treatment" rules to online services and required member countries to criminalize cybertheft of trade secrets.

Some U.S. tech companies are now pushing for rules that go even beyond what's in the TPP.

The danger for Canada's mayors is that by aggressively wooing Amazon, they risk becoming unwitting pawns in a larger battle over the rules of the road for the new economy in North America.

Then again, maybe winning the lottery is worth all that.

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