On July 11, 2024 the Chairman of the United States House Committee on Ways & Means Jason Smith and Trade Subcommittee Chairman Adrian Smith sent a letter, that was signed by every Republican on the Committee, to the United States Trade Representative (USTR), Ambassador Katherine Tai. The letter calls on the Biden Administration to utilize authorities under Section 301 of the Trade Act to send a strong response given the threat Canada’s Digital Services Tax (DST) poses to American workers and businesses.

The letter reads as follows:

“Dear Ambassador Tai,

We call on the Biden Admnistration to deliver a quick and decisive response to Canada’s decision to move forward with a discriminatory digital services tax (DST). The United States cannot permit trading partners to levy taxes that uniquely target our firms and workers. It is time for this Administration to make clear that the United States will defend our interests by immediately initiating an investigation of Canada’s DST under Section 301 of the Trade Act of 1974.

Canada’s decision to unfairly target U.S. companies runs counter to our substantial bilateral economic, diplomatic, and security relationship. We appreciate your past attention to this issue and desire to “examine all options” should Canada continue to pursue its DST. Given Canada’s decision to enact its DST on June 19, despite significant U.S. concerns expressed by Congress, USTR, and the Treasury Department, the time has come to make clear to Canada’s political leadership that the United States is done examining options and will act decisively to protect American workers, small businesses, and innovators.

We support continued engagement with the Government of Canada regarding DST implementation. To date, however, talks have been ineffective and Canada has not changed course at all. We strongly urge you to make clear that unilateral and discriminatory DSTs are unacceptable and immediately initiate an investigation under Section 301. A weak response from the Biden Administration will harm American interests, lead to a proliferation of similar measures, and allow Chinese companies to gain a foothold in the markets of our closest trading partners.

As you know, Section 301 gives USTR ample authority to take action against unreasonable or discriminatory acts that burden or restrict U.S. commerce. In fact, thanks to aggressive action by the prior administration, between 2019 and 2021, USTR investigated the harmful DSTs implemented by other countries, creating a path for USTR to respond quickly in this instance. Without swift action, the United States will not be ready to immediately retaliate when Canada’s discriminatory DST is applied. This is especially concerning because of the potential retroactive application of the DST.

At the same time that you proceed with a prompt Section 301 investigation, we also expect you to fully exercise U.S. recourse under the United States-Mexico-Canada Agreement (USMCA).

It is disappointing that Canada seeks to erode the durability of our bilateral economic relationship. The size and scope of the relationship are something for both countries to be proud of. Yet Ottawa insists on moving forward with a policy of unique discrimination and unreasonableness, while rejecting multilateral efforts to eliminate DSTs. Given the urgency of the issue and the significant potential economic impact on American workers, we expect an immediate and vigorous use of your available tools to push back on this problematic tax.”

The letter was signed by:

• Jason Smith (Chairman Committee on Ways and Means);
• Adrian Smith (Chairman Subcommittee on Trade);
• Darin LaHood (Co-Chair Digital Trade Caucus);
• Vern Buchanan;
• Mike Kelly;
• David Schweikert;
• Brad R. Wenstrup, D.P.M.;
• Jodey C. Arrington;
• Drew Ferguson, IV, D.M.D.;
• Ron Estes;
• Lloyd Smucker;
• Kevin Hern;
• Carol D. Miller;
• Gregory F. Murphy, M.D.;
• David Kustoff;
• Brian K. Fitzpatrick;
• Gregory Steube;
• Claudia Tenney;
• Michelle Fischbach;
• Blake D. Moore;
• Michelle Steel;
• Beth Van Duyne;
• Randy Feenstra;
• Nicole Malliotakis; and
• Mike Carey.

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