NAFTA Renegotiation to Happen 'Very Early' in Next Administration, Commerce Nominee Says

Ross also vowed to work with CBP to improve collection of “literally billions of dollars of countervailing duties” that haven’t been collected, a situation that “horrified” Ross as he studied trade enforcement, he said. “Foreigners set up little shell companies here,” he said. “When we impose a duty, there’s nobody home when it comes time to collect, and I think that kind of thing needs to be fixed.”

Despite indications that Ross will take on a larger role in the presidential trade agenda than previous Commerce secretaries have, neither he nor President-elect Donald Trump plans to implement any policy that would undermine the legislative authority of the Office of the U.S. Trade Representative as the lead agency in trade negotiations, Ross said. “I think it’s important to bring all the intellectual resources and experience that we can to help resolve the trade issues, and therefore we view that there will be a collaborative process among the U.S. trade rep, myself, and Peter Navarro,” who was named head of the newly ordered White House National Trade Council. As Ross said this, two demonstrators stood up and shouted “Ross supports TPP; Ross offshores jobs,” the only part of the hearing interrupted by protest. Police then escorted the protestors out of the hearing room.

Ross acknowledged that he favored the Trans-Pacific Partnership when he read the first press reports of the agreement, but found some things out of step with how the deal was “advertised” as he started reading the agreement itself, he said. Even though the concept overlaying the deal was to enable benefits only for participants, the TPP’s auto rules of origin would allow 60 percent of car components to come from outside countries and still enjoy tariff preferences under the agreement, he said.

Notably, Ross did not directly answer questions from Republican Sens. Dean Heller of Nevada and Dan Sullivan of Alaska regarding whether he would help Trump follow through on his threats to slap 35 percent tariffs on car companies that move jobs overseas -- to Mexico, namely -- and subsequently export automobiles to the U.S. (see 1701040040 and 1611150035). Responding to Heller, Ross said the question of whether to impose one flat tariff “on everything” or whether “it should be more tailored to the individual situations” is complicated. He cited the merit of tariffs as a negotiating tool and as punishment for “offenders who don’t play by the rules.” Then, responding to a question from Sen. Roger Wicker, R-Miss., Ross said the U.S. could help convince more companies to insource jobs to the U.S. by lowering the marginal tax rate, noting that Mexico’s corporate tax rate is about half of the U.S.’s 35 percent level.

Ross didn’t encounter much Democratic opposition during the hearing, and, interestingly, Sen. Tammy Baldwin, D-Wis., said she supports some of Trump’s trade doctrine and said the U.S. needs to undertake a new approach to trade. She underscored concerns about NAFTA “Buy America” provisions, which give Canadian and Mexican companies the same level of preference as U.S. companies in bidding on U.S. government procurement programs. She asked whether Ross would commit to eliminating the domestic procurement chapter from NAFTA.

Ross said all changes will on the table for NAFTA renegotiation, and he expects procurement to be a topic for discussion. “But you don’t have a deal on anything until you have a deal on everything, so exactly what would come in a final treaty or not is … premature to say, but I’m certainly aware of the issue,” he said. Ross added that these types of procurement provisions, in general, are “highly problematic” to include as part of free trade agreements, but noted that similar language could be warranted in cases that would better position the U.S. to take advantage of innovative technologies made primarily in other nations. He cited the need for world governments to uphold reciprocity principles, as honored by the World Trade Organization, noting as an example that if China prevents U.S. companies from government bids, the U.S. should accord the same treatment to Chinese companies.

Earlier during the hearing, Ross said China is the “most protectionist” of the world’s largest nations, decrying their tariff and non-tariff trade barriers, and adding that their talk surpasses action on adopting free trade policies. “We would like to levelize that playing field, and bring the realities a bit closer to rhetoric.”

Also noteworthy is that Ross noted the U.S. trade deficit in fishing, adding that he would like to examine how the U.S. might become more “self-sufficient” in the sector, “perhaps even a net exporter of fishing,” and said that seafood imports are often permitted to enter U.S. commerce under lower standards than domestically raised seafood. Sen. Marco Rubio, R-Fla., who was critical of Trump's attorney general nominee Sen. Jeff Sessions, R-Ala., introduced Ross during the hearing and voiced support, saying, among other things, Ross will bring an experiential perspective to big policy debates such as tax reform. In closing the hearing, Committee Chairman John Thune, R-S.D., said Ross’ answers on trade policy were “somewhat reassuring,” since the Trump team's talk of tariffs “spooked” some people.