With the promise of North America Free Trade Agreement renegotiations still on the White House docket for this summer, President Trump’s approach looks like it will be more nuanced than candidate Trump’s rhetoric seemed to foreshadow.
That’s according to a letter sent to the House Ways & Means Committee and the Senate Finance Committee addressing Administrations plans for taking a closer look at NAFTA provisions. The letter, which is expected to undergo revisions, will serve as the basis for the official 90-day notice the president is required to provide to Congress before trade talks begin.
In an interview on CNBC, U.S. Commerce Secretary Wilber Ross addressed several key points outlined in the document, including what he refers to as the rules of origin “loopholes.”
Saying that rules of origin—which allow goods produced in the three countries to cross borders duty free—also permit in materials from anywhere in the world, which are used in those finished goods. “It’s an obsolete provision, and it’s essentially a back-door way for a non-NAFTA goods to take advantage of NAFTA,” he said.
Ross also commented on the section of the letter having to do with taxes. Calling it “unfair” he explained that other countries, including Mexico, have value added taxes that are rebated on exports, while the WTO has blocked the U.S. from instituting measures that would give companies here the same advantage through corporate income tax rebates.
“That’s a problem that has to be solved in one way or another, and we will be using NAFTA as a partial means of addressing that,” Ross said.
With regard to how the negotiations might unfold, Ross said the Trans Pacific Partnership, the 12-nation trade agreement, which the president pulled the U.S. out of, would serve as a basis for the new talks.
“We feel that any of the provisions in TPP, that Mexico and Canada already agreed to, should be the starting point,“ Ross said, adding that from there, the U.S. will push for even more.
When asked about how the possibility of a border adjustment tax might color the discussions, he said it’s too soon to worry about that. “The Administration has not, as of yet, taken a position on the border adjustment tax,” he said.
The letter also includes language regarding the protections of digital trade and commerce, stricter intellectual property enforcement and rules that state-owned companies operate in a commercial fashion.
“There are some specific problems,” former Mexican trade official, Antonio Ortiz-Mena, told The New York Times. “But in terms of the language used during the campaign and at the beginning of the administration, it’s not as far-reaching as some people could have expected.”
From a Canadian perspective, Mark Warner, a Canadian-American trade lawyer, was quoted in the same article, referring to possible sticking points as “sticks of dynamite.” “It’s going to be a messy, hard-slogging negotiation,” he predicted.
The 90-day clock could start as early as next week. Ross has indicated he will try to get the appropriate sign-offs on the notification letter before Congress begins its Spring recess.