NAFTA will see big changes: U.S. commerce secretary

“The Mexicans know, the Canadians know, everybody knows, times are different. We are going to have new trade relations with people,” Ross said during a Bloomberg broadcast interview Wednesday.

“And they all know they’re going to have to make concessions. The only question is what’s the magnitude, and what’s the form of the concessions.”

Ross credited the president for preparing other countries to make concessions: “He’s made my job easier by softening up the adverse parties. What could be better than going into a trade negotiation where the fellow on the other side knows he has to make concessions?”

In the interview, Ross revealed multiple aspects of his thinking on the upcoming renegotiations of the seminal 1993 agreement with Canada and Mexico.

He answered two lingering questions:

> Will the U.S. seek only minor administrative changes, or more substantive ones that would require consultations with U.S. Congress, under the rules of so-called fast-track legislation, and then a vote in Congress? Ross said he intends to involve Congress.

> When would the U.S. start negotiations, which must follow a 90-day consultation process with Congress? Not right away, he said. The U.S. has yet to get its entire cabinet confirmed, including the U.S. Trade Representative, who is the legally designated point of contact with Congress.

“You’re talking probably the latter part of this year before real negotiations get underway,” Ross said. “[Then] I think the negotiations hopefully won’t take more than a year.”

Ross says he has an open mind on another key question: whether the final deal should be a three-country arrangement or two bilateral ones. As for the substance, he says there will be significant changes.

Ross hopes to add entire new chapters to NAFTA, which currently has 22 chapters. He says the additions would reflect the modern digital economy.

“It’s an old treaty. Our economy is very different from what it was [back then],” he said. “There were some things in [the original] that were missed. There were things in it that were not done correctly to begin with. And a lot of things that might have been OK back then but don’t work now. So there’s a lot to fix….

“Several chapters need to be added because of the digital economy and other things that have developed subsequently,” Ross added.

He also hinted at substantive changes on auto parts — significant enough to require a phase-in period as car companies adjust their global supply chains. Ross has made no secret of his desire to adjust the rules of origin for tariff-free vehicles, to bring auto-parts production closer to home.

What’s unclear is whether his intended target would be limited to Asian auto parts suppliers or whether Mexican and Canadian ones might also get hit. Ross didn’t elaborated on that.

What he did suggest was that car assemblers might need time to adapt.

“You need to be mindful also of the supply chains that have developed [for auto parts]. And to the degree that a transition, a geographic transition, is needed, that takes some time.”

Photo copyright: ronniechua/123RF