US may press trade partners to turn up heat on China, says Ross

US Commerce Secretary Wilbur Ross said that it would set a precedent for new trade deals.
US Commerce Secretary Wilbur Ross said that it would set a precedent for new trade deals.

WASHINGTON • US Commerce Secretary Wilbur Ross has signalled that Washington may flex its muscle with additional trading partners in order to exert pressure on China to open its markets, saying that a "poison pill" provision in the recently completed pact with Canada and Mexico could be replicated.

Mr Ross said in an interview that the provision was "another move to try to close loopholes" in trade deals that have served to "legitimise" China's trade, intellectual property and industrial subsidy practices.

The United States is now in the early stages of talks with Japan and the European Union to lower tariff and regulatory barriers and try to reduce large US trade deficits in autos and other goods.

If the EU and Japan signed on to provisions similar to the one in the new US-Mexico-Canada Agreement (USMCA), it would signal that they are fully aligned with Washington in trying to increase pressure on China, the world's No. 2 economy, for major economic policy changes.

The provision in USMCA, which is expected to replace the North American Free Trade Agreement, effectively gives Washington a veto over Canada and Mexico's other free trade partners to ensure that they are governed by market principles and lack the state dominance that is at the core of US President Donald Trump's tariff war against China.

Under the provision, if any of the three countries in the USMCA enters a trade deal with a "non-market country", the other two are free to quit in six months and form their own bilateral trade deal.

If the EU and Japan signed on to provisions similar to the one in the new US-Mexico-Canada Agreement, it would signal that they are fully aligned with Washington in trying to increase pressure on China, the world's No. 2 economy, for major economic policy changes.

"It's logical, it's kind of a poison pill," Mr Ross said on Friday. Mr Ross, asked if the provision would be repeated in future trade deals, said: "We shall see. It certainly helps that we got it with Mexico and with Canada, independently of whether we get it with anyone else." He added that with a precedent now set, it will be easier for the provision to be added to other trade deals.

"People can come to understand that this is one of your prerequisites to make a deal," he said.

Hanging over the talks with the EU and with Japan is the threat of a 25 per cent US tariff on imported autos and auto parts as the Commerce Department pursues a study on whether such imports pose a national security threat. The USMCA deal largely exempts Canada and Mexico from such tariffs.

The US cited national security concerns when it announced tariffs on imported steel and aluminium from a number of countries in early March.

 

Mr Ross declined to discuss timing for releasing the "Section 232" auto probe's findings, noting that Mr Trump has said he would not impose car tariffs while the EU and Japan talks are under way.

REUTERS

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A version of this article appeared in the print edition of The Sunday Times on October 07, 2018, with the headline 'US may press trade partners to turn up heat on China, says Ross'. Print Edition | Subscribe