WASHINGTON — NAFTA negotiations will probably start late this year, might take about a year, and will include serious changes that could include the addition of several entire new chapters to the landmark agreement.
That's according to U.S. Commerce Secretary Wilbur Ross, tasked to lead the process by President Donald Trump, who has previously indicated he expects only minor tweaks to the trade relationship with Canada.
"The Mexicans know, the Canadians know, everybody knows, times are different. We are going to have new trade relations with people,'' Ross told 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 tough talk that he says has prepared the 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.
Two questions have lingered: whether the U.S. would seek minor administrative changes or more substantive ones, which would involve a vote and consultations with U.S. Congress; and if the latter, when the 90-day consultation period would begin.
Yes, he intends to involve Congress, and no, it won't happen right away, Ross 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 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. He hoped to add entire new chapters to the agreement, including one related to the digital economy.
"It's an old treaty. Our economy is very different from what it was when that treaty was was entered into."
— Wilbur Ross, U.S. Commerce Secretary
"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.''
He also suggested changes on auto parts could require a phase-in period as car companies adjust their global supply chains.
Ross has made no secret of his desire to adjust rules of origin for tariff-free vehicles, to bring the production of auto parts closer to home. What's unclear is whether those changes would be aimed simply at reducing imports of parts from Asia, or from the North American neighbours.
Any changes would have to be brought in gradually, he suggested.
"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.''
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