Ross Says 'WTO Pincer' of MFN and Bound Tariff Rates Preventing 'Reciprocal Tariffs'

The combination of World Trade Organization rules for Most Favored Nation treatment and bound tariff rates leave the U.S. at a disadvantage within trade negotiations, Commerce Secretary Wilbur Ross said during a May 14 speech at the National Press Club. "We are now constrained by two sides of a WTO pincer," he said. The MFN, which requires level tariff rates for countries the U.S. doesn't have free trade agreements with, and Bound Tariff Rates, the ceiling on allowed tariff levels, "prevent us from having reciprocal tariffs because, in most cases, our bound rate ceiling is at or near our very low MFN applied rate, while other nations have higher levels of both." President Donald Trump has mentioned the possibility of implementing a "reciprocal tax" (see 1802120034).

Ross, who noted a wide gap remains between the U.S. and China on trade (see 1805090013), also downplayed concerns about Section 301 tariffs and subsequent responses from China. "I hope that we can make a fair deal. But if that does not happen, a trade tit-for-tat will not be economically life-threatening to the United States," he said in the speech. Ross also complained of China's "non-tariff barriers" that are "non-science-based" restrictions that "essentially are tailored to keep U.S. goods out." There have been recent reports of new non-tariff barriers in China on products from the U.S. (see 1805100033).

Discussions on an exemption for the EU from the Section 232 tariffs are ongoing, and Ross will speak with Cecilia Malmstrom, European Commissioner for Trade, on the subject on May 15, he said. "As we get closer to the June 1 deadline, hopefully we'll come to a reasonable conclusion. If not, the tariffs will go into effect," he said. The EU has not "yet agreed to anything" on quotas or tariffs for autos, Ross said in response to a question submitted by International Trade Today.

Commerce likely won't keep extending the Section 232 country exemptions a month at a time, "except if we were in continued negotiation," he said. That's the case with Canada and Mexico, and "depending where we are with NAFTA on June 1 the President will decide whether or not to extend their situation." None of the major topics, such as rules of origin and sunset provisions, have been decided on NAFTA in the most recent meeting among the countries, he said. "It eventually will come down to every comma, every semicolon, every everything before we can figure out if it's something that is workable." Other countries are trying to exert political pressure on trade issues, and Ross noted that Canada's lead trade negotiator last week "spent two-and-a-half hours in negotiations with us and about 40 hours lobbying Capitol Hill."

Part of the rationale behind the broad Section 232 tariffs is that "it can be kind of easy to get around them if you don't have a blanket solution," he said. "So we have imposed the tariff provision on countries that even sell us little or no steel or aluminum because we don't want them suddenly to become a transshipment vehicle," he said. Ross also complained of the U.S. reliance on imported seafood. "More than 80 percent of our seafood consumed in the U.S. is imported and that seems a little bit silly to me," he said. "One of my objectives is to try to change that trade deficit into a trade surplus."