Commerce Secretary Wilbur Ross defended the Trump administration's hardball strategy for renegotiating the North American Free Trade Agreement, suggesting that the U.S. can pressure Mexico and Canada into big concessions because they have more to lose if the pact collapses.
A U.S. withdrawal "would be devastating to the Mexican economy," Mr. Ross told The Wall Street Journal CEO Council on Tuesday. "It's also a big-time problem for Canada," he said.
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He noted that because those countries are more dependent on the U.S. than vice versa, the termination of the 23-year-old pact "would be far more damaging to them than to us."
The likely result, Mr. Ross said, was that the two countries will "come to their senses and make a sensible deal."
President Donald Trump has branded Nafta "a disaster," and threatened to withdraw unless the two countries agree to rewrite the pact. Negotiations on a new Nafta began in August, and a fifth round of talks is slated to open in Mexico City this week. The parties have said they are aiming to reach a deal by March.
The talks hit a snag during the last round, in Washington in October, after the U.S. put forth a number of proposals that would significantly alter the agreement in ways that the two trading partners have branded unacceptable.
Among them: a proposal that would "sunset" the agreement, making it expire five years unless the parties all agreed to renew it, and a plan to increase the requirement for what portion of cars would need to be made in North America, and in the U.S., to qualify for Nafta tariff breaks.
Many U.S. business leaders have expressed concern about the impact on their operations if Nafta were to collapse and have disagreed with Mr. Ross's assertion that the U.S. held significant leverage over Mexico and Canada. They have noted that those countries have begun seeking new trade deals with other countries in ways that could soften the blow from diminished access to the U.S.
Michael Froman, who ran trade policy for President Barack Obama, also questioned Mr. Ross's confidence in U.S. power.
"While it's true that Mexico and Canada are more dependent on us than we are on them, it turns out they have trade politics too," said Mr. Froman, who was in the audience for Mr. Ross's remarks. "And there are limits to the degree to which you can push them and still reach an agreement," he added.
During his appearance, Mr. Ross also expressed frustration with the vocal pushback from American business and lawmakers to the administration's Nafta negotiation strategy.
The longtime investor was asked to compare the process of negotiating business deals with trade deals.
"It's much better to negotiate anything in a conference room than in an open stadium," Mr. Ross said. "That's a very big complication."
He explained that "as one special-interest group -- agriculture for example -- gets nervous, they start screaming and yelling publicly." Then "Congress people, they start screaming and yelling publicly and that just complicates the negotiations," he added.
"Frankly, it makes the negotiations harder," he said.
Write to Jacob M. Schlesinger at firstname.lastname@example.org
(END) Dow Jones Newswires
November 14, 2017 15:48 ET (20:48 GMT)