Trump nominates NAFTA critic to handle United States Commerce post
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WASHINGTON — A vocal critic of the North American Free Trade Agreement will be in charge of the U.S. commerce portfolio, with the nomination Wednesday of Wilbur Ross, a billionaire investor who condemns foreign sales taxes as a backdoor tariff on American goods.
The 79-year-old investor in manufacturing companies helped write Donald Trump's trade platform — which accused U.S. trading partners of using value-added taxes as an economic weapon, to force American companies to move offshore.
Ross co-authored an economic policy paper that proposed renegotiating NAFTA and included a call for combating the use of foreign consumption taxes that render American-made goods less competitive. Trump echoed the paper's views in campaign speeches.
The document argued that foreign countries offer a sales-tax rebate on their own goods shipped abroad, but then tax incoming products from the U.S., which does not have a value-added tax. The net effect, he said, is to invite U.S. companies to relocate.
"Like many countries, Mexico has shrewdly exploited the (value-added tax) backdoor tariff to further its competitive advantage," Ross wrote in the 31-page paper, co-authored in September with University of California business professor Peter Navarro.
"It is thus not surprising that U.S. corporations want to move their factories offshore and then export their products back to the U.S."
Ross is one of several billionaires nominated to the new Trump cabinet.
The latest additions to the administration on Wednesday included a treasury secretary, Steven Mnuchin, who worked at Goldman Sachs and whom critics say was instrumental in introducing the creative debt-swapping instruments that contributed to the global financial crisis; and Ameritrade heir and Chicago Cubs owner Todd Ricketts, nominated as deputy commerce secretary.
Trump has yet to name the next U.S. trade representative — responsible for executing his promise to renegotiate or cancel NAFTA.
Yet some observers suggest he's signalled his seriousness on trade by nominating a billionaire best known for buying struggling U.S. manufacturing companies, then either saving them, according to admirers, or brutally downsizing them, according to detractors.
One observer voiced both opinions of Ross.
Scott Paul, president of the Alliance for American Manufacturing, a coalition of steel industries and the United Steelworkers union, told the Wall Street Journal: "There are lots of jobs (in the U.S.) that are here now that would have disappeared forever if not for his interventions. ... But he's like dealing with a trauma surgeon: He can keep you alive, but it will cost you your leg."
Trump himself hinted Ross will be applying his negotiation skills.
"Wilbur Ross is a champion of American manufacturing and knows how to help companies succeed," Trump said in a statement.
"Most importantly, he is one of the greatest negotiators I have ever met and that comes from me, the author of The Art of the Deal."
It's unclear how Canada fits into the complaints about NAFTA.
During the campaign, Trump almost never mentioned Canada. Ross did the same in the September paper he co-authored — it mentioned Mexico 10 times, and Canada just once, in passing, as one of the major countries contributing to the U.S. trade deficit.
A leading expert on international tax policy says Canada could be affected by the trade talk.
"I guess, probably, Canada should worry," said Gary Hufbauer, a former U.S. federal official and now a fellow at the Peterson Institute for International Economics.
"If Canada loves its value-added tax, or its GST as they call it ... that's fine. That doesn't bother Trump at all." But when it's applied to imports, Hufbauer said: "He sees it as a tariff when you levy it at the border."
He said one of two things might happen: the U.S. will push for an end on tax rebates for products shipped into the U.S., or introduce its own rebates as suggested in a plan by Republican congressional leader Paul Ryan.
Hufbauer said economists will conclude it's no big deal — because currencies would adjust to the new reality and because Canada has a smaller trade surplus with the U.S. than Mexico, which would feel a deeper sting.
"It's not a big concern for economists at the University of Toronto who are going to say the Canadian dollar is going to offset (this)," Hufbauer said.
"They're going to go on TV and tell people not to worry. ... But it's a big concern for firms that (trade across the border)."