An hour. With us today is the architect of the new think, within the administration, the secretary of commerce, wilbur ross. He will be interviewed by edit editorial, wall street journal, please join me in welcoming them. [applaus [applause]. Guest so thank you, john, and welcome being mr. Secretary. Thank you for doing this. The president tweeted as you does, he will have a major announcement on thursday regarding trade on asia. I wish you could give us an advance. Id be derelict if i didnt ask as the journal, what that might involve. Im actually out of tweets for today. [laughter] you dont have to tweet. Any indication, any at all . You dont want to no, ive learned not to interfere with his big announcements. [laughter] i can understand that. All right. So, mr. Secretary, i was just in japan and with the pullout of the United States from tpp, a week before the president arrived there and what i heard from the japanese was that, you know, they would love the United States to get back into tpp and shinzo abe, the Prime Minister is reluctant to start a Bilateral Agreement with the United States because hes trying to coax the president to come back in. Is there any chance that that would happen . Well, i think you have to understand the position from which mr. Abe comes. He used a tremendous amount of Political Capital trying to get the tpp through, because it involved a lot of agricultural reforms and in japan, just like here, in many countries, agriculture punches way above its weight politically. So, thats the reason hes so looked into tpp. Now, at the apec conference, he and the other ten agreed it agree, whatever that means, on a new tpp without us, and they hope to actually consummate it sometime the early part of next year. We shall see. I think its going to be tough for them to do that because the real bait for everybody was access to the big u. S. Market. And you dont think theres a chance the United States might enter, even to be able to renegotiate some of the terms, if they dont decide on a new deal themselves . Well, i think once we see what the first of all, why do we favor bilateral versus multilateral . Thats probably a good starting point. The problem we see with multilateral is first of all, it takes too long to do. Tpp itself took Something Like ten years and never even came into being. Now, during that kind of a period, you get a sort of negotiation exhaustion. Can you imagine if at the end of ten years, you go back to your spouse and you say, you know, dear, i just blew ten years of my life. We couldnt make a deal. Thats a tough, tough thing, so, by the end of it, you get to where the people want a deal, even if it isnt the deal. So, thats one problem we see with it. Second problem is, lets say youre china and lets pretend you were going to be part of tpp. Lets say i want these reforms from you, intellectual Property Rights, and youll say, sure. But here is what i want in return. So we get a little nick for that. And then maybe here is japan and they say, well, we need from you more agricultural reforms and he says, fine, but i need this from you. What does that mean . You both benefit from the nicks each other took out of us even the ones you didnt ask for, reproduce that 12 times and you have a pretty well nicked up body. So thats the second problem that we see with it. If i may push back on that, mr. Secretary. Youre talking about having the president announced on this trip, hes willing to do bilaterals with all comers. Sure. Thats 11 different bilaterals and those are not easy either. And some have gone for years, south korea took years and has been redone a couple of times and you want to do redo it again. Is this a first term project, a second term project . 11 deals is a lot of deals. Well, lets take a look at nafta. Nafta is on a very short time fuse. Its a very large agreement, a very complicated agreement, needs tremendous amount of revision. If, in fact, thats accomplished by more or less march of next year, which is what the current hope and plan is mostly due to the political calendar, but if, in fact, that happened, that would be an enormously complex thing done in a year. So, the fact that other people took eight or ten years, part of the reason is they would generally only negotiate once every four weeks, once every five weeks and they would do it for a day or two days, nafta is being done four or five days in a row and then only three, four week separation between them. So its a little like painting your house, its a function, how many painters for how many consecutive days is what tells you how many calendar days it will take. Youll line up any number of bilateral deals the country is interested in, youll knock them off . I think so. One of the things we hope will come out of nafta, even though its a trilateral rather than bilateral is language we can roll out in other agreements. For example, intellectual Property Rights is not a particularly huge issue between us and canada and mexico. So, we should be able to get a decent set of wording for ipr. Well, that will then hopefully become our standard wording. The same thing with some of the other sections, so, we think that having some standardized language rather than starting with the blank book every time you negotiate, will also save a lot of time. Okay. I want to follow up on nafta in a bit, but first the tax bill moving through congress. Very much in the news. And secretary mnuchin said last night that the 20 Corporate Tax rate fixed and the president has no give on that. What about the timing . Youre an investor, you know how ceos make decisions, are you worried at all about the delay in the senate bill of getting to that 20 rate of one year . Oh, i think it would be highly preferable to have it start january 1st. But is it does it worry you that youre going to see corporations withhold investment in 2018 if they see that 20 carrot out there in 2019 . Well, part of that depends on when the abbing abbing celebration of depreciation goes into effect. Host i think that would be immediate. If that postponed a year that would have an effect. Host would expensing delay enough in the rate so we wouldnt get an economic slowdown . Well, in terms of capital expenditur expenditures, i think the immediate spending of cap x is much powerful than rate of return. Whatever youre constructing next year, youre probably not going to get a return until the following year anyway. So if you got the expensing of the capex, it seems like its taking the delay isnt a deal breaker in your view . I didnt say that. The president is the one that decides what is a deal breaker. What we are bound and determined though is 20 , not squiggle up to 35. Host do you believe the tax reform will be investment . Absolutely. Host lets say close to what the house and senate have now submitted, have you told the president if that happens, the dollar is likely to go up . Because investments going to flow here and youre likely to see a big increase in the dollar . Well, i think that the dollar going up would be a function of a whole lot of things. I think Monetary Policy comes into effect. The amount of the federal budget deficit is going to have an impact on that. Its a lot other tan tax that would have an impact on where the dollar trades. Host i think you know where im going with this. If you get that capital inflow youll got an increase in the trade deficit almost by definition because of the national accounts. And thats not something the president says he wants. Well, it is true, obviously, that both sides must balance because thats just the way it works. Host correct. But its not inevitable with it does to the currency because of other factors. Lets just deal with the trade deficit. What do you do if the trade deficit you get, lets say everything works, you get the tax bill through, growth pops up like your white house Economic Advisor says. An influx of capital and wages are going up. People, the growth is going up. You get 3 growth. Oh, the trade deficit is also going up. Can you live with that if youre this administration . The key thing is, were using trade deficit as a way of saying job creation. Job creation is the purpose of reducing the trade deficit and its why the way we mainly wish to reduce the deficit is by increasing our exports as opposed to constricting imports. That way, you have more total trade and you have a reduction in the deficit. Okay. All right. Just to return to nafta. The negotiations resume again, i think, later this week. Ive heard a lot from Business People in this room and elsewhere about their concern about some of the u. S. Negotiating positions and particularly, the fiveyear sunset clause, because if you put a fiveyear sunset into a revised agreement, the concern is, how as a business person can you make an Investment Decision where to invest multibillion dollars, perhaps, if the whole thing youre basing it on goes away in five years . Well, right now in nafta, businesses are exposed to a sixmonth termination. Any of the three countries can terminate it on six months notice. Theres never been an assumption that anybody would do that until it may not have been an assumption, but its a fact. So, theres right now, a shorter term trigger than the five years, plus, the five years just says in the fact that the president must make a conscious decision to continue it. Well, assuming its an agreement thats working well, then thats the general assumption that people are making, why would anyone terminate it. This idea the fiveyear sunset has been part of the president s thinking since the campaign. If you look at the editorials i wrote during the campaign, five year sunset for all trade agreements was always part of it. So, thats not a new thought. The reason we won it is that the tragic truth is that the forecasts that were made when trade agreements were entered into never have been achieved, at least in the case of the u. S. And theres no when theres not an automatic mechanism for rethinking things, they go on and on and on and on and we think that the discipline of saying, okay, well do the best trade agreement we can. Chances are, well get something wrong in it that will need fixing and having this formal period of five years is a good way to deal with that. Host but your message to ceos who are thinking, do i build that plant in mexico or do i go to malaysia, is and that sunset provision shouldnt worry them . Well, there are lots of parts of the world that are very low cost, that have a lot more risk than a five year sunset. Host okay. Another u. S. Position that people have raised a question about is the rules of origin, which i know have been a priority for this administration and right now, rules of origin require 62. 5 of the products be nafta made, i think in automobiles, for example. You have suggested that it be raised to 85 . Right. Host now, thats a very high rule of origin, i think its higher than any trade deal around the world that ive observed. Maybe thats wrong, but our friends at chamber of commerce make the point, if that happens, youre going to give car makers an incentive to start making parts in asia, for example, and import those into the United States, those components, paying the most favored nation tariff of only 2 1 2 . Are you worried at all about that kind of well, first of all, the 62 1 2 is somewhat fictional, particularly as it relates to automotive because what they did, they specified the exact parts that were subject to the 62 1 2 . Well, with Automotive Technology having moved along, none of those parts are used in cars anymore and the cars back then didnt have nearly as much electronic content as they have now. So, that was not a workable thing in any event. But as you know, from the editorial that you kindly published for me, we have found that the u. S. Content has gone down. U. S. Content of cars made in mexico and cars made in canada, but imported to the u. S. Its gone down and it hasnt gone down particularly to mexico or to canada, its gone down to outside the nafta, but when you think about it, a trade agreement is meant to help the people inside consolidate business and build a barrier against the people outside. And the current nafta has totally failed to do that. Far more of the content of a car brought into us from canada or mexico comes from Southeast Asia right now, than it does from the u. S. And if you changed some of the rules of content, rules of origin, they might move there anyway. We dont think so. We believe that there will be a different thing because of all the other changes that were making. The regulatory changes, reduce the cost of business here, the tax change, reduces the cost of business here. Immediate expensing of capex reduces the cost of business. So you cant look at one provision in isolation, you really ought to look at that as an overall package. Host you refer to the politics of the timetable of nafta and you have the mexican election thats coming up, obviously, that will affect their willingness and their ability to compromise. If you cant work something out by march, is the president prepared to unilaterally withdraw from nafta . Well, i think the president has spoken for himself on innumbererable occasions. His general point of view is that no deal is better than a terrible deal. Hell exactly evaluate whatever we come up with. Because it wont be that nothing lands on his desk. Something will land on his desk in all like hooked. Host likelihood. Host you mean some kind of a draft . Some kind of a draft will land on his desk. It will be a binary decision in that sense. Host what do you think the impact would be of unilateral withdrawal of america from nafta . I think it would be several different things. For one thing, it would be devastating to the mexican economy because its such a big part. We are 80some odd percent of all of their exports and i think the amount of their exports to us, theres Something Like 30 of their economy, so, youre talking about a big, big time problem for mexico and its also a big time problem for canada. And canadas economys and mexicos are 1 9, 1 10 of ours and they have trade surpluses. So it would be far more damaging for them than for us. Host i cant assume that you would enjoy, as the american commerce secretary, economic damage in two of our biggest trading partners and neighbors. That certainly wouldnt help us. No, i would certainly prefer them to come to their senses and make a sensible deal. Host but it sounds like youre holding that over their heads. Come to the table and youre going to get whacked more than we do and in any negotiation if you have a party thats not prepared to walk away over whatever are the threshold issues, that party is going to lose. Host message delivered to, i think, the mexicans and canadians. All right. Lets open it up to questions from the audience. Anybody have any . I want to yes, yes, sir, right there. Right here. Do we have a microphone for the gentleman in the middle right here . Thank you. Thank you. From bb holdings. Secretary ross, id be interested in your views just off the last question. If your perspective or in the perspective of this administration, do you view trade as distinct from National Security interests . In other words, going back to the question or comment, if fallout, which is less than favorable in the context of two northern and southern neighbors, how do you view trade and National Security . Are they separate or distinct . My impression would be theyre integral and have been in the architecture that weve put in place over the last several decades, thank you. Well, theyre certainly related. But i think its highly unlikely that either mexico or canada would actually declare war on the u. S. If we dont have the trade agreement. So, in the narrow sense, i dont see thats a bit much of an issue. In a broader sense, i think part of the reason, a very big part of the reason why we have the trade deficits we have is that nontrade, noncommercial influences have dominated the negotiators, and think about it. Right after world war ii, it was the clear policy of the american administrations who then had very big trade surpluses. We, in fact, had trade surpluses right into the 1970s, when we were in the trade surplus period, clear policy was try to help rehabilitate europe, try to help rehabilitate asia, from the ravages of the war. So, we made a lot of unilateral concessions and that was probably good nearterm public policy. What was bad public policy, they were not time limited, nor any other way limited. So, we now have germany getting the same concessions that it got in 1950. Even though germany now has a huge trade surplus, huge exporting nation, huge industrial power. So, there was a big policy mistake made and that was compounded when we went into the wto, because we agreed to bound rates, which means the maximum tariff that you could put at very low levels. Quite close to sometimes identical to the actual tariff. So, between the bound rates and the mfn, we have no trade weapons other than enforcement proceedings. All right, any other questions from the crowd . We have this gentleman right there, to the far left there, good. Oh, hi, alan. Hey, paul. Secretary ross, given the very significant differences between the mexican and the canadian economies, why was the decision taken to do sort of an overall agreement instead of the bilateral ones in the tpp state . Well, given that we were starting from a preexisting frame work, there was one reason. The other reason was if you only completed one of the two negotiations, youd have a funny, very discombobulated situation and therefore, it seems, that we should at least try to do the trilateral route. But the president has said if that fails and if there is one of the two parties with whom we can make an agreement, he might be very inclined to go ahead with that. All right, anybody else want to talk about trade, taxes, or anything else . There is one. Yes, sir, right over here. Im just interested from your business experience and now your experience in government, you know, negotiating these trade deals versus negotiating some of the deals that you would have negotiated when were you in business. Can you give us some insight into how you think differently in the two different situations . Well, in business the ceo or his designee or his or her designee normally can pretty much have the total negotiating power. Here under the trade promotion authority, which only the congress would call fast tracked, i can tell you that. [laughter] but such as it is, its relatively better than the alternative. Anyhow, because of that theres an immense amount of consultation and interaction required between the negotiating team and the congress. Thats a complication of sorts because what it basically means is theres an effort to have your negotiations done in public. Its much better to negotiate anything in a Conference Room than in a great open stadium, and so, i think thats a very big complication. Its a complication in another regard in that as one special interest group, say, agriculture, for example, gets nervous, they start screaming and yelling publicly, they start writing letters and soliciting the congress people, then they start screaming and yelling in public and it just complicates the environment and, frankly, makes the negotiation harder. It sound like activist investors. Pardon me . A sounds like activist investors. [laughter] anybody else at all . Let me follow up then on steel because when you talked to us in and this gets to the question of National Security and the link between steel and National Security because you the last time you talked to us, i think, was in the spring and you said that thats when the president had started his 302 investigation into steel and National Security and you said at the time that your recommendation was going to be imminent or within a month or two. Now, thats been put off, obviously, for many months. Whats the holdup and when can we see that . Well, the president has indicated that he didnt want that to come out until after the tax legislation is dealt with. And so thats the principal holdup in publishing the report. There is a statutory deadline from his executive order and thats january 28th. So you have at least until then to do it. And just in thinking through that steel decision, one of the things youve often talked about the pressure that u. S. Steel companies are under, but as i look at the record, it looks like, i mean, theres about 150,000, 160,000 employees in the United States of steel companies, a lot of people, obviously, but theres Something Like 15 or 16 times that that are employed by steel consuming companies, that use steel as a commodity for export or other products. How does that balance fit into your calculation when youre talking about a potential decision to impose steel tariffs . Well, lets focus on the National Defense part. There had been only one facility in the u. S. That made certain very important types of the armor plate used in military vehicles. That facility has recently closed. So we now have no active domestic producer of that kind of steel. So, it already has had an impact on it. Now, hopefully when we get the 232 released and the president agrees with it and all that, hopefully we can get that back up and running. But there is a very direct National Defense importance, both of steel and aluminum. Aluminum is the other one, we have a similar report in waiting. So, thats one. As to the fact that there are more users than there are makers of steel, thats absolutely true, but theres not any reason to think that the Consuming Industries deserve dumped product and thats what a lot of them have been living off, subsidized dumped product. Thats not a great solution. Thats not a valid basis to build a business. So, unless you adopt the theory that we should let everything be subsidized and come in and destroy all our industry, then you have to draw the line somewhere. Well, lets not quibble over the dumping point, but if their prices or consuming prices go up a third or whatever the amount of tariff you put on. Their argument, were not going to be able to compete with the rest of the world, well have to layoff people. Well, the whole rest of the world is eventually going to become more protectionist, especially in steel anyway. When i was in japan with vicepresident pence some months ago, theyd decided that the Japanese Agency decided for the first time in history to adopt an Enforcement Group and weve consulted quite actively with them about how to go about that. They now, for the first time, have a 20person Enforcement Group. Eu is starting to do a much better job of enforcement than they had historically. So, the idea that if we cured dumping, someone else will take advantage of it and their products, therefore, will be cheaper is gradually getting to be less and less of an issue. All right, i want to thank you, mr. Secretary, for taking the time to be with us today. We very much appreciate it. Well, thank you, paul. [applaus [applause] were live this morning at the center for National Interests here in washington d. C. For a conversation with the Qatari Foreign minister about the role of the middle east and the u. S. A group of arab countries cut off diplomatic relations with qatar and would remain a diplomatic boycott with that country unless a list of 13 demands were met. Qatars foreign minister is expected to address that and others in the middle east. This is live coverage here on cspan2 and it should start in just a moment. 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