More on Secretary Ross on MFN

Last month, I blogged about a press conference by Commerce Secretary Wilbur Ross, in which, among other things, he seemed to criticize the MFN clause as a barrier to trade liberalization. I explained (briefly) there why I thought this criticism was misguided. Chad Bown and Alan Sykes subsequently wrote a WSJ op-ed on the same issue. In response to the op-ed, Secretary Ross submitted a letter in which he elaborated on his views (and also spent some time on dumping).  Here's an excerpt:

If instead we could tell the Europeans that unless they drop their tariff on autos from the U.S. to our rate of 2.5%, we will raise the tariff on their autos to match their 10%. The likely result will be a 2.5% tariff in both directions. Since MFN prohibits this, it is a barrier to free trade, not a help toward achieving it, as suggested in Monday’s piece.

In the comments to my earlier post, Perry Bechky asked for my views on the Ross letter. Here are a few thoughts:

• I do like the fact that he seems to want tariffs to go down. That's one positive note in all this.
• However, getting rid of the MFN clause seems unlikely to get us to lower tariffs overall.  Even if it worked in some cases (resulting in lower tariffs), it could backfire in many others (higher tariffs), and would definitely add massive complexity to the system.  And would it actually work?  For example, would the U.S. lower its 25% tariff on trucks/SUVs in response to this kind of pressure?  I have doubts it would work very often.
• And anyway, isn't this what FTAs are for?  The MFN clause does not prevent tariff reduction being undertaken right now through a comprehensive FTA.
• And of course, multilateral tariff liberalization at the WTO is also a possibility, if anyone were interested.
• I'm not against radical changes to the system, but such changes should have some evidence to back them up.  I have not seen any evidence that sectoral reciprocity is a good way to lower tariffs.
• Until I hear someone from USTR criticizing MFN, I'm not taking this too seriously.

Speaking of FTAs, this is from an Inside US Trade article quoting NEC director Gary Cohn:

“The president was not in any way [or] shape in a position where people were disagreeing with him,” Cohn said in response to a question if Trump received any push-back against the comments he made earlier in his trip on Germany's “bad” trade practices, including the success German auto companies have in the U.S.

“There was a lot of mutual respect and a lot of what I would call pushing and prodding at the edges, which was intended for both sides to get smarter,” Cohn added. Trump and German Chancellor Angela Merkel also held a bilateral meeting on May 26, according to Cohn.

Describing Trump's conversations with G7 leaders regarding his view of trade, Cohn said, “the president said, 'look I believe in free, fair and reciprocal.' And then after like 10 minutes I think the president realized, 'okay they may not understand completely what I mean is reciprocal so I’m going to go into what I mean by reciprocal.'”

“Reciprocal is if you've got a 30 percent tariff, you know what, we should have a 30 percent tariff but really you should have a zero tariff. And if you're putting our cars through an excruciatingly difficult test for safety to see if they can be imported into your country maybe we should put your cars through an excruciatingly difficult test to see if they'd be imported to our country,” Cohn continued, describing the president's pitch.

“Now I don't think that excruciatingly difficult test makes sense for you,” Cohn said, quoting Trump, “so it probably doesn't make sense for us, so don't do that to our cars and we won't do it to your cars.'”

This sounds sort of familiar: An agreement across the Atlantic to lower tariffs and address regulatory divergence.  I can't think of a name for such a negotiation right now, but I'm sure something will come to me.