U.S. Commerce Secretary Wilbur Ross indicated Friday that he was looking into replicating a “poison pill” provision in the United States-Mexico-Canada Agreement with other trading partners as well in order to pressure China into opening its markets.
Ross said in an interview the provision helped “close loopholes” in trade deals that have served to “legitimize” China’s trade, intellectual property, and industrial subsidy practices, CNBC reports.
The U.S. has recently begun negotiations with Japan and the European Union to lower tariff and regulatory barriers in an effort to minimize substantial U.S. trade deficits into various goods, including automobiles. President Donald Trump has threatened a 25 percent tariff on imported autos and auto parts if they are concluded to pose a threat to national security.
Should Japan and the EU agree to sign on to such “poison pill” provisions, it would be a sign of their full alignment with Washington in trying to increase pressure on China for major economic policy changes.
The so-called “poison pill” provision in the USMCA gives the United States a veto over Canada and Mexico’s other free trade partners to make sure that they are governed by market principles and lack the state dominance which drives the U.S.’ trade conflict with China.
The provision gives the three countries the right to withdraw from the agreement in six months if any of the other two countries enter a trade deal with a “non-market country.” In such a case, they are also free to form their own bilateral trade agreement as well.
“It’s logical, it’s a kind of a poison pill,” Ross said of it.
When asked if the U.S. would repeat the provision in future trade deals, Ross didn’t give a precise answer, but rather said, “We shall see. It certainly helps that we got it with Mexico and with Canada, independently of whether we get it with anyone else.”
However, he hinted on the possibility of replicating the provision, noting that countries may now “come to understand that this is one of your prerequisites to make a deal.”