WASHINGTON — Commerce Secretary-designate Wilbur Ross sought to reassure senators at his confirmation hearing Wednesday that he is pragmatic on trade and indicated there are no plans to go back to the days of Smoot-Hawley tariffs, despite President-elect Donald Trump’s threat to impose punitive tariffs on imports.
Ross said there will be a priority on renegotiating the North American Free Trade Agreement out of the gate, a consideration of reviewing and possibly reopening other existing trade deals and assured senators that he understands the supply chain and the impact of tariffs.
“I am not antitrade. I am pro-trade, but I am pro-sensible trade, not pro-trade that is to the disadvantage of American workers and the American manufacturing community,” Ross said in testimony before the Senate Commerce, Science and Transportation Committee.
Ross, a billionaire investor with past ties to the textile industry, divested his financial holdings ahead of his confirmation hearing.
Some senators raised concerns about imposing punitive tariffs on imports and the potential impact it will have on global supply chains — a key issue for apparel brands and retailers that imported $112 billion worth of apparel and textiles to the U.S. last year.
“If you are confirmed and as you consider in that position a particular trade deal or action taken in relation to trade, will you take into account the potential retaliation [of punitive tariffs] on American consumers and the American supply chain, what spillover consequences these might have? Will you take those into account in making those decisions?” asked Sen. Mike Lee (R., Utah).
“Sure, having been part of those supply chains, I have some fair understanding as to how they work and how they are essential,” Ross said. “But on the topic of retaliation, my mind-set will be that the world’s largest customer is dealing with its vendors. I view these other countries with whom we have trade as vendors. While you need to treat the vendors with respect, they must also treat you as their largest customer both with respect and more importantly, playing by the rules of the road. To the degree they don’t, it must be enforcement.”
Another senator also pressed Ross on the potential of punitive tariffs disrupting the supply chain.
“Tariffs do have a useful role in correcting inappropriate practices,” Ross said. “They also do have a useful role as a negotiating tool. I am keenly aware of Smoot-Hawley [Tariff Act of 1930] and the effect [it] had on trade in general and on our trade in particular. If nothing else, we can learn from history that kind of approach didn’t work very well. It didn’t work very well then and likely wouldn’t work very well now.”
The Tariff Act of 1930, more commonly known as the Smoot-Hawley tariff, named after the two lawmakers who sponsored the bill, imposed extremely high tariff levels on a vast array of imports under President Herbert Hoover, and cemented a period of economic isolationism and protectionism that many feel contributed to the Great Depression.
Sen. Ben Nelson (D., Fla.) questioned Ross about the apparent elevation of the role of Commerce Secretary in trade, noting that it is a “departure from past Commerce Secretaries and the role that they play, which is much smaller in setting U.S. trade policy.”
“Tell us more how your trade duties might expand and how it could impact the role of USTR who traditionally has taken the lead on trade negotiations,” Nelson said.
Trump has indicated that Ross would have the lead in crafting broader trade policy, along with Peter Navarro, head of the newly created White House National Trade Council and a China hawk, and in collaboration with the U.S. Trade Representative. Trump has named trade lawyer Robert Lighthizer as his USTR-designate.
He has also vowed to withdraw the U.S. from the Trans-Pacific Partnership on his first day in office and renegotiate NAFTA with Mexico and Canada. He has also threatened to impose tariffs of up to 45 percent on Chinese imports and 35 percent on Mexican imports and separately impose a 35 percent tariff on imports from companies that move offshore and export goods back to the U.S.
“We are well aware of the legislated powers of the U.S. Trade Representative and obviously neither the president nor I will try to do anything that is adverse to the Congressional mandate given to the U.S. Trade Representative,” Ross said. “I think it is important to bring all of the intellectual resources and experience we can to help solve the trade issues. Therefore I view it as being a collaborative process among the U.S. Trade Rep and myself and Peter Navarro.”
“We will try our best collectively to do what is best for this county. That is how it was visualized and how the interaction of those parties will work,” he added.
Nelson also peppered Ross on what he said has been “negative commentary on how you built your business empire by belling and selling troubled companies, while others have lauded you for saving companies and thousands of jobs.”
Ross defended his record at International Steel Group and International Textile Group.
Ross, who at 79 would be the oldest person to be named to that post, has made a fortune, said to be in the neighborhood of $2.9 billion, as a private equity investor. He has been seen as a turnaround king, bankruptcy baron or a vulture, depending on the analysis, buying financially distressed companies in industrial sectors such as coal, steel and textiles, often merging failing companies as part of his turnaround strategy.
As part of the high-stakes gamble, Ross has resuscitated bankrupt companies through his private equity firm, WL Ross & Co. LLC, and saved jobs that might have been lost otherwise. Ross sold his investment firm in 2006 to Invesco, an Atlanta-based investment company, but has remained chairman and chief strategist.
He has direct ties to the textile industry as former majority owner of ITG, which owns Cone Denim and Burlington Worldwide. ITG was acquired by Platinum Equity in late October through a merger with an affiliate of Platinum Equity.
“Similarly, [with] International Textile Group, it’s true that it had to reduce its workforce. It is also true it is probably the last largest domestic manufacturer of textiles left standing with maybe one or two other exceptions,” Ross said.
He said as an outgrowth of his work at ITG, the union, UNITE, representing apparel and textile workers, used its pension fund to invest in Ross’s funds, a sign that Ross claimed the union showed he was doing a “responsible job” and not “anti-worker.”
“In reality, if we hadn’t also begun some foreign operations, we would have shut down far more of the domestic activities,” he added. “I believe if you add and subtract it, we would have been very large net creator of jobs during this whole period in the United States.”
As for NAFTA, Ross said: “As to Canada and Mexico, the President-elect made no secret in his public remarks nor have in earlier remarks during the campaign, that NAFTA is logically the first thing for us to deal with. We ought to solidify our relationship the best way we can in our own territory before we go off to other jurisdictions.”
Ross also addressed several questions about China and unfair trade practices.
“China is the most protectionist country of very large countries,” Ross said. “They have very high tariff barriers and very high non-tariff barriers to commerce. They talk much more about fair trade than they actually practice it. We would like to [level] that playing field.”
Ross also said he thinks there should be “systematic re-openers of trade agreements after a few years.”
The Committee must vote to approve Ross’s nomination, followed by the full Senate.