Economic and National Security Provisions in U.S. Trade Agreements

A few weeks ago, I wrote a post cautioning everyone to "Beware the 'Securitization' of Trade Policy." So far, however, it looks like my post has been a big failure, as many people seem to be throwing caution to the wind, and instead of being wary are embracing the securitization of trade policy. Here's a post by former Biden Administration official Geoff Gertz that discusses the "economic and national security" provisions in the trade agreements recently signed by the Trump administration with Cambodia/Malaysia:

❗❗ Big news this weekend for those thinking through how to bring economic security into trade agreements! ❗❗

While there have been lots of trade “deals” announced by the Trump administration, over the weekend we got what I think are the first real trade agreements of this term: with Malaysia and Cambodia. Not just fact sheets, press releases, or even “framework agreements” : these are signed, legally binding trade agreements.

Notably, both agreements include a distinct section on “Economic and National Security”, which I believe contain the most detailed commitments on economic security ever included in a legally binding trade agreement. Congrats to the USTR team for taking this on.

- Where the US imposes a “customs duty, quota, prohibition, fee, charge, or other import restriction” on 3rd country goods or services for economic or national security reasons, Malaysia commits to adopt equivalent measures. (This seems very broad to me, not sure how it will work in practice!)- Malaysia will address “unfair practices” of foreign-owned companies operating in Malaysia that are exporting below market-priced goods to the US. (This is scenario 4 in my earlier transshipment explainer here: https://lnkd.in/e8Pfpn-2 )

- Malaysia will adopt measures akin to those of the US to “encourage shipbuilding and shipping by market economy countries.” (This seems almost purposively designed to irritate China…)

- Malaysia will, through its own domestic regulatory process, “align with all unilateral export controls in force by the United States”.

- Malaysia will “explore the establishment” of an investment screening regime. (The “explore” language here a bit weaker than what’s found elsewhere in the agreement, but still this is good to see!)

Overall, as Emily Kilcrease and I have written, I think this is the direction trade policy needs to move in. I have some quibbles – the blanket language that Malaysia “shall” align with US national security tariffs and unilateral export controls seem overly ambitious/impractical, for instance, and I’d prefer to see more of a process to determine under what conditions Malaysia would align (and what it gets in return). But this is a lot more promising than the vague gestures at economic security cooperation included in earlier framework agreements, and demonstrates the administration is interested in making these ideas concrete.

I have a few questions for my friend Geoff and others who support these provisions in trade agreements.

The first question is, security against what? Obviously, the most likely answer here is "China!" (And perhaps Iran or Russia or North Korea or Venezuela too, depending on your particular perspective on foreign policy, but in all likelihood it's mainly China.) But I don't think that's sufficient. What I would want to hear is, what exactly does everyone worry about China doing? To be clear, I've read a lot of people's concerns about what China might do, so I can imagine a range of answers here. The problem is that some of the answers seem like a stretch while others are more reasonable. I think it would be useful for the proponents of these provisions to articulate their specific concerns. It's very difficult to evaluate the merits of these provisions in trade agreements when we don't know what "security" people have in mind exactly.

For what it's worth, one thing I notice is that when people point to a threat from China in a particular area – say, influence over social media – there is sometimes a broader problem involved. In these situations, dealing with only the China aspect may not be the best approach. It would be better to tackle the broader problem, which would then also address the China-related one. I understand that, as a general matter, it's difficult for the U.S. government to address broad problems these days, but the problems aren't going away and trying to address only the China aspect may distract from solving some serious societal issues.

There are also questions about how forging alliances, which I think is at the heart of the economic and national security provisions, plays a role here. My sense is that many of the people who advocate for incorporating security into trade agreements are also the ones pushing the idea of a U.S.-led alliance (against China and others). Some of them have a concern that Trump is undermining traditional U.S. alliances, which makes working together on China more difficult. But that raises a basic problem with the alliance idea: The choice of alliance partners can shift from administration to administration. We are seeing this pretty clearly from the Trump to Biden to Trump administrations. If the alliances have to be re-worked with each new administration, incorporating them into formal trade agreements through these kinds of security provisions could lead to problems.

And then there is a practical question about whether Malaysia and Cambodia (or others who sign on in the future) will do any of the things in the agreements. Do they have the resources? Can they withstand the pushback they will get from China? I wonder if this is a situation where a government signs on to an agreement and hopes that the substance is ignored and no serious enforcement takes place. I think that happens a fair amount with international agreements, and it wouldn't surprise me if it were the case here, as it seems unlikely that Cambodia and Malaysia will be able to implement much of what they agreed to. Does having this language in international agreements really help with economic and national security if it is going to be ignored? With export controls, for example, trying to coordinate them with allies is a longstanding policy, but I'm not sure that formalizing that coordination with specific countries helps if it is not actually going to happen. (And are the agreements even enforceable?)

Finally, it's worth noting that while the trade agreement language on "economic and national security" is new, the general idea isn't. A couple decades ago, the U.S. government was doing similar things without using this language when it set out cooperation with the U.S. on foreign policy and national security matters (such as the Iraq war) as a condition for trading partners to negotiate an FTA with the U.S. Looked at in retrospect, did that effort to promote alignment with U.S. foreign policy make sense in terms of economic and national security? I think it's a good idea to keep things like this in mind when evaluating the current iteration of this approach.