Guest Post: The Case for Bringing Economic Security Priorities into U.S. Trade Agreements, Part I
This is a guest post from Geoffrey Gertz of the Center for a New American Security (CNAS), responding to my post on Economic and National Security Provisions in U.S. Trade Agreements
Thanks to Simon for kickstarting a debate on the prospect of bringing economic security provisions into trade agreements, and for allowing me to respond here. In the spirit of advancing this debate and clarifying our points of disagreement, this post will cover why I believe the United States should seek to incorporate economic security priorities into the trade architecture. In a second post I’ll cover how best to do this. Both posts draw on a body of work developed with my colleague Emily Kilcrease at CNAS, and so readers who are interested to learn more should check out this earlier writing.
Simon’s skepticism of this approach starts with a simple question: what specifically are the security risks that we’re worried about? I agree it is important to avoid vague hand-waving that amounts to “China bad”. But there are specific and actionable risks. For instance, China (and other adversaries) could seek to acquire sensitive dual use technologies with military applications through trade or investment transactions. This is one reason the United States, and many other countries, has long maintained export control and investment screening authorities. Likewise, if China dominates global supply chains in critical goods (as it has already done on critical minerals, and might one day achieve on foundational semiconductors), it could weaponize this leverage to coerce other governments to make economic and political concessions. The United States should seek to reduce such vulnerabilities. This does not seem like a controversial position.
Notably, it is worth underlining the turn toward economic security is not just a passing fad. There has been a broad, bipartisan effort—in both the executive branch and Congress—to address national security risks associated with certain trade and investment patterns for over a decade. Nor is this a preoccupation confined to the United States. Japan enacted an economic security law in 2022 (and is currently considering updating it), the European Commission published an economic security strategy in 2023, and the G7 published a joint statement on economic security in 2023.
It should also be uncontroversial that governments’ efforts to advance economic security will be more successful if they are coordinated by a group of like-minded partners, rather than pursued unilaterally. Indeed, the United States has long sought to work with allied countries on economic security, primarily through informal ad hoc diplomacy and various non-binding frameworks and MoUs. While these efforts have yielded some successes, they are clearly insufficient to the challenge. Trade lawyers should be familiar with the reasons why non-binding MoUs are less effective at shaping behavior than full legally-binding agreements: the latter provide greater certainty and durability, create a stronger “compliance pull”, and have mechanisms to resolve disputes and enforce commitments. In the absence of a more institutionalized framework for economic security cooperation, today coordination remains incomplete and haphazard: we get dozens of talk shop forums to analyze supply chain dependencies, but far too little actual policy alignment.
Incorporating economic security cooperation into binding international trade agreements provides a more promising approach. Governments can make real commitments to each other to build out and effectively resource economic security tools and build institutional structures – such as economic security committees – to facilitate deeper, continual on-the-ground policy coordination, while preserving states’ autonomy to act in their own national security interests.
Of course, one could agree that economic security cooperation will be more effective if done through formal legal agreements than ad hoc diplomacy, but still worry about unintended negative spillovers on the functioning and effectiveness of the global trade regime. But I would argue economic security cooperation is not some distraction from the main purposes of international trade agreements, but in fact is essential to ultimately preserve and advance economic integration among trade partners. Deep international trade integration requires trust, and cooperating on economic security measures promotes trust. For example, the United States should be more willing to welcome cross-border supply chains on dual use technologies when it trusts its trade partners will not (intentionally or inadvertently) divert these goods to China, or allow adversaries to compromise supply chain security in a way that could introduce national security vulnerabilities.
Today governments increasingly prioritize economic security as a central objective of their foreign economic policy, alongside their efforts to advance openness and efficiency, and the trade regime must adjust to maintain its relevance. In an earlier era stakeholders came to see environmental and labor provisions as critical to preserving the integrity of open markets through trade agreements, and today any modern comprehensive trade agreement includes environment and labor commitments. Similarly today, bringing economic security into the trade regime will strengthen the foundation for economic interdependence, recognizing that trade policy cannot be considered in a vacuum given its impact on other national policy priorities.
Finally, I sense that part of free trade advocates’ concerns with this approach is an apprehension that economic security claims can be a slippery slope to protectionism. To be sure not every invocation of national security to limit trade or investment is made in good faith – I am not here to defend national security tariffs on kitchen cabinets. But this worry misdiagnoses the cause of the problem. Governments are already intervening in markets in the name of economic security, and at times doing so in disjointed and contradictory ways—in part precisely because trade agreements have to date largely relegated such matters to exception clauses outside the scope of the rules-based trading regime. More institutionalized and formalized cooperation on economic security could, over time, help develop shared expectations on the legitimate bounds of national security interventions in the economy, and provide at least some modest guardrails on their abuses. For example, if the United States and Japan had an economic security agreement of the type Emily and I have advocated for during the Nippon steel CFIUS saga, the Japanese government would have had a formal channel to raise its opposition to the decision, and the U.S. government would be required to explain its justification. While one might never be able to prevent all bad decisions, such deliberative consultation processes should over time provide a helpful moderating effect.
The ultimate drivers of the turn to economic security—in both the United States and many of its major allies—are deep, structural features of the current global political economy. There is no turning back the clock to an era where trade powers abstained from invoking national security to intervene in trade and investment flows. The question is what to do about it. Bringing economic security cooperation into the trade regime can help address national security risks and strengthen the foundations for deep economic interdependence.
For suggestions on just how to go about this, see my second post, which will be available in a few days.