Guest Post: The Case for Bringing Economic Security Priorities into U.S. Trade Agreements, Part II

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

An earlier post made the case for why the United States should bring economic security commitments into trade agreements; this post covers the nuts and bolts of how best to do so. 

In recent comments submitted to USTR as part of the USMCA review process, Emily Kilcrease and I provide detailed suggestions – including model text – on what this should look like in the North American context. While the details may shift with different partners depending on particular policy priorities, this provides a useful template of our thinking. Our basic approach seeks to combine deeper market integration among like-minded security partners while also strengthening common defenses against shared risks. This would include:

·         Institutional alignment on defensive economic security tools like export controls and investment security, to ensure U.S. allies have the domestic authorities to take actions to prevent adversaries from acquiring sensitive dual use technologies;

·         Fast track licensing and white-list programs, to ensure economic security tools do not unduly restrict trade and investment flows among allies;

·         Processes to coordinate trade protection measures to address shared vulnerabilities associated with dependencies in critical supply chains;

·         And consultation and information sharing mechanisms to facilitate joint risk assessments and the development of shared norms and expectations on legitimate interventions in trade and investment flows to protect economic security.

Simon’s original post on this topic was sparked in part by the novel economic security commitments in the recent U.S. trade deals with Malaysia and Cambodia, and so it’s worth noting some of the similarities and differences in what Emily and I have suggested for USMCA from what’s in those texts. The Malaysia and Cambodia deals made important strides in creating formal commitments on topics like export controls and investment security, where earlier “trade framework agreements” had only vaguely gestured at future intentions to cooperate. But I worry the approach in the Malaysia and Cambodia deals, which asserts that these countries shall adopt measures equivalent to U.S. restrictions, is going to be extremely difficult to implement in practice. What happens, for example, when the United States asks Malaysia to impose a certain export control and Malaysia’s response is that it does not have the legal frameworks or institutional capacity to do so?

The approach Emily and I suggest for USMCA would focus on fixing the legal and institutional gaps up front, to better enable alignment on specific measures down the line. Our proposal would create (a) a commitment to have in place domestic authorities to implement economic security restrictions, as well as (b) an institutional process for trade partners to seek to align on future specific measures (without committing governments to any actions that would typically be a sovereign national security decision). This seems more likely to produce true, enduring economic security alignment than the one-sided commitments included in the Malaysia and Cambodia deals.

So while the pair of Southeast Asia deals are a notable reference point on incorporating economic security into the trade architecture, the real test case will be whatever emerges from the USMCA review process, which I anticipate will be more of a true negotiation than the Malaysia and Cambodia agreements. Both USMCA and its NAFTA predecessor were landmark agreements that defined state-of-the-art high standards for their times. For USMCA to remain a gold standard trade agreement, it must address governments’ growing focus on economic security, and recognize economic security alignment as foundational for building the trust needed for deep economic integration.

And on that note, Emily and I would certainly welcome additional reactions from Simon and other IELP readers on our USMCA comments, as I’m sure the debate on how to bring economic security into the trade regime will continue to heat up in the lead up to the formal review this summer.