In One Sentence

• A U.S. trade official noted that most existing U.S. trade agreements fail to address supply chain resiliency concerns.
• The White House highlighted the need to build data sharing mechanisms with allies and the private sector while addressing the “supply chain crisis.”
• In defense of its commitment to ensure “robust cross-border data flows,” the Biden administration noted that the approach will also align with a worker-centric trade policy. 
• The Office of the U.S. Trade Representative (USTR) aims to ensure that the Indo-Pacific Economic Framework’s (IPEF) sustainability initiative does not create more non-tariff trade barriers.

Mark the Essentials

• During the third round of meetings of the U.S.-Japan Partnership on Trade, the two sides discussed plans for a task force on human rights and labor standards, coordination efforts to respond to “third-country regulations” of concern with regard to the digital economy, as well as Japan’s concerns on the Inflation Reduction Act’s electric vehicle tax credit requirements. 
• According to former Assistant USTR Dan Mullaney, the United States and the European Union have shared goals and overlapping interests in areas such as addressing non-market economy policies and avoiding inconsistent regulation and standards to facilitate trade, but must get specific on the exact policies and standards if concrete progress is to be made within the US-EU Trade and Technology Council (TTC). 
• Both the U.S. and the EU plan to work on shared standards in electric vehicles (EV) and explore ways in which digital technologies can be used to facilitate trade at the next meeting of the Trade and Technology Council (TTC). On February 15th however, the Biden administration independently released its own EV charging standards and mandated that, come July 2024, 55% of the cost of EV charging equipment funded through the Bipartisan Infrastructure Law must feature domestically manufactured components.     
• Canadian Ministers Anita Anand and François-Philippe Champagne said that Canada could play a “unique” role as the U.S. strengthens economic and supply chain resiliency, pointing to Canada’s traditional exemption from ‘Buy America’ rules, North America’s coordination with regard to semiconductor manufacturing, and Canada’s abundant critical mineral resources. 

Keeping an Eye On…

• A U.S. trade official noted that most existing U.S. trade agreements fail to address supply chain resiliency concerns. This official is correct. U.S. trade agreements are meant to facilitate market access-based reciprocal trade liberalization; they are not intended to facilitate trade diversion by way of ‘friendshoring’, be it in the name of supply chain resiliency or ‘worker-centric’ protectionism. More fundamentally, the race to ‘friendshore’ stands in polar contrast to the existing practice of multilateral liberalization. The latter is predicated on the ‘most favored nation’ (MFN) clause, i.e., extending the same trade terms to all trading partners; the latter rests on selective preferences exchanged among friends utilizing skewed rules of origin. And although free trade agreements are an exception to the MFN principle and discriminate between insiders and outsiders, the most recent ‘friendshoring’ pact—the US, Mexico, Canada Agreement (USMCA)—was the first such agreement to actually raise barriers. Expect the Indo-Pacific Economic Framework for Prosperity (IPEF) to more-or-less follow in this vein. Is it any surprise, then, that USTR continues to resolutely stand against constructive reform of the WTO’s dispute settlement function? And that the national security exception has been turned into a defense of first and last recourse at the WTO by USTR? A ‘friendshored’ trading order stands in contrast to—and in violation of—key principles of the postwar-rules based trading system. And in which case, a number of ‘friendshoring’ provisions will be found to be in violation of these trade rules; the national security defense claim notwithstanding. 
• Going forward, the operative question is not so much whether Washington will make an about-face and embrace conventional or MFN means of trade liberalization. Rather, the question is whether, and the extent to which, other countries in Washington’s orbit will choose to restrain themselves from partaking in the benefits of ‘friendshored’ trade and investment policy measures that are clearly inconsistent with WTO rules. Judging by the European Union’s oscillating response to the vast sums shoveled out in the Biden administration’s WTO non-compliant Inflation Reduction Act (IRA), the pragmatic temptation to cut side deals and enter the charmed circle of subsidized friends is likely to be far more powerful than ideologically standing up in solitary defense of global rules. That said, that which is individually beneficial could yet at the aggregate level come to haunt the trading order systemically. The rules-based international trading system stands at an important inflection moment. And America’s allies have an important role to play in helping to preserve that order. Deepening WTO-complaint trading arrangements with all interested parties on a non-bloc basis should remain an essential component of their toolkit. 

Expanded Reading

• US-Made Rare Earths to Skip China In Supply Deal With Japan, Bloomberg, February 22, 2023 [Paywall]
• Joint Allied Procurement, Supply Chains a Shot to Counter China, Bloomberg Law, February 17, 2023 [Paywall]
• CBP Expands 321 Data Pilot Participation, U.S. Customs and Border Protection, February 16, 2023
• Maintaining market access for US ag goods is a priority for USTR, Brownfield, February 15, 2023
• Constricting the Means of Production: Ally-Centric Cooperative Economic Deterrence, Center for Strategic and International Studies, February 14, 2023
• Remarks by Under Secretary Marisa Lago at the 2023 Washington International Trade Conference, International Trade Administration, February 14, 2023
• Day 1 Virtual: WITA Washington International Trade Conference, Washington International Trade Association, February 13, 2023
• CHIPS and the Modern American Industrial Strategy, Stanford Institute for Economic Policy Research, February 13, 2023
• Fostering National Security and Economic Prosperity in North America, Wilson Center, February 10, 2023
• Ministers promote integration of North American defence industrial base, Government of Canada, February 10, 2023
• US Seeks Critical-Mineral Pacts With Japan, UK to Curb China, Bloomberg, February 10, 2023 [Paywall]
• FACT SHEET: The Biden Economic Plan Is Working, The White House, February 6, 2023
• Readout of the Third Round of Meetings of the U.S.-Japan Partnership on Trade, Office of the U.S. Trade Representative, February 3, 2023
• Supply Chain Visibility Isn’t Just a Catchphrase; It’s an Imperative, SupplyChainBrain, February 3, 2023
• Supply Chain Resilience: Agencies Are Taking Steps to Expand Diplomatic Engagement and Coordinate with International Partners, U.S. Government Accountability Office, February 2, 2023