What's Beyond Traditional Free Trade Agreements?

Oct. 24,2022
By: Pietro N. Bianchi

Earlier this month the Biden Administration stated that “we have to move beyond traditional Free Trade Agreements” in its National Security Strategy. What’s beyond traditional free trade agreements? The Strategy indicates that the administration will seek to “deepen economic engagement with our partners,” establish a global minimum tax, and update the “rules of the road” for technology, cyberspace, trade, and economics, among other ambitions. These comments correspond with Ambassador Tai’s previous statements that tariff reduction is not an end unto itself.

The strategy highlights the Indo-Pacific Economic Framework for Prosperity (IPEF) as the poster child for this new version of economic engagement. The IPEF lays out four pillars for economic engagement: trade, supply chains, clean economy, and fair economy. Going forward, free-trade agreements and tariff reduction will take a back seat to, or at least not be primary to, American interests such as supply-chain diversity, climate change, human rights, and the economic development and political stability of the U.S.’s trade partners and allies. The Biden Administration stated that this new attitude on international commerce is being developed to fit what it calls “contemporary realities,” namely China’s “intent to reshape the international order.”

To that end, the Biden Administration will “place a premium on growing the connective tissue—on technology, trade and security—between our democratic allies and partners in the Indo-Pacific and Europe.” The strategy emphasizes that both these regions are “intertwined” and affected by the administration’s perceptions of Chinese ambitions on the world stage. The strategy offers high labor and environmental standards to combat perceived Chinese influence in an attempt to create an attractive alternative to Chinese “coercion.” The 48-page strategy document mentions supply chains 19 times and human rights 20 times.

All of this comports with the impression that Section 301 duties against China will be in place for the foreseeable future (in some form) and that the United States is trying to incentivize diversified supply chains. The Strategy clearly contemplates that new economic frameworks, such as IPEF and the Americas Prosperity for Economic Prosperity, focusing on more than trade are “critical to tackling serious long-term challenges” posed by China and will counter corruption and illicit finance, the corporate race to the bottom, and harms to U.S. workers, consumers, and business.

If you have questions about tariff or supply chain policies do not hesitate to contact an attorney at Barnes Richardson, & Colburn LLP.