Most trade experts, including me, will tell you that the Section 338 tariffs rest on dodgy statutory grounds. Any threat to use these tariffs then seems, as we saw with IEEPA, to be a threat with a clock running --- how much pressure can the USTR exert before a US court finds the use of tariffs illegal? We might say this is a preposterous position to take, and yet we have the very recent experience with IEEPA to consider. The Canadian negotiators know this, and they know that US businesses will demand continuity of the USMCA in some form. So, on what basis should or could the United States press for restrictions in exchange for removing the Section 338 tariffs? I’d wager not much.

But the most interesting question is what the United States demanded, at the last minute, it seems, that led to this more dramatic twist? On this, I continue to struggle to find facts. The USTR tweet offers some mixed insights. It seems the breakdown does reflect the fact that Section 232 tariffs on various goods were not removed or lowered, and heavy vehicles were not excluded from tariff relief. I had imagined that the Canadians would push back on a combination of restrictive rules of control or ownership, which, when coupled with tariffs on auto inputs, could substantially undermine Canada’s plans to foster EVs and other next-generation green technologies.

Albert Pinto provided the following list on X respecting US demands, though there is no clear evidence these issues were at stake (and a reader pointed out Pinto thereafter deleted the list from their feed):

Pinto seemed to have compiled the list by listening to Carney’s Saturday press conferences. Some of these are clear red lines for Canadian negotiators, such as changes to French-language rules or Canadian cultural content. Some demands may require further examination of Canada’s GPA commitments.

Regardless of the inaccuracy of Pinto’s list, some issues have long been well-known demands from the United States in its reciprocal trade negotiations and remain worthy of consideration as we await confirmed texts. Other demands address longstanding market restrictions that past NAFTA and USMCA negotiations failed to unlock.

You can see why Carney may have noted that the US simply asked for more than it was willing to give in return. Josh Wingrove, a correspondent for Bloomberg, spoke with the Canadian Ambassador to the United States H.E. Mr Mark Wiseman, who described a sort of creeping breakdown, with a number of issues that added up.

Commitments to accept ‘shared’ management of critical minerals could risk Canadian regulatory controls. Some indication of what could be at play in US-Canada talks may come from the Critical Minerals Ministerial last February. Or, we have some indications of what collaboration could look like, based on the EU-US memorandum concerning ‘strategic partnership.’ Moreover, we know from looking at other agreements, such as the Malaysian agreement below, that the United States has asked partners to, for example, ‘refrain from banning critical mineral exports’ and ‘commit to the expedient development of its rare earth and critical minerals sector in partnership with U.S. companies.’ And, finally, to ‘encourage’ supply on terms ‘favorable to the United States, subject to mutually agreed upon arrangements.’

Critical minerals are a significant source of leverage for Canada in negotiations with other partners. Agreeing to shared management effectively locks Canada into dependency on the United States and ties their fates together. Canada may have an incentive to impose substantially equivalent measures to ‘delink’ from global distortions, as Wolfgang Alschner has persuasively argued. However, such a proposal depends on partners who want to industrialise in a mutually beneficial way. It’s bad news if your partner demands equivalence and local content requirements that shift value-added production away from your own interests and jurisdiction. Moreover, as Johannes Fritz has recently shown, the tendency of the Commerce Department to secure production by negotiating directly with firms means that, in the long run, Canada could lose control of its long-term economic policies.

Former lead Canadian negotiator, Steve Verheul, has further suggested that the United States’ demands would have ‘serious’ impacts on Canada’s long-term economic policies and on ‘how we attract investment.’ Perhaps he was simply reflecting on these same long-term policies. Or perhaps we might question demands for Canadian alignment on investment screening, bearing in mind US security interests?

This means that the United States could, for example, ask for exemptions for permits and licences, or even commitments to exclude US firms from opaque screening, while simultaneously further restricting third-country investments in sectors, pending US consultations.

Consider Article 5.2.3 of the Malaysian agreement:

Other reports suggest that the United States demanded control over future Canadian trade negotiations. Article 32.10 of the USMCA requires Canada to notify the United States when it intends to sign a free trade agreement with a non-market country (per US trade remedy laws), allowing the United States to terminate the USMCA with notice. See subparagraphs 4 and 5 below:

In contrast, consider Malaysia’s Article 5.3.3:

In this case, we see that Malaysia must consult with the United States on any future agreement that could jeopardise US interests. Simon Evenett described these provisions as ‘poison pills,’ noting that they create ‘asymmetric negotiating dynamics for partner countries in future trade negotiations with third countries.’ This could have been highly problematic for Malaysia, given the lack of a clear definition of what constitutes US interests. In essence, the commitment demands that Malaysia factor in US interests alongside its domestic values and interests, or risk future tariff actions. And, as the provision is quite vague, there is ample scope to consider that the US may seek input in third-country negotiations.

Most treaties are incomplete contracts, but the parties would build into that very stable and predictable paths for short-term exceptions or permanent changes. But you need to bind core norms and agreed processes; otherwise, you end up with paper-thin promises (which is why so many experts dubbed the ARTs napkin deals).

Brett Fortnam of Inside US Trade told me on Blue Sky that he could imagine the USTR proposed something even beyond USMCA Article 32.10, whereby Canada could not afford more favourable terms to another trade partner, even in the context of a reciprocal treaty.

What Brett proposed seems to address the problem the Americans had with Canadian dairy. As you may recall, the United States threatened Section 338 tariffs on the basis that Canada maintained a more preferential tariff-rate quota for cheeses under the Canada-EU trade agreement than the USMCA TRQ for cheeses of all types. But the United States cannot indefinitely demand that it always seek the most favourable preferences – that’s not how reciprocal negotiations work. Even the architects of Section 338 recognised this and were clear about it, as I explained here. Can the United States demand the use of MFN to import more favourable provisions from other third-country agreements? Will the provision be clear about this, or be broad, so that it rests on treaty silence? If so, it will rest on Canadian negotiators to anticipate future interpretations and clarify potential readings. And, any effort to use MFN to demand such favourable treatment would require a finding of a breach of the MFN clause and an examination of its elements. Who would make that finding? The United States executive? For Section 338, the President must determine discrimination. But it is entirely unclear what this means in a US-Canada context, given the requisite cooperation of both states.

Much of the US trade strategy hinges on trading partners backing away from the bullying performance, but I emphasise the performativity of the US trade strategy simply because the economic changes remain, as of writing, more apparent than real. Until we see drafts and know more about the particulars, I read the events as Canadians refusing to let the Americans shape the public narrative – a show for a show. I am no political scientist, but I have observed that Carney has refused to cede to the United States’ theatrics. I think, at this point, trade partners understand that some of what has to happen is the drama of it all. While I loathe to depict the very real consequences of North American trade policy as entertainment, it seems that some of that has become a necessary public element, though I very much doubt it factors into the real discussions behind closed doors.

Complex border analysis is needed here to assess the claims of ‘potential tariff evasion and origin shifting,’ and I would still take the US’s position seriously as it reshapes its approach to rules of origin. That said, the document makes one thing clear -- their definition feeds into a plan to manage transhipment that rests upon a trade wonks version of Grimms' Fairy Tale. In need of data, the document introduces an ‘AI-driven net’ to evaluate its efforts to monitor transhipment – an AI Detective Border.

I wanted to briefly reflect on the narrative built into this position on transhipment, with terms such as shadowing, illegality, scam, and (I kid you not) a witch’s brew of toxicity.

What are the systemic consequences when the US seeks to unilaterally define transhipment and enforce its approach worldwide through its agreements?

On the basis that all states are sovereign and equal (I will put a pin in defining equality), what are the broader legal implications arising from the US determining that transhipment is always ‘smuggling disguised’ and illegal? Is it? Illegal to whom? Illegal under US law?

On one hand, you may consider this policy a necessary enforcement of US reciprocal agreements. The US has noted that its systems are old and require modernisation owing to the complexity of multinational production and the digitalisation of logistics. Fair enough. I leave it to others more skilled to evaluate its AI systems.

On the other hand, what if other countries have legally agreed to transhipment practices? What if they promote or protect multi-national corporate structures and foreign investments that build transnational supply networks as ‘legal’ economic practices based on international or domestic rules? Can the US police how other countries set policies for ‘their’ global businesses?

The US implementation necessarily rests upon the cooperative efforts of other trading partners. On what basis will its trading partners do so? Will trading partners press upon the US to give due regard to the consequences of its policies on other actors and interests? Will BRI partners have to make some difficult choices in the future? Considering how little we know about the durability of these arrangements, what factors will influence such decisions if they remain untethered from international standards?

Finally, could the US argue that such non-US reciprocal arrangements that facilitate transhipment constitute a disadvantage to US commerce – and therefore have justification to impose a penalty? This may seem like a clear no, at first glance, surely other countries are free to conclude trade and investment agreements. The purported use of Section 338 of the Trade Act of 1930 against Canada a few weeks ago was based on the assertion that Canada imposed disadvantages on US dairy vis-à-vis the Canada-EU trade agreement.

There is a growing stack of legal questions about labelling requirements, corporate control and domicile, and rules of origin. If you want to get ahead, follow (see here and here and here, as starters).

And yet, as I suggested in a post a few weeks ago, if the US seeks equal opportunity and advantages for US commerce, unilateral action and differential tariffs will not be as effective as multilateral MFN.

Turkey then attempted to justify its WTO-inconsistent duties under GATT Article XX(b) — and in the end, failed to demonstrate that EVs/Hybrid imported cars “creates a risk of higher (or non-reduced) CO2 emissions related to charging infrastructure.” After reading, I wrote a post reflecting on this part of the panel’s analysis.

I will add that Turkey then failed to demonstrate that the additional duties were “relating” to the conservation of natural resources (as required to justify measures under GATT Article XX(g). There are some other fascinating bits concerning GATT Article XXIV defences, but I leave that for another day.

Let’s start with the defence under GATT Article XX(b). Here is a quick rundown of the panel’s analytical approach:

Turkey argued that the additional duties were “necessary for it to achieve its carbon dioxide (CO2) emissions reduction objectives in the transport sector by developing domestic EV manufacturing capacity.”

According to Turkey, the additional duties were part of a strategy to meet its climate targets and to decarbonise key sectors, including transport. More specifically, Turkey’s first step was imposing additional duties “to achieve the objective of reducing CO2 emissions is that they have a protective effect for the domestic industry” (note 241).

The panel assessed whether the objective of reducing CO2 emissions falls within the objective of protecting human, animal, and plant life or health. There are no big surprises here, I think, as global warming and climate change pose a significant threat to life and health. The panel referred to multilateral efforts to combat climate change and confirmed the threat it poses to human, animal, and plant life and health (7.89).

Having found the objective of reducing CO2 emissions in the transport sector is “the only relevant objective” to consider provisional justifications of additional duties. But this takes us to an interesting part of Turkey’s arguments. Turkey argued that the objective is achieved through “intermediate steps” in a causal chain.

Turkey emphasised that support for its domestic industry is not an end in itself, but rather “a means to achieving the environmental goal of a net greater EV uptake.” (7.93).

And this leads us to the legal standard for Article XX(b), and the panel’s finding that there is a “textual root” for examining the existence of “risk” as a first step in the analysis concerning action to “protect”.

The factual establishment of risks would have to occur before weighing and balancing could take place, including whether a measure contributes to protecting against a risk.

Therefore, the panel examined whether Turkey had demonstrated the existence of a risk. More specifically, Turkey had to show that there is a risk linking the products covered/affected by the measure to the objective of reducing CO2 emissions. In this case, Turkey argued that the “excessive importation” of EVs/Hybrid cars “creates the risk” of higher CO2 emissions.

In what feels like an “if they build it they will come” logic, Turkey linked import competition to risks that would deprive its domestic industries of growth and, with it, of the necessary charging infrastructure. A growing domestic EV industry would create stronger economic and social incentives for consumers to purchase EVs/hybrid cars. I note that Turkey also added “in much less detail,” the risks related to import dependence (7.108-7.109).

As such, the issue became the development of a “causal chain” linking the risk of higher CO2 emissions to insufficient purchases of EBs/hybrid cars to the growing Chinese importation of EVs/hybrid cars. The logic, as explained by the panel (7.111) was as follows: “Domestic EV manufacturers are key in developing charging infrastructure and, therefore, need to be protected from the importation of EVs and hybrid vehicles.”

Upon examining the facts presented by Turkey, the panel made some observations. It did not seem, based on the evidence, that Turkish consumers will not buy EVs and hybrid vehicles because of a lack of charging infrastructure in the country. First, Turkish consumers have been buying EVs and hybrids, based on a review of the market over the last three years. Second, there was already satisfactory charging infrastructure. Third, investment in charging infrastructure was open to domestic and foreign firms. Fourth, several investors were Turkish firms. The panel further observed that consumer preferences extend beyond charging availability and focus on other purchase conditions, such as price and availability (7.112-7.116).

Risk suggests not just actual risk but also concern about the future. In this case, a fear of a future charging infrastructure “bottleneck” if the sector expanded well ahead of charging, or a risk that charging infrastructure would not be built because of the “key” role that the domestic EV industry played as investors in charging infrastructure. However, it seemed that Turkey had implemented several incentive programmes to create an attractive investment environment for charging.

Thus, on the whole, the panel found that Turkey failed to demonstrate this risk, deeming it “hypothetical.” (7.119).

Furthermore, upon close examination of Turkey’s arguments that domestic EV manufacturers were the “primary” investors in its charging infrastructure, the panel found that government incentives were the same for domestic and foreign firms, and that “nothing sets domestic EV manufacturers apart” (7.121).

The panel further noted that additional duties on Chinese cars may have reduced imports from China, but that imports from Turkey’s RTA partners simply took their place. Consequently, the additional duties did not appear to have achieved the desired protective effect on the domestic industry (note 241).

As a final note, the panel added a note on the systemic concerns at play in this causal chain. A valid environmental objective may require a dose of domestic protectionism. As the panel pointed out, this is not the first dispute in which a Member sought to advance a legitimate state interest through domestic protections. Yet if the goal is to reduce CO2 emissions, then is the only thing that matters the availability EVs and hybrid cars for consumers to purchase?

The panel observed: “We find it problematic that these are the very same products that Türkiye wants its consumers to buy to reduce CO2 emissions and that the only ‘risk’ they present is that they compete with domestic products”

At the end of the day, the panel avoided a firm conclusion on the question of import competition, staying close to the examination at hand, and whether Turkey could evidence its causal chain argument. (7.123).

It’s hard not to consider Tim Meyer’s 2021 paper, which introduced his “channeling paradigm,” observing that trade policies result from bargaining among domestic interest groups and that each group had to benefit to achieve the policy. Simon Lester offered a friendly critique of Tim’s thesis at the time.

Would domestic industry have to seek protection against foreign competition to support a public policy goal, such as reducing CO2 emissions? For this panel, the question was how to demonstrate the risks, and Turkey did not seem to have done enough to make the case that domestic firms are better positioned to meet consumer demands and charging infrastructure to local energy and urban environments. Additionally, there can be benefits to foreign investment. For example, foreign firms can work with local services to support their business plans, offering technical skills transfer along the way. There are trade-offs, to be sure, based on each case.

A final note: I have long considered whether Members might demand a new safeguard rooted in economic security risks, one that departs from the existing causation requirements and draws upon risk assessment to connect to foresight, preparedness and risk mitigation in supply. Are contemporary fears of import competition and dependence well-trodden, or is there something about our current world that does require governments to reimagine the legal relationship between the state and commerce?

But the fixation with equality did not end there.

Fast-forward about one hundred years, and this week, President Trump exercised his authority under Section 338 of the Tariff Act of 1930 (hereinafter Section 338) to impose the maximum amount of additional tariffs (fifty per cent) on Canadian cars, alcohol, and dairy, owing to his determination of Canada’s discriminatory treatment of US exports. The fact sheet confirms that if a 30-day clock runs out, the United States will impose a broader penalty on even more products, even mentioning Canadian hockey sticks (perhaps not realising how much this will anger Washington Capitals fans).

It has become crucial that U.S. trading partners understand the constitutionality, scope, and power of this little-understood statutory authority. Is Section 338 like IEEPA power, fairness and non-discriminatory in aim, like Section 301, or a totally different ballgame? Is it possible that the sky’s the limit?

Though I think, for now, the plan is to use Section 338 as a threat, the tariff authority still deserves careful attention, for it is a relative power -- the United States needs to assert unequal competitive positions to use it. And from this threat on Canada, we know the United States believes the tariff power can pierce through the Canada-European agreement in an effort to equalise conditions on cheeses. There are also questions about whether the President can cite specific disadvantages and then go beyond resetting disadvantages to what looks either like leverage or more punitive in nature.

This work draws on my book project that explores the making of MFN norms before the GATT. The United States is using Section 338 to demand unconditional MFN from the world while simultaneously urging WTO Members to reform the WTO to allow for selective discrimination or conditional MFN.

There are several issues still to unpack. But I hope this opening helps situate an authority that has been kept on the books. Check out WorldTradeLaw.Net, a brilliant service for academic engagement and all things WTO analysis. Find the short essay here.

Happy Friday,

Mona

You might recall that last year, the United States coerced negotiated with several trading partners to make large investment pledges as part of the bargaining down of the legal* illegal tariffs based upon the International Emergency Economic Powers Act of 1977 (IEEPA).

[*The United States Supreme Court's February 2026 decision in Learning Resources, Inc. v. Trump invalidated the President’s use of the statute to impose tariffs. Right after, the US executive tried to lay out legal breadcrumbs to clarify the status of the agreements and frameworks. Still, I have never seen confirmation of the statutory basis. As far as I was concerned, the agreements rooted in IEEPA-imposed tariff bargains ceased to exist. That said, it has been difficult to track any official enquiries, and some partners have proceeded with implementation.]

Almost one year ago to the day, Japan committed to a US-driven loan fund to be used by 2029 to “rebuild and expand core American industries".

The United States posted the Japanese agreement dealing with the tariffs.

The Japanese government posted the Memorandum of Understanding (MOU). A big part of the MOU’s appeal, as touted by the US side, was the powers vested in the President to choose the investments.

Last year, I raised legal issues regarding the draft MOU, and questioned the effort to fast-track the investments past the requisite oversight and assessment processes needed to establish them, because thorough government regulatory and administrative processes can be slow.

Unlike the social media post-information from the United States, the MOU was clearer in Japan’s investment commitments and detailed the investment execution and management processes. The short story is that Japan should be able to have some autonomy over investments provided they follow the consultation process.

That said, there was not much to force the United States to accept consultation as evidence of good faith implementation, as the MOU is non-binding.

Beyond structuring of the investment scheme to fast-track investments, this report by Hudson Institute’s William Chou highlighted communications, workforce, and regulatory challenges with the $550 billion loan fund, following consultations with businesses.

So, I wondered how much the fund has achieved.

CSIS has done work on tracking US-Japanese investments, showing Japanese energy investments, but it was not clear to me that any were under the Investment SPV established by the MOU. The US and Japan signed a Framework for Securing the Supply of Critical Minerals and Rare Earths through Mining and Processing in October 2025, adding another legal layer to the picture, and a host of potential investments followed, as outlined in a fact sheet posted by Japan.

Could it all just be business as usual? Was the tariff drama for nothing? I cannot tell.

In any event, I found news from last month that Japan announced $3.2 trillion of combined public ​and private investment by 2040 across seventeen strategic sectors. That strategy dwarfs the US concession.

Regardless of whether the pressure was or is more apparent than real, there are some complex questions about foreign alignment with US security priorities written into all of the United States’ agreements and deals. And there are more questions than answers concerning issues of ownership and control, as Sam Lowe pointed out at the time.

Which brings me to a plug for a future WTO public forum session that captures one of my big interests — a question I have been relentlessly asking — how do businesses fit into the big economic security picture? Are businesses pawns, players, or partners in a growing economic security complex? (Kathleen Claussen is on the same wave-length as me, with this recent short essay).

Governments and businesses face some big questions ahead — as they grapple with a new chapter in public-private partnerships and the rules governing engagement control. Who decides how security interests are named? What standards should govern the boundaries between commercial and strategic interests? Will we see more courts, arbitrators, or governments piercing the corporate veil to examine ownership and investment structures? Who will pay for costly regulatory volatility? Who will pay for supply diversification? Can a foreign investor ever again claim they had legitimate expectations in a stable and predictable legal framework? How does transparency persist in a world of handshakes and closed communications? What does this mean for possible reform of the rules on state-trading?

As always, more questions than answers.

Many rationales, at first glance, appear to fall outside the scope of Section 232 (impair or threaten to impair national security). Some rationales concern subsidies and other unfair trade practices; some concern the ‘future role of anthracite coal production’ and the ‘potential for foreign control’ of the supply chain; some concern the ‘impact of foreign government subsidies’ and the ‘economic impact of artificially suppressed prices of anthracite due to unfair foreign trade practices and state-sponsored overproduction.’

For the first example, Section 232 is somewhat unclear about how far the Trump administration may stretch the notion of ‘threats’ to US national security, and we might ask how far into the future a potential threat extends and by what standards we might evaluate such an assertion. The other concerns subsidies and unfair trade. Here, we might consider trade-offs – subsidised foreign production may translate into lower prices for US purchasers, so if the goal is to provide the steel industry with cheap coal, this may not be an issue.

Posting so many rationales weakens the persuasiveness of the claim that the investigation is, strictly speaking, a matter of national security. Section 201 of the Trade Act of 1974, for example, concerns safeguards, that is, action to help a domestic industry unable to compete with foreign imports. A 201 investigation can occur when ‘an article is being imported into the United States in such increased quantities as to be a substantial cause of serious injury, or the threat thereof, to the domestic industry producing an article like or directly competitive with the imported article.’ It is known as an economic emergency action. But there is a reason why Sections 232 and 201 are separate – one concerns security and the other concerns economic emergency to aid a domestic industry against competition. Blurring them neglects the distinct purpose each statutory basis is supposed to serve.

The blog explains that the IMF held competence and enforcement powers over exchange actions and that, therefore, the GATT deferred to its recommendations. The point of the blog is to encourage thinking about how we read current trade restrictions in the context of rules written in the 1940s.

It may not be, then, that we need to point to the IMF and demand action, or abandon hope of a conversation about China at the World Trade Organization. Instead, history suggests the only way for a community to figure out whether the interpretation reflects the community is to get on with the business of talking about it. Article XV:4 provides one opportunity for doing so, but there may be others as well.

India failed to convince the Appellate Body that there was any imminent risk of disruption to the supply of solar cells or modules needed for its domestic industry. The AB found that India had not rooted its risk concerns with evidence of “any actual disruptions in imports of solar cells and modules.” Additionally, the AB reasoned that a panel must examine the extent to which a product is “available” in all markets to meet the requisite demand. As such, India had to consider the international supply in evaluating its needs. Such a finding was a fatal blow (or at least, it seemed to be) for future defences of self-sufficiency or onshoring to manage risks in global markets.

I am therefore curious to see how Indian arguments might address China's monopolisation of materials and inputs, which allows it to lead technologically and to shut off international supply at will.

Yesterday, the DSB agreed to establish a panel. So, for now, the dispute will proceed.

The news comes amid a major heatwave in Europe. A new pod by Volts featuring RMI’s Ankit Kalanki explores the dramatic electricity demand from Air Con -- which the IEA predicts could outpace data centre demand in less than a decade.

Kalanki got me thinking about how international mechanisms can help governments plan for industrial competitiveness in our rapidly warming world.

If one country produces cheap solar panels that could offset Air Con electricity demand, is that bad? Could governments focus on developing innovative refrigerant solutions and standard-setting practices while working with China's renewable energy supply? Or, as suggested above, are the risks of relying on a single supplier too costly?

The dispute may offer a reality check for economic security strategy -- governments do not toggle between interests but, in practice, juggle many priorities, some of which compete or conflict. Governments have always had to wear different hats (also good for sun protection, still on theme). As such, one issue I always had with stretching a neoliberal frame across international trade rules was that it paints a glossy picture –– a static tale of purely economic focus, in which global markets are cleared of state interventions. But that isn’t reality.

Perhaps the gloss erases the agency of another powerful player from the global picture - business. At least here in the UK, businesses have to navigate commercial considerations within complex administrative and regulatory structures designed to balance societal interests. Do businesses understand governments' security and economic interests as counterweights? How do policy aims produce different time and cost calculations for businesses? What is it about defence/military interests (versus conservation, for example) that changes how businesses do business?

Governments should consider the future legal landscape rather than invoking security as a woolly time-out from international commitments to advance domestic goals. There are trade-offs to weigh. I hope governments will have these discussions, but without Air Con.

My bottom line: Why and how go hand in hand. Tariffs are not credible commitments, but rules are.

https://giftarticle.ft.com/giftarticle/actions/redeem/b24a35b8-f335-4162-a15d-aba7c7c01b1f

As a WTO member, the EU and its Member States commit to DSU Article 23, which provides that when Members ‘seek the redress of a violation or other nullification or impairment of benefits under the covered agreements or an impediment to the attainment of any objective of the covered agreements,’ they shall have recourse to the WTO dispute settlement function. In a nutshell, they shall not serve as judge, jury and executioner in their own complaint. To take any proposal for an equivalent 301 seriously, the Commission must consider the long-term repercussions of directly contravening its WTO obligations. There are trade-offs in pursuing trade restrictions alone.

When the United States revived the President’s discretionary powers to raise tariff rates or undertake other actions to address actions by foreign countries that violate U.S. rights under international trade agreements or that burden or restrict U.S. commerce in “unjustifiable,” “unreasonable,” or “discriminatory” ways, this was (and is) in contravention of the United States’ WTO commitments. In 1998, the European Community challenged Section 301-310 of the Trade Act of 1974, arguing that the legislation nullifies or impairs benefits accruing, directly or indirectly, to the European Communities under GATT 1994.

Moreover, as Alan Beattie pointed out last week, finding new tools may not be the EU’s answer to Chinese competition. The EU has several sharp, technocratically authored instruments, not to mention the multilateral remedies available at the WTO. But the question is whether Member States will accept greater centralisation of economic security powers to combat international competition. As Alan points out, EU’s proposed accelerated investment plan mirrors that of the US and China. However, matching their executive-driven authority raises big questions about whether ‘strategic’ investments can bypass security and environmental protocols. The EU’s future as a leaner, meaner regulatory power depends on the political will of the Member States. This raises complex questions about support from European businesses. Since Alan’s story came out, Andy Bound published a report that some Members were keen to push for more aggressive defence tools (but not necessarily endorsing the 301 proposal).

Last week, Sam Lowe published a smart MFN Substack post, cautioning that any consideration of trade restrictions demands more careful price discovery—such as cost ceilings and the duration of action. To quote Sam, the story doesn’t end on one continent … “global supply chains, man.”

Which is why multilateralism, despite ever-growing protestations of its stability and durability, matters. Small companies and multinationals need to assess risks to global supply chains. The nature of business demands an assessment of the multifaceted impacts of foreign markets on local markets. Such thinking is not new, as governments have long known that trade defences achieve their aims only when coordinated. Maintaining multilateral forums upholds the principles governing how protections are imposed and on whom.

One interesting pickle concerns the how and the who, particularly digital services taxes. The second Trump administration indicated it would evaluate the impact of digital services taxes on US firms, prompting investigations into France, Austria, India, Italy, Spain, Turkey and the United Kingdom. The United States has shown little interest in the global tax framework under the OECD/G20. Should the EU develop a 301, and if – a big if – then would the EU use this power to counter US acts concerning digital services? Then we can imagine a future battle of the 301s and digital sovereignty. Who would win in a battle of the 301s? Sam’s caution comes into play – who would really pay for the 301s? Businesses. How long can they live with tariffs and other restrictions? A 301 hits a surprisingly narrow target, and equalising competition is not the same as beating the competition.

The answer does not lie solely with Europe, China, or the United States. While these admittedly large economies are caught up in trade defences, other governments are developing their own policies, too. As they coordinate to address climate change, prevent famine, and work on e-commerce, they are likewise considering how to coordinate and cooperate to avoid reactionary plans. For example, TPP partners could reform the TPP and prioritise advanced subsidy transparency, improved academic funding for innovation, and market access to facilitate greater flows of digital transactions. Does that discriminate against EU companies? Would a 301 tariff to level the playing field be reasonable? Be proportionate? Would it be subject to international review? Or, would the EU argue that such actions are necessary security policies? Time will tell whether the European 301 proposal gains traction and how the Commission navigates its existing international commitments in implementing it.

Reading the outputs from each government as to the prospects of a deal leaves more questions than answers.

Overall, a cautious look without details on paper. Rather than substantially opening up trade between the two economies, the US and China appear to have adopted a "do no explicit harm" approach. In the end, trade remains focused on efficiency: the theory of efficient breach.

Some other quick thoughts. Similar to the Phase One Agreement in that it largely commits to purchasing aircraft, oil and farm products. Yet unlike Phase One, it does not focus on the theft of trade secrets or forced tech transfer.

No mention of what a possible future enforcement mechanism would look like. I imagine it would be similar to Phase One and other US deals -- bilateral consultations. However, China has economic leverage over key materials, and I would expect to see "good faith" and "proportionate" responses-type language in the event consultations fail.

I only read about some ambiguous 'guardrails' for AI. Nothing on technological security. Nothing on cybersecurity. Nothing on services. And, of course, nothing on climate security.

What does it mean for US consumers and producers?

There was no formal mention of the US tariffs.

What does it mean for US trading partners? In terms of tariffs, this depends on whether an agreement resolves some of the claims of discrimination and security.

Most partners have committed to tackling non-market practices, ending transhipment, and addressing economic security issues arising from "third countries." Such commitments are code for helping the US compete with China.

Will partners accept the economic security alignment as a double standard, or will they challenge whether China may now have more favourable treatment than they do? US rhetoric, at least as reflected in the visit, suggests that China, and only China, could be on equal footing with the United States' economy.

Where does that leave close regional partners, such as Mexico and Canada? I presume USMCA talks will continue, though it would be interesting to see if or how discussion of non-market practices proceeds. My guess is that nothing changes in terms of US goals until there is some formal confirmation of a US-China arrangement.

Where does that leave Europe?

EU partners must be asking what support they can expect in dealing with Chinese exports and China's monopoly over materials the EU wants to develop for next-generation industries.

Thus far, only Japan has an elaborate investment framework that accelerates investment in US-approved projects in the US. We still lack information on whether Japanese investments can bypass security protocols. If the US offers Chinese financing through the same investment accelerator, will Chinese firms receive the same treatment as Japanese or EU projects?

We may see extensive complaints from foreign investors about discrimination and disparate effects arising from these less favourable regulatory environments. If the US welcomes Chinese investments, this may create challenges for managing US security reviews and keeping the stalemate. It's unclear how the US would remedy competition problems arising from foreign subsidisation.

So, more questions than answers. Talk is talk until it’s action.

Korea's statement is carefully written. But its messaging is clear: short-term, unilateral actions have failed and will continue to fail to solve "structural challenges, including overcapacity and trade-distorting subsidies." Korea believes that responses should “not rely primarily on tariffs.”

As any gardener knows, weeding requires action at the root -- likewise, Korea urged greater collective action to tackle “root causes.”

We do not have further information from the meeting’s minutes at this time.

However, US Ambassador Barloon also posted his statement from the meeting, noting this:

I have good news for Ambassador Barloon – unlike some trade remedies (such as safeguards) or violation complaints, a situation complaint does not require perfection. Indeed, inherent in its name and design, the complaint is intended to address a situation in real time.

To preserve diplomacy within the forum of GATT Contracting Parties, the situation complaint affords collective action for due process and interim arrangements among complainants, under the oversight of an independent adjudicator’s recommendations.

In our paper, Dan Ciuriak and I speculated that a situation complaint could have been an appropriate pathway for the United States to address its accumulating concerns about its trade deficit. The same holds true today for Korea and those Members who stood with Korea this week to address structural challenges amid ongoing global economic uncertainty.

The paper builds on archival research from Ambassador Julio Lacarte’s proposals from the 1950s and further advances by Brazil into the 1960s, as well as on the economic and political economy literature on collective action.

Some of Brazil’s statements:

We have yet to see a situation complaint attempted at the WTO. So, for those delegations attending the General Council today, I say: Try it: What have you got to lose? Many of you have already experienced bargaining, bartering, and investment payouts; yet, producers still face uncertainty and unpredictable actions. Time to try something new, perhaps.

Today, I thought I’d share another lesson. Governments were divided into commodity committees, so each group addressed the equitable allocation of a single commodity at a time (e.g. a tungsten group and a copper group). Each government had to disclose its production and consumption on a quarterly basis as part of negotiations to divide the supply among governments (an entitlement). All members had to agree. But what happened when a government exceeded its entitlement? There was no penalty duty and no IOU note. This fact was used at the next quarterly meeting. Data collection and information sharing were almost as important as the allocation itself.

However, owing to its size, the US would exceed its entitlement across various commodities. While some officials would attend only the committee meeting relevant to them, a US official always attended each. So the politics underlying these allocations are clearly skewed in the US’s favour. And yet there is some evidence that the US often baulked at unilateral bartering. At times, US officials set very clear restraints on consumption at home. Coordination meant discussing alternative materials when necessary and finding a balanced outcome on price and distribution. The allocation was often political – I think the polite way to describe the Canadians’ views on the allocation formula would be “dodgy.”

What undid the delicate political balance? For one, US businesses, fed up with sacrificing their dominance in markets, demanded access to other countries’ unused entitlements. Another factor was the Defence Department’s demand for stockpiling purely for US strength, though one DPA official would describe their consumption demands as “unrealistic military requirements.” Forget the fact that Dean Acheson had always described partners as requisite for building situations of strength.

This is not to say we are in the same situation as in 1950 – certainly not. But there are signals here that remain relevant to drafting a new structure for managed trade today.

Mona Paulsen, The Past, Present, and Potential of Economic Security, Yale Journal of International Law 222 (2025), pp. 222-297.

A non-binding MOU could have significant repercussions for both Participants’ legal systems. As with other US trade deals, the MOU is a powerful shaper of domestic regulation. Kathleen Claussen has shown the regulatory effects of trade executive agreements, revealing that they regulate foreign commerce –– and US commerce. The MOU initiates processes that could require changes to domestic law and create obligations for private actors. Without administrative or congressional review, the MOU will provide a legal hook for domestic legal change as the two Participants institutionalise it.

For example, the Participants will “cooperate” on preparedness for supply chain disruption, including stockpiling. This could require private firms to supply a trust or surrender certain tonnage to a stockpile, neither of which is new for some other economic security-focused countries. But what lessons can the Participants learn from past efforts? If commitments are uneven, some suppliers may be at a disadvantage compared with others that do not have stockpile commitments. Will private actors receive compensation for stockpiling? Will they willingly save for a rainy day? How often will the Participants meet, and will they publish the allocation of supply? What happens if each Participant insists on its own approach to determining supply requirements, allocation, and administration?

Another example is the commitment to accelerate permitting with faster timelines. I saw this in the Japan agreement and already raised concerns. The commitment to offer certain accelerated streams could pose significant discrimination challenges for non-participants, making this non-binding commitment potentially incongruent with the Participants’ existing investment protection commitments. Moreover, such promises of acceleration could erase vital environmental assessments that take time – something the EU has always taken seriously. So, what now?

Of course, all of these soft obligations are subject to the caveat that applicable law governs. But this does not stop the Participants from changing regulation. Nor does it erase the many legitimate regulatory routes that hinge on urgent action taken in times of crisis, war, or emergency. Will this collective security plan have its own security exceptions? Do you need such exceptions if the foundations are already security-grounded? But then, is there a plan to ever return these sectors to the “market”? I ask because one of the core commitments is to coordinate efforts to address “non-market” practices. Fair enough, there may be good reasons to pursue the partnership, but will commercial considerations guide the actions it entails?

Which raises an interesting question. Most of the MOU depends on the US and the EU sharing “collective security and strategic interests.” Do they share collective interests? Perhaps in some ways, but not in others. Should the MOU clarify what those interests are? It seems that before any marriage, it helps to know whether both partners are really on the same page.

Finally, what does this mean for the rest of the world and each Participant’s trade and investment partners? Most are reduced to the terms “third countries” or “like-minded.” You are either a friend or not. But since other countries have the resources or know-how to extract, purify, process, recycle, and supply these minerals, the partnership remains incomplete. Unfortunately, the Participants have already been told – for decades – that many developing economies do not want to “join” a party just to stay on the periphery. They have their own international development agendas, too. Multilateralism is highly demanding. Still, a broader forum can facilitate bargaining and contribute to cooperative outcomes. The Participants “reiterate their respect for public international law obligations” without explicitly mentioning their WTO commitments. In a world of strategic partnerships driven by unilateral action, what norms will govern the spaghetti bowl? Proportionality? Equity? Reasonableness?