As expected, the Administration responded forcefully, referring to all of the other powers it has at its disposal to reimpose tariffs and starting things off with Section 122 of the Trade Act of 1974 to impose a 10% (or 15%?) tariff on most imports for 150 days.

There’s been a lot of commentary on the decision and what is coming next. I’ve collected some of the most useful of these in this post (welcome pointers to more in the comments or via email).

Two articles that cover the field

First up, two great pieces if you want an overall summary of the Supreme Court decision and the other powers the Administration has to levy new tariffs.

If you only want to read one thing on the decision and what comes next, Kathleen Claussen (as always) is the best place to start, covering the decision itself, options under Section 122 and Section 301, and what this means for all of the ‘deals’ the US has struck with other countries. Some key quotes:

Some commentators have argued that the Court’s decision significantly curtails the president’s “foreign policy” tariff power and that he can no longer threaten tariffs at a whim or, for example, to secure Greenland. Perhaps not so fast. Yes, the decision seems to have removed IEEPA from the immediate peacetime tariff toolkit – or at least the administration has accepted that is the case for the orders imposed last year. But, as noted above, the many other tariff authorities that are available to the president continue to give him the ability to impose tariffs, and quickly. The Court in its decision both commented that the other authorities include constraints on the president and also later acknowledged that the authorities are themselves rather capacious.

So, will we see a lot more litigation? Short answer: yes.

… But how can the administration legally maintain those rates [under its deals with other countries] in light of what the Supreme Court has said? As I wrote last June, the administration is likely to argue that it has authority to enter into the deals under IEEPA and that once entered into, the deals give rise to the rates, not IEEPA itself. The USTR also regularly relies on other arguments such as the president’s Article II authority and its organic statute for these sorts of agreements. Despite the weaknesses in those arguments, the administration may advance them in this context as well. … For foreign governments with implemented deals regardless of rate, the prudent political decision might be to just wait and see rather than re-open negotiations on an arrangement they believe to be durable, even if only lightly so. For those without finalized arrangements, the landscape may have just become more complicated.

Inu Manak, at the Council of Foreign Relations, also has a great piece on Section 122, Section 232, Section 301, and Section 338, what each of these sections allow and the limits on their use. From Inu’s piece:

Looking more closely at the legal issues

Second, there’s lot of great trade lawyer commentary on the legal fall out from the Supreme Court Decision.

Simon Lester wrote on Section 122, looking at the White House’s justification for its conclusion that the US is facing “fundamental international payments problems” and whether Section 122 can be used to apply discriminatory tariffs between countries (Section 122 refers to exempting countries from import restrictions but otherwise appears to contemplate uniform restrictions being used).

Bryan Riley and Joe Bishop-Henchman also wrote on Section 122, providing a detailed argument for why the President’s use of Section 122 is not legal, with lots of quotes from economists to back up their position that the US does not face a fundamental international payments problem, and concluding that:

While Section 122 served a legitimate purpose within the fixed exchange rate framework that governed international trade over fifty years ago, it has no meaningful application in a modern floating exchange rate system.

Mona Paulsen dug into what the Supreme Court decision might mean for the framework agreements, deals, and other arrangements the US has negotiated since ‘Liberation Day’:

In sum, the EOs on the establishment and implementation of the trade/security deals do not resolve the fate of the negotiating trade/security deals that impose tariffs and implement a variety of economic security commitments. It does seem, however, that the executive has tried to quarantine its trade/security deals from the IEEPA reciprocity tariffs, for the executive can argue that the deals remain in effect as long as the emergency that gave rise to them persists.

The Hinrich Foundation also has a great piece by Dawn Shackleford on the WTO provisions relevance to balance-of-payments and what this means for the US’s use of Section 122:

Thus, it is extraordinary that the United States is justifying its latest round of tariffs under the rationale of a balance-of-payments crisis, even among a host of other “extraordinary” trade measures. If the United States seeks to justify this action at the WTO (which it is required to do under WTO rules), it will need to establish that it meets the requirements of GATT Article XII and the 1994 Understanding on Balance of Payments Provisions. … If the US measures are notified to the WTO, the IMF will be called upon to review whether the United States meets these thresholds.

It would surprise few if the United States does not notify the WTO of its new use of Section 122 tariffs. It would be ironic if the US does not notify the WTO given a key tenet of the US submission on WTO reform on December 2025 addresses the US position on transparency and notifications [was on the importance of Members complying with their transparency/notification obligations].

Numbers, stats, graphs and more

Finally, if you like numbers, graphs, and maps, here are some I appreciated.

Johannes Fritz at Global Trade Alert’s analysis of the Section 122 tariffs has all the relevant numbers, graphs and winners and loses:

The United States Studies Centre has a lovely interactive map of how the change from IEEPA has hit different countries:

And if you like maps, the New York Times as a whole bunch of them too.

That covers the most immediate and useful writings I’ve found so far. But things are changing rapidly, so if I’ve missed a great piece or take, drop a link in the comments or send me an email.

Leave a comment

I also recognise this all may seem tangential compared to everything happening over Greenland at the moment. That is all moving very quickly, and so for smarter and more focused takes on what it all means see Alan Beattie, Dimtry Grozoubinski, David Henig, Simon Lester, and Deborah Elms.

🌏 The Mega-Regionals - RCEP and CPTPP

First up, could 2026 be the year that we see more substantive progress under the Regional Comprehensive Economic Partnership (RCEP) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)?

In 2025 the RCEP Joint Committee adopted the Terms of Reference for an Ad Hoc Accession Working Group and has been tasked by Ministers to proceed “with the consideration of the request for accession” (Hong Kong was first to lodge its accession request, but that’s not a guarantee it will be first to start proper negotiations). RCEP’s General Review is also due in 2027, and RCEP Leaders have instructed officials to “commence the preparation” for that in 2026.

RCEP suffered from everyone being occupied by adjustments to the new US Administration in 2025. Geopolitics also made deeper integration under RCEP slightly more complicated, particularly given recent language in US deals with Cambodia and Malaysia regarding agreements with countries that “jeopardize… essential U.S. interests”. That said, the US’s response to Canada’s recent deal with China suggests there is some room to move in this space. Conversely, a recent Op-Ed in the China Daily suggested RCEP Members “develop a framework … to review whether the new agreements signed by members with external partners might inadvertently hurt members’ interests and erode the RCEP’s relative value…”. This seems unlikely to happen, but I’m sure there are lots of interesting discussions being had in RCEP meetings and their coffee breaks.

CPTPP made clearer progress on a few fronts in 2025, although it still seems to be moving slower than it should be. The Costa Rica accession is still not concluded, but the Parties did launch one more accession negotiation (for Uruguay) and set out the queue of who is next (the United Arab Emirates, the Philippines, and Indonesia). CPTPP Parties also completed the General Review Report.1 Negotiations to upgrade the agreement are set to commence this year, including on trade facilitation, services, and e-commerce (in addition to work on investment, State-Owned-Enterprises, innovation, and economic coercion). The EU and ASEAN dialogues with CPTPP will also continue.

This all amounts to a pretty big agenda for CPTPP in 2026, and it will be a challenge to manage it all with everyone’s competing priorities. Vietnam has taken over from Australia as Chair, so has a tough gig ahead of it. The Parties are also planning to establish a ‘Unit’ in lieu of a proper Secretariat to “provide administrative support”. But this is unlikely to be operative until 2027, given that officials only tasked to work on what the Unit will look like and provide a report on this by the end of this year.

🤖 Digital trade

Second, as always, I’m very interested to see where the world goes with digital trade rules this year. Two particular negotiations to highlight are:

• As noted above, the CPTPP’s General Review negotiations will cover the now ten-years-old E-Commerce Chapter. A recent CANCPEC and AusPECC report laid out the range of ways the chapter can be modernised. This includes doing more on digital trade facilitation (e-invoicing, e-payments, etc); clarifying data flow rules and exceptions and how these are being implemented (or not); and agreeing on AI governance principles.

• ASEAN’s negotiation of its Digital Economy Framework Agreement (DEFA) is supposed to fully conclude in 2026. The announcement of ‘substantial conclusion’ in October 2025 listed a wide range of areas where there has been agreement (including data flows, e-payments, the MLETR, and cooperation on AI). It did not mention customs duties on electronic transmissions, which is a key digital trade issue. However, the US ‘deals’ and statements with Malaysia, Thailand, Cambodia and Indonesia all contain some variety of this commitment. ASEAN as a whole also “reaffirmed [its]…commitment” to the WTO moratorium in the CPTPP-ASEAN Trade and Investment Dialogue Joint Ministerial Statement. So it will be interesting to see exactly what has been able to be agreed in the DEFA, and how much it builds on RCEP and the other ASEAN+1 agreements.

More broadly, could 2026 be the year where governments start thinking more seriously about what AI means for trade agreements (and vice-versa)? Joshua Meltzer has published some good work on what negotiators should be considering on this. I also recently worked on a submission to Australia’s DFAT that included a proposal to pursue a ‘Trusted AI Trade’ agenda and what this could contain.

Global Shield Australia - Submission to Australia's Review of its Southeast Asian Trade Agreements

453KB ∙ PDF file

Download

A submission to Australia's consultation regarding the modernisation of its trade agreements in Southeast Asia. It focuses on supply chain resilience and AI governance as two areas where these agreements could be doing more.

Download

Governments are rightly worried about adopting binding rules in agreements regarding AI given the pace of change, and many are still working to catch-up on the domestic front. But there are still some easy wins that could be put in place that would actually help in the uncertainty, including recognising common principles for AI regulation, committing to address AI risk, establishing regulatory cooperation to align approaches and share safety and security research, and supporting partners with capacity building on AI governance.

📑 Rules-based trade

There has been much crowing about the death of the rules-based order or that recent events show it has all been a mirage from the start. I think these comments are far too quick (rules-based trade at least is far from dead) and too triumphalist (even a “partially false” rules-based order is something of enormous value for the weak and strong alike).

However, rules-based trade will continue to be tested in 2026 as countries adapt to the new operating environment. In 2025 many governments continued to see the value of negotiating binding trade agreements. Australia is set to conclude an agreement with the EU in coming months and is continuing upgrade negotiations with India. The EU was on track to land its agreement with MERCOSUR, and is preparing to sign an agreement with India. The United Arab Emirates has been on a particular streak of agreements. There is also significant interest in acceding to RCEP and the CPTPP.

In addition to full trade agreements, 2025 also saw the launch of minilaterals and groups to coordinate on trade outside of traditional structures. ASEAN now has a Geoeconomic Taskforce (which released a report in October). The CPTPP has dialogues with the EU and ASEAN. Singapore, New Zealand, the UAE, Switzerland and 12 other small states launched the Future of Investment and Trade-Partnership (FIT-P).

This suggests rules and international cooperation are still useful (and seen as useful) to the majority of the world. This is good and hopefully it is a trend that is maintained in 2026.

The World Trade Organization (WTO) also has its 14th Ministerial Conference (MC14) in Cameroon in March of this year. In 2025 the WTO had the most dispute complaints since 2019, two thirds of world trade is done on a WTO MFN basis, and WTO committees remain active and useful. However, serious questions remain about its future and ability to resolve the dispute settlement body crisis and/or negotiate new rules. Questions for MC14 include will the e-commerce custom duties moratorium be extended? Will the Agreement on E-Commerce or Investment Facilitation for Development Agreement be added to the WTO rulebook? Will WTO reform move forward? Expectations are low, but I still think those declaring the WTO dead are getting ahead of themselves.

🇺🇸 US deals: done or dusted?

Finally, where to now on the US trade deals, frameworks, and joint statements on trade?

The EU’s deal is now under threat (even as USTR Greer suggests the European should “silo” the Greenland issue off from the trade deal). The UK deal is potentially being derailed by additional demands, as well as the Greenland tariffs. The US has said Indonesia is also reneging. And Cambodia and Malaysia may not see the more onerous parts of their deals as being as restrictive as they appear on their face.

The Greenland tariff threats also underline that these deals remain subject to the US’s expansive application of national security exceptions. So they might not give much certainty if a country ends up on the wrong side of an issue the US cares about. As Simon Lester noted:

… I'm not sure what the short-term holds for trade agreements with the U.S. If it turns out that signing a trade agreement with the U.S. does not help you avoid the wide range of geopolitical tariffs that may come your way these days, will other countries see these trade agreements as worth signing?

We are also still waiting for the Supreme Court to rule on the domestic legal basis for many of Trump’s new tariffs. Although even if the Administration were to lose this particular case, there are plenty of other bases for tariffs to be imposed they could then move to (albeit some more complicated than IEEPA to implement).

So in 2026, how much implementation or enforcement of existing US trade deals will we see? And will more deals be forthcoming? On the latter, I’d say for most countries a deal will still be worth taking if something acceptable is on offer, but potentially governments will also be considering how quickly they can unwind or pause them if needed.

There is, of course, much more on the horizon for trade in 2026 - including the high-stakes USMCA review, AfCFTA implementation, and work under the Digital Economy Partnership Agreement (which keeps expanding). But that’s some of the key things I’m looking forward to tracking as 2026 kicks off.

Last year I wrote about the African Continental Free Trade Agreement’s (AfCFTA) Digital Trade Protocol (the Protocol), which on paper contains some relatively high ambition digital trade rules. This includes a rule that Parties will not impose customs duties on digital products traded electronically (an idea with a long history).

The customs duties rule, however, was subject to “scope and origin criteria” that were to be set out in a promised Annex on Rules of Origin (ROO Annex). The ROO Annex was adopted back in February and has some new approaches to determining what qualifies for preferential treatment under digital trade rules.

In this post I set out how I read the the ROO Annex as working, along with some questions it raises, and comparisons with past practice.

The AfCFTA Digital Trade Protocol

For context, Article 6 (Customs Duties) of the Protocol sets out the primary rule prohibiting customs duties and makes this subject to the ROO Annex’s scope and origin criteria:1

Article 6
Customs Duties

1. A State Party shall not impose customs duties on digital products transmitted electronically originating from other State Parties, subject to the scope and origin criteria that shall be set out in the Annex of Rules of Origin, in accordance with Article 5 of this Protocol.

The Rules of Origin Annex

The primary provision in the ROO Annex that limits the scope of the customs duty prohibition is Article 7 (Eligibility for Preferential Treatment):

Article 7
Eligibility for Preferential Treatment

1. African content traded by African-owned enterprises or persons of State Parties or on African digital platforms shall be eligible for preferential treatment under the Protocol.

2. State Parties shall, in the application of this Annex, accord favourable treatment to African start-ups, Micro, Small and Medium-Sized Enterprises (MSMEs), women, youth, indigenous peoples, rural and local communities, persons with disabilities, and other underrepresented groups.

This establishes a two-stage test for what content must be treated preferentially under Article 6 of the Protocol. Namely, the content must be:

1. African content; and

2. That content must be traded:

   1. By an African-owned enterprise or person of a Party;2 or

   2. On an African digital platform.

Each of these terms are then defined further.

First, Article 6 (African Content) of the ROO Annex specifies that “Content is African if it is owned by a natural or juridical person of a State Party…”.

It is not clear how ownership is defined here - for example, does it include copies of software or media licensed from a company? Does it depend on the terms of the licence? Is it limited to ownership in the intellectual property sense of who owns copyright over the product (this would significantly limit the scope of the customs duty prohibition)?

Second, Article 4 (African-Owned Enterprise) of the ROO Annex sets out three criteria that must be met for an entity to be an “African-owned enterprise”:

1. First, it must be “a legal entity duly constituted, registered, or otherwise incorporated and operated under the applicable laws and regulations of a State Party”.

2. Second, it must be “owned and controlled by a natural or juridical person of a State Party or State Parties”.

3. And, third, it must “maintain… substantial business operations in the territory of a State Party.”

Ownership is defined as beneficially owning more than 50 per cent of the equity interest in the enterprise. Control is defined as having the power to appoint a majority of an enterprise’s directors or to otherwise direct its legal operations. Substantial business operations is defined by reference to the AfCFTA Protocol on Investment’s definition of “substantial business activity”.3

Third, Article 5 (African Digital Platforms) of the ROO Annex defines a digital platform as African if it “is duly constituted, registered, or otherwise incorporated and operated under the applicable laws and regulations of a State Party, and owned and controlled by a natural or juridical person(s) of a State Party or State Parties.”

“Digital Platform” is also itself defined as:

a digital interface or application which enables interactions and transactions between businesses and/or consumers to facilitate digital trade, including, but not limited to, online marketplaces, collaborative or sharing economy platforms, communication platforms, online social networks, online search engines, web browsers, online maps, news aggregators, music platforms, video and other media sharing platforms, digital payment systems, application stores, online advertising platforms, operating systems, and online intermediary services[.]4

What must originate in an AfCFTA Party - the transmission or the digital product?

One issue that I am unsure of with the above is whether the Parties intended for the customs duty prohibition to be limited to only electronic transmissions that originate from AfCFTA Parties, or for the prohibition to also apply to transmissions of African content regardless of where the transmissions came from.

The relevant language is in Article 6(1) (Customs Duties) of the Protocol, which limits the customs duty prohibition to “digital products transmitted electronically originating from other State Parties”.

I had initially read this as adding a requirement that the electronic transmission must begin in an AfCFTA Party. And on this, I’d note that the transit of the transmission is not explicitly addressed. Given the nature of the internet, you would hope a transmission bounced through various jurisdictions before getting to its destination in another AfCFTA Party would not be excluded purely due to its ‘transit route’. But this is also a further complication.

However, Article 6(2) (African Content) of the ROO Annex clarifies that “For greater certainty, African content shall be interpreted as a digital product originating from State Parties as stipulated in Article 6(1) of the Protocol.” This seems to link the ‘originating’ in Article 6(1) (Customs Duties) of the Protocol to the digital product (or the content) as opposed to the transmission. That is, this clarification seems to refer to Article 6(1) of the Protocol as requiring the digital product to originate from an AfCFTA Party, and then says this test is deemed satisfied for African content.

I’m not entirely sure I’m reading all of this right though. Perhaps the intention is to apply both tests - requiring the digital product and the transmission to originate from an AfCFTA Party. Views from others are welcomed!

What’s new: ownership and digital platforms

Comparing the approach in the ROO Annex to past agreements, the two key differences that stand out are:

1. Adding a test of who owns the digital product or content to previous tests that focused on the ownership, control or nationality of the persons (juridical or natural) doing the transmitting; and

2. As I read Article 7 of the ROO Annex, allowing trading by persons of non-Parties to benefit from the preferential treatment, as long as the trade is done on an “African digital platform” and is of “African content”.

Previous digital trade agreements, such as the Digital Economy Partnership Agreement (DEPA), limited their customs duties on electronic transmissions rule to “content transmitted electronically, between a person of one Party and a person of another Party” (Article 3.2(1)).5 The addition in AfCFTA of an ownership requirement linked to what is being transferred significantly limits the scope of what content is required to be duty-free (in addition to the issue of what ownership means as mentioned above).

The allowance for all trading on African digital platforms perhaps provides some benefits for African digital platforms above and beyond the traditional approach. But I’m not sure how important this will be in practice, particularly given the content ownership test.

It is also interesting that, unlike DEPA and CPTPP, there are no general or security exceptions that apply to the customs duty prohibition in the AfCFTA Digital Trade Protocol as far as I could see. This is unlike other AfCFTA Digital Trade Protocol Annexes, such as the Annex on Cross-Border Transfers, which do apply exceptions to its provisions.

Summing up

The use of nationality or ownership/control of an enterprise to determine access to preferential treatment is not new. This is how it’s been done in the services and investment context as a matter of course.

However, the overall effect of the ROO Annex is to significantly limit the scope of value of the Digital Trade Protocol’s rule on customs duties on electronic transmission, or at least to make its benefits less clear and certain. It will be interesting to see exactly how AfCFTA Parties implement this - in particular whether it will be worth the effort to narrow down the application of zero duties to just those digital products that meet the ROO Annex requirements or if it is easier to just apply the zero duties non-preferentially.

Also - as Sam Lowe has recently noted - what Sam calls ‘Rules of Control’ look to be expanding into the goods context too. Rather than just looking at where a good originated it (or where most of its value was added), the US is now looking at who is making the good too (and who owns or subsidies that entity).

Finally, to make this more concrete, here’s a hypothetical trade to show why these various approaches to ROOs matter (particularly for lawyers). Imagine an Australian purchasing an internet connected EV from a seller in China. Thanks to Australia’s FTA with China (ChAFTA), the purchase should get preferential or protected treatment - but this depends on:

• For the tariffs on the physical car entering Australia, the amount paid will depend on whether the car qualifies as originating in China under the goods rules of origin (e.g. where was car made or the most value-added?);

• For any connected services (such as remote access, remote control, entertainment, or vehicle monitoring services) provided from China to the car in Australia, whether or not they are protected by ChAFTA’s services rules will depend on the services meeting requirements around where and from whom they were supplied (and who owns and controls those entities); and

• For any data being transmitted to or from the EV from China (such as a software update), if ChAFTA had substantive data rules these would only apply if relevant origin, nationality, or ownership requirements were met in relation to who was doing the transmitting.

Certainly something to keep lawyers busy as governments move to regulate our increasingly connected devices.

2

Note it is not entirely clear to me why the ROO Annex includes almost identical definitions for “enterprise” and “juridical person”:

Last weekend the United States (US) signed two new trade agreements - one with Cambodia and one with Malaysia. I’m a bit late to comment - with excellent commentary coming earlier this week from Mona Paulsen, Simon Lester, Peter Harrell, Wendy Cutler and Simon Evenett (here and here). But there are a few of points of interest that stood out to me that I haven’t seen highlighted elsewhere yet.

First, three high-level points:

1. These agreements stand out from the other Trump 2.0 deals in terms of how much they cover and that they are actually legally binding treaties (notwithstanding the lack of any meaningful dispute settlement mechanism). Still far from WTO-compliance and I’m sure they’ll raise distinct US domestic process issues (but will leave that question to US lawyers).

2. They are still, though, incredibly one-sided with the majority of the obligations falling on Cambodia or Malaysia only. Mona Paulsen has taken a look at what this might mean for Cambodia, which is worth a read.

3. There have also been suggestions these two agreements could be a “notional template” for future US deals. If that is the case, it will be very interesting to see what other countries agree are willing to sign on to these kind of obligations and what other divergences we see in future texts.

Moving to the specific provisions in the agreement, there is a lot that is of interest.1 In this post, I’ll focus on the services commitments, requirements around digital trade agreements, and the obligation to mirror certain US trade restrictions. I’ve also focused on the main text of the agreements, although the annexes do have some interesting and far more specific obligations as well.2

Services Pseudo-Most-Favoured-Nation (MFN) Treatment

On services, the Malaysia Agreement contains a broad article that means any services commitments Malaysia has made or will make in a trade agreement are automatically also given to the US.

[Malaysia Agreement] Article 2.7: Services

This Agreement incorporates, mutatis mutandis, any commitment concerning trade in services that Malaysia has made or hereafter makes in a trade agreement to any third country, jurisdiction, or economy. This Article shall not apply to any commitment to the Association of Southeast Asian Nations (ASEAN) under any ASEAN trade or investment agreement.

Negotiating language that automatically incorporates ‘commitments’ under other agreements (as compared to incorporating a specific provision or giving a guarantee of treatment) can sometimes get bogged down if there’s debate over what is actually being incorporated - e.g. is the ‘commitment’ read as subject to scope carve-outs and any exceptions that apply in the other agreement? How broad is the intended coverage of the language used here when it comes to services commitments is a key question.

Article 2.7 also appears to capture not just scheduled services commitments but also obligations such as domestic regulation or in relation to professional services. I also wonder the extent to which temporary entry/movement of natural persons commitments are intended to be or could be captured.

The article also has a carve-out for ASEAN agreements, which presumably only include those agreements that only ASEAN Member States are party to. If so, this would mean that Malaysia would still be required to provide the US with the services commitments it made under ASEAN’s +1 FTAs and the Regional Comprehensive Economic Partnership (RCEP).3

This article, by the way, is a great way to circumvent a lengthy services negotiation over sector-specific commitments or negative lists by just automatically capturing all the work done by others.4 The fact that this captures past agreements is also a key difference to MFN commitments in agreements like CPTPP, where parties often carve-out existing agreements from the obligation.5

The Cambodia Agreement takes a slightly different approach to this services provision:

[Cambodia Agreement] Article 2.6: Services

Cambodia shall refrain from imposing new barriers that provide less favorable treatment to U.S. services suppliers than the treatment afforded to domestic services suppliers and services suppliers from any third country, jurisdiction, or economy.

This just requires Cambodia to not impose new discriminatory barriers on US service suppliers.6 This would mean that Cambodia could still liberalise regulations on other foreign service suppliers without offering that same better treatment to US suppliers. One question is what would happen if Cambodia imposes a new non-discriminatory barrier on all foreign service suppliers and then a month later gives an exemption to several FTA partners? Although I’m sure Cambodia will not want to be too tricky in how it applies this.

Consultation ahead of certain new digital trade agreements

Article 3.3: Digital Trade Agreements

[Malaysia/Cambodia] shall consult with the United States before entering into a new digital trade agreement with another country that jeopardizes essential U.S. interests.

This article is the same across both agreements and obliges Cambodia and Malaysia to talk to the US before entering into a new digital trade agreement that “jeopardizes essential U.S. interests”. This isn’t necessarily a US veto over these countries’ digital trade agreements, but it is still a procedural requirement that could be used to apply some pressure if the US didn’t like the proposed deal.

Key will be what falls within a “new digital trade agreement” and what qualifies as an agreement that “jeopardizes essential U.S. interests”? Presumably at least anything requiring data flows and non-discriminatory treatment with China would meet the latter test. On the former - will amendments to existing agreements be captured?

Malaysia and Cambodia both already have an Electronic Commerce Chapter in an FTA with China under RCEP. The RCEP General Review has also been slated for 2027. Would an upgrade of RCEP’s Electronic Commerce Chapter as part of that review trigger Article 3.3?

ASEAN and China also signed the “3.0 Upgrade” to the China-ASEAN FTA this week. The text isn’t public yet, but reporting refers to it including at least “digital cooperation” provisions. Would future amendments to this get captured by Article 3.3?

Also to note that both China and Malaysia are participating in the WTO Joint Initiative on E-Commerce (aka the Agreement on Electronic Commerce). It’s not clear how or if Article 3.3 might give the US some leverage over Malaysia’s continued support to this agreement (noting the US dropped out of the initiative last year).

Note there is also a separate provision in the Malaysia Agreement that more straightforwardly permits the US to terminate the agreement and reimpose the full so-called reciprocal tariffs from April if Malaysia enters into any new bilateral FTA or “preferential economic agreement” that “jeopardizes essential US interests”:

[Malaysia Agreement] Article 5.3: Other Measures

3. If Malaysia enters into a new bilateral free trade agreement or preferential economic agreement with a country that jeopardizes essential U.S. interests, the United States may, if consultations with Malaysia fail to resolve its concerns, terminate this Agreement and reimpose the applicable reciprocal tariff rate set forth in Executive Order 14257 of April 2, 2025.

Like Article 3.3, this also carves-out RCEP and the ASEAN-China FTA by only applying to new agreements. The question again is does this Article 5.3 apply to any future upgrade or amendment to either of those existing agreements?7

Cambodia’s version of this ‘poison pill’ applies where the US “considers” that the new agreement “undermines” the US agreement with Cambodia or “otherwises poses a material threat to economic or national security”.8 This clearer ‘self-judging’ language contrasts with Article 3.3, potentially giving more leeway for the US to make use of the poison pill as compared to the digital trade agreement provision. Of course, the phrase “jeopardizes essential U.S. interests” is so vague and broad in any case, and there is no real dispute settlement to settle interpretive difference, so this is likely a distinction without a practical difference.

Requirement to mirror US domestic regulatory actions

In Malaysia’s agreement there are a few provisions that essentially require Malaysia to mirror US domestic action on a range of trade measures.

First, there provisions on goods produced by forced labour and in relation to shipbuilding and shipping:

[Malaysia Agreement] Article 2.9: Labor

1. … Malaysia may acknowledge U.S. government determinations on entities under Section 307 of the Tariff Act of 1930 and shall take appropriate action to prohibit importation of goods from those companies. …9

[Malaysia Agreement] Article 5.1: Complementary Actions

3. Malaysia shall adopt, through its domestic regulatory process, similar measures of equivalent restrictive effect as those adopted by the United States to encourage shipbuilding and shipping by market economy countries. The Parties shall discuss the structure and effect of such measures, recognizing the Parties’ commitment to address shared economic or national security concerns in the shipbuilding and shipping sector.

And second, a far broader provisions on US trade restrictions:

[Malaysia Agreement] Article 5.1: Complementary Actions

1. If the United States imposes a customs duty, quota, prohibition, fee, charge, or other import restriction on a good or service of a third country and considers that such measure is relevant to protecting the economic or national security of the United States, the United States intends to notify such measure to Malaysia for the purpose of economic and national security alignment. Upon receiving such notification from the United States, Malaysia shall adopt or maintain a measure with equivalent restrictive effect as the measure adopted by the United States or agree to a timeline for implementation that is acceptable to both Parties, to address a shared economic or national security concern, guided by principles of goodwill and a shared commitment to enhancing bilateral relations between the United States and Malaysia.

This essentially obliges Malaysia to adopt equivalent restrictions to, for example, Section 232 measures, when the US “considers” these to be for the protection of its “economic or national security” and notifies them to Malaysia. The Cambodia Agreement also has a similar provision, although with slightly more deference for “Cambodia’s sovereign interests”.

Mona Paulsen notes the potential WTO issues this creates for Cambodia, but I think Simon Lester had the best question in relation to this provision:

“Really?”

I’m sure we’ll see a lot more written on these agreements and the others that some have suggested will follow in their wake.

Perhaps Cambodia and Malaysia are hoping the US will provide some leeway to some of the more broadly worded provisions and not get into the weeds of comprehensive compliance. Then full implementation of the agreements could be dragged out, and meanwhile each country gets a lower, preferential, and hopefully more certain baseline tariff rate from the US.

However, neither agreement has dispute settlement, which means that the US can enforce its view of what each agreement means unilaterally at any time (following consultations “when practicable”). The question then is can each country do enough to avoid this outcome, while also maintaining relationships with other major trading partners?

UPDATE: Malaysia has released a detailed FAQ on its agreement with the US, it is well worth a read for those interested in how this will all work in practice. See also Alan Beattie’s FT article on the deal, with quotes from Malaysia’s Trade Minister, including “We are very clear that any actions taken under the agreement will be based on Malaysia’s interest and under Malaysian law…There’s a consultation process, and if it’s not in our interest to follow the US we won’t.””

4

That said, the Annex to the Malaysia Agreement still contains specific commitments on submarine cable repair and broadcasting services that would fit into a typical services schedule:

7

See Simon Evenett’s examination of these “poison pill” provisions, and comparison to the earlier precedent in the USMCA. This note in CPTPP’s Annex II Explanatory Notes may also be relevant to this question:

Detailed analysis of the CETA is available elsewhere. In this post I’ve just set out three areas where I spotted something of interest (to me): (1) Trade in Services, (2) Digital Trade, and (3) the Security Exception.

1. Trade in Services

First, the CETA contains what looks to be India’s most detailed Domestic Regulation Article to-date (Article 8.8), and the article actually binds India to much of what is contained in the WTO’s Joint Initiative on Services Domestic Regulation (Services Dom Reg JI) (which India had some concerns with).

The biggest aspect missing from CETA is the Services Dom Reg JI’s translation of GATS Article VI(4) into a binding obligation. GATS Article VI(4) sets up a process for the development of “necessary disciplines”, “with a view to ensuring that measures relating to qualification requirements and procedures, technical standards and licensing requirements do not constitute unnecessary barriers to trade”. Such disciplines “shall aim to ensure” that these measures are:

(a) based on objective and transparent criteria, such as competence and the ability to supply the service;

(b) not more burdensome than necessary to ensure the quality of the service;

(c) in the case of licensing procedures, not in themselves a restriction on the supply of the service.

The only disciplines to come out of the GATS Article VI process so far have been the Disciplines on Domestic Regulation in the Accountancy Sector (but these have not entered into force). While waiting for such disciplines, GATS Article VI(5) obliges WTO Members to not apply qualification, licensing, etc, measures if they would nullify or impair a specific commitment “in a manner which” does not comply with the criteria listed above and could not reasonably have been expected when the specific commitments were made.

Meanwhile, trade agreements started using an amended version of Article VI(4) that requires Members to follow (or endeavour to follow) the criteria in at least sub-paragraphs (a) and (c).1 In the Services Domestic Regulation JI this looks like:

22. If a Member adopts or maintains measures relating to the authorization for the supply of a service, the Member shall ensure that:

(a) such measures are based on objective and transparent criteria;

(b) the procedures are impartial, and that the procedures are adequate for applicants to demonstrate whether they meet the requirements, if such requirements exist;

(c) the procedures do not in themselves unjustifiably prevent the fulfilment of requirements; and

(d) such measures do not discriminate between men and women. [footnotes omitted]

India has traditionally opposed this move, including because it is seen as usurping the mandate under GATS Article VI(4) obliging Members to work on more specific disciplines. So it is not a surprise to see this position continued in CETA.

Second, as compared to India’s recent trade agreement with Australia (the ECTA),2 in CETA India has provided the UK with a slightly larger list of services sectors covered by Most-Favoured-Nation (MFN) treatment (by my count its roughly five extra sectors3).

India’s MFN commitments to the UK are also missing four sectors it committed to Australia:

1. “Internet and internet infrastructure services”: it may be for this one that India and the UK consider this covered by other commitments on data processing, data base and other computer related services—however these are also committed by India in its agreement with Australia in addition to these internet sectors;

2. “Audio-visual services (CPC 9611, 9612, 9613)”: this sector is entirely carved out of CETA’s Trade in Services Chapter so could never have been committed;4

3. “Insurance and insurance-related services;” and

4. “Banking and other financial services”.

The two financial services sectors are interesting given the UK’s obvious interest in the sector. But part of the explanation is similar to audio-visual services.

CETA carves financial services out of the Trade in Services Chapter and puts them into their own chapter. This is typical for many modern trade agreements, including for example the CPTPP. However, often those agreements then include versions of the services disciplines (including MFN) in their Financial Services Chapter to enable similar commitments to be made on financial services.

CETA’s Financial Services Chapter doesn’t contain MFN (although please correct me if I’ve missed it in my review!), so it was not possible for either India or the UK to make an MFN commitment on financial services.

Conversely, in Australia’s ECTA, the Trade in Services Chapter (including its MFN provision) applies to financial services, and more specific provisions for financial services only are set out in a Financial Services Annex to the chapter. This mean India was able to commit MFN on two financial services sectors for Australia.

In the past I’ve seen some confusion on the ‘value’ of having a separate Financial Services Chapter. Some mistakenly automatically associate this with higher ambition outcomes or more substance for financial services. Clearly that is not the case—form and structure is rarely determinative.

Third, and this is not a substantive point, but I did enjoy this paragraph in the Trade in Services Transparency Article

Article 25.2 of CETA’s Transparency Chapter is a publication obligation, requiring parties to publish regulations in advance, seek comments and the like. Article 25.7 says dispute settlement does not apply “for any matter arising under Article 25.2”. I just enjoy cross-referencing drafting, particularly where it does something slightly complicated like reversing a non-application of dispute settlement clause.

2. Digital Trade

CETA’s Digital Trade Chapter is the highest ambition digital trade chapter India has agreed in a trade agreement to-date. It covers much of the same ground as the WTO Joint Initiative on Electronic Commerce (E-Commerce JI), but doesn’t prohibit customs duties on electronic transmissions or have provisions on electronic payments or personal data protection. One notable addition as compared to the E-Commerce JI, though, is that CETA does include a prohibition on forced source code disclosure (which is already under criticism).

Also of interest is the chapter’s ‘forward review mechanism’ contained in Article 12.20:

In essence, this article means that if India enters into a trade agreement in the future that contains provisions on personal data protection, cross-border data flows, or data localisation requirements, the UK could then force India to enter consultations that are aimed at amending the CETA to include similar disciplines. So if India ever does accept these disciplines with another counterparty, it provides a way for the UK to try and maintain equivalency.

Earlier examples of similar language in trade agreements (although in the services context) include Article 7 of AANZFTA’s Trade in Services Chapter (prior to the recent upgrade) and Article 8.5 of ECTA.

A related kind of provision is Article 28(5) of the Singapore-Australia Digital Economy Agreement, which triggers an immediate expansion of its source code provision to also cover algorithms once both parties have undertaken such an obligation in other international agreements. This is more than just an obligation to negotiate, instead creating a new obligation as between Singapore and Australia once triggered. But the trigger itself is both parties entering into other trade agreements containing a relevant obligation.

3. The Security Exception

Finally, on LinkedIn Mona Paulsen has noted that CETA contains a new formulation of the security exception.

Article 28.2(1) of CETA essentially reflects the standard security exceptions from the GATT and the GATS. But Article 28.2(2) then also allows for any action a Party “considers necessary for the protection of its essential security interests, including in time of national emergency or relating to the protection of critical public infrastructure, whether publicly or privately owned, including communications, power and water infrastructure, subject to the requirement that such action is not taken in a manner which would constitute a disguised restriction on trade.”

This language is an interesting amalgam of:

1. ‘self-judging’ security exception language from agreements such as the CPTPP (“considers necessary for the protection of its essential security interests”);

2. a non-exhaustive list of essential security interests with critical infrastructure protection language that, as Professor Paulsen notes, has some history in other bilateral and regional trade agreement security exceptions including RCEP (“relating to the protection of critical public infrastructure”); and

3. part of the chapeau requirement found in the GATT/GATS general exceptions (“subject to the requirement that such action is not taken in a manner which would constitute a disguised restriction on trade”).

The use of the chapeau language is particularly interesting as it adds in an explicit hook for evaluating the application of the security measure (even if the measure itself is ‘self-judged’ as necessary). This would be in addition to the broader good faith obligation that would attach to the use of the exception. We shall see whether others pick-up this new compromise approach.

More interesting, as Professor Paulsen's 2020 article points out, in the negotiations that led to the GATT the UK actually proposed chapeau test language for the security exception (including the disguised restriction on trade test):

It’s always interesting to see some rhymes in trade negotiation history.

Programming note: the longer than usual delay between Trade Notes posts is due to my change of jobs back in April. I’m no longer a lawyer. Instead I am excited to now be leading Global Shield’s advocacy work in Australia for ambitious action to reduce global catastrophic risk. Please do get in touch if you have connections to the issues we work on (including AI risk, food supply security, catastrophic crisis planning, and national resilience and preparedness) - I’m always keen to share notes. Trade Notes will continue, but perhaps more intermittently (I am still regularly posting to the Trade Notes chat for those that haven’t checked that out yet).

We are now about halfway into Australia’s year chairing the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP),1 so I thought this might be an opportune time to offer up some suggestions for what would be useful potential wins for the agreement in the last half of the year.

Australia’s theme for its chair year was “Delivering Sustainable Trade and Resilient Growth” and it said it would focus on:2

1. Increasing trade: leveraging the “gold standard” of the Agreement to further boost trade between members, bringing economic gains to our communities.

2. Facilitating trade: we aim to make it easier for members to trade with each other by improving processes.

3. Spreading the benefits of trade: Australia is committed to ensuring that CPTPP supports inclusive and sustainable trade practices.

I’m not sure any of my suggestions really fit into these higher level aims, although perhaps ‘resilient growth’ and ‘inclusive trade’ are a broad enough themes to capture some of these.

First, these is clear momentum behind the CPTPP Parties cooperating with the EU and ASEAN to support the rules-based trading system.3 New Zealand, Singapore and the United Kingdom seemed to take the lead on this within the CPTPP group. Australia has not said much publicly, but the 16 May 2025 CPTPP Joint Ministerial Statement included a decision to “work towards dialogues as soon as possible in 2025” with both groups. The EU’s recent even stronger messaging on this shows the desire for this is real and ASEAN has also discussed it. Getting these dialogues underway should be a key priority and there are lots of good ideas of what these could involve.

Although, I do agree with Peter Ungphakorn and Robert Wolfe that constant talk of the WTO being dead, defunct or irrelevant is both wrong and unhelpful (it gives the US an excuse to withdraw further among other things). Reform is needed, but there are important functions that continue to deliver for Members, but if the WTO dies the impact would be devastating (particularly for developing countries) and hard to undo.

Second, Australia’s Trade Minister has said he “will be pleased to mark continued progress on the General Review of the CPTPP agreement”, hopefully we can see something substantive delivered to lay the groundwork for CPTPP modernisation in 2026. Under the Terms of Reference for the General Review, the CPTPP General Review Report is meant to go to the 2025 CPTPP Commission with recommendations on next steps. These need to be substantive, reflective of input received from stakeholders, and identify concrete areas for upgrade and what needs to be added to the agreement.

Third, the CPTPP needs more robust institutional backing, such as through a proper Secretariat. This seemed unlikely in recent years - with no-one wanting to provide the funds. However, the work to be done under CPTPP is only increasing, and the current ad hoc administrative arrangements are likely one of the bottlenecks. RCEP’s Secretariat is also slowly emerging from the ASEAN Secretariat in Jakarta. I recently saw reporting in January that Japan might now be willing to host a CPTPP Secretariat and that this is part of the agenda for the General Review. Getting this locked in would be a substantive achievement for Australia’s chair year.

Fourth, the CPTPP accessions process needs to be fixed. It was understandable why the United Kingdom had to be done as a singular process and we are only six months into the formal part of Costa Rica’s accession negotiation. However, lessons from the United Kingdom’s experience should have been learned and implemented by now. Revision of the 2019 Accession Process is needed, particularly given parts of it are almost dead letters (e.g. the Commission is supposed to make a public determination of “whether to commence the accession process with the aspirant economy within a reasonable period of time after the date on which the aspirant economy made the Accession Request”). More agile, efficient and public processes are needed to get the CPTPP accession pipeline moving (perhaps managed by that new Secretariat).

There is some potential competition in the region too. After a long delay, RCEP’s Procedures for Accession were agreed late last year. It also looks like the RCEP Parties are potentially working on Terms of Reference for a Hong Kong accession, which could be ready by September (if the politics don’t prevent agreement being reached).

Fifth, and more substantively, with IPEF slowly fading from view, lessons and mechanisms from its Supply Chain Agreement should not be lost. Supply chain resilience and economic security are front of mind for many governments now. CPTPP could pick up some of the useful pieces of this prior work such as IPEF’s ‘Action Plans’ to improve resilience in critical sectors, better engagement with the private sector, crisis response mechanisms, and table-top and stress tests to simulate supply chain disruptions.

This doesn’t necessarily require amending the treaty text - although this could also be done as part of the General Review - but could start with specific CPTPP Committees starting initiatives using their existing powers. Indeed, in 2023 Canada led work under the CPTPP’s Committee on Competitive and Business Facilitation that resulted in The Growth of Supply Chain Trade within the Comprehensive and Progressive Agreement for Trans-Pacific Partnership report.4

And finally, I can’t mention the CPTPP without mentioning the need for increased transparency. Trade institutions cannot continue with the business-as-usual opaque approach to their meetings, this wasn’t tenable before January of this year and it becomes less tenable as the need to demonstrate the value of these institutions only continues to grow under the pressure of Trump’s second presidency.

On this it looks like Australia is actually falling behind one past Chair, New Zealand, which had a far more detailed online presence for its chair year. Hopefully we’ll see more material come online as the year progresses. While social media posts and communication directly with stakeholders is useful, creating a durable and accessible public record would go a lot further (including given Australia’s focus on inclusiveness!).

With just six months remaining in Australia’s CPTPP chair year, it may be too late to realistically deliver on much of the above, except where work is already underway. My guess is that we will see something on at least EU-CPTPP cooperation and the General Review report. Hopefully these can be substantive and the ground is laid to do more next year with Vietnam as chair.

A quick aside on terminology - MFN basically means the parties agree to will provide goods from each other with the ‘best’ treatment that they provide to goods from any other country. So if, for example, India lowered its tariffs on natural gas from Oman, it would also need to apply the same (or lower) tariffs on natural gas from the United States. 

MFN has been described as the cornerstone of the World Trade Organization (WTO) and is found in the General Agreement on Tariffs and Trade (GATT) as well the General Agreement on Trade in Services (GATS). There is a slight irony here, as India was previously reported as being potentially willing to ignore these WTO rules around MFN to reach a sectoral deal with the United States. 

As for the the ‘forward’ part of the reference to MFN, I take this to mean that the proposed clause would exclude preferential treatment offered under existing trade agreements. For example, preferences India has given Australia or the United Arab Emirates could be excluded from what India has to provide to the US. Even on this model, though, there are differences of views as to whether this should exclude future preferences granted to existing trade agreement partners - such as if Australia and India completed their Comprehensive Economic Cooperation Agreement negotiations and included additional tariff commitments in it. 

My impression was that goods MFN provisions outside of the GATT were very rare - having previously only seen a broad (i.e. all products), goods MFN clause in the Pacific Agreement on Closer Economic Relations Plus (PACER Plus). And even then, PACER Plus’s MFN clauses only applies to “duties and charges” and not to other other forms of treatment.

Chapter 2, Article 3(2) of PACER Plus is the relevant provision and it reads as follows:1

2. With respect to the levels of all duties and charges referred to in paragraph 1, any advantage granted to any good of any country or territory, other than in respect of a preference in force under a regional trade agreement on the date referred to in Article 8.1 of Chapter 15 (Final Provisions), shall be accorded immediately and unconditionally to all like goods originating in the territories of all other Parties except where:

(a) (i) the advantage granted is accorded pursuant to Decision 36 of Annex F of the WTO Hong Kong Ministerial Declaration of 2005 on Measures in Favour of Least-Developed Countries and related WTO Decisions on duty-free and quota-free access for products originating in Least-Developed Countries; and (ii) the treatment of such goods pursuant to the Decisions referred to in subparagraph (a)(i) is in conformity with those Decisions;

(b) the advantage granted is in respect of a preference in force pursuant to a regional trade agreement exclusively involving Pacific Island countries and territories; or

(c) the advantage granted is in respect of a preference in force pursuant to a regional trade agreement exclusively involving developing countries to which at least one Party is a party and other parties are non-Parties, where: (i) each such non-Party accounts for not more than 1 per cent of world merchandise exports; and (ii) all non-Parties that are party to the regional trade agreement together account for not more than 4 per cent of world merchandise exports; measured as of the date of entry into force of the regional trade agreement for each such Party and as of the date of accession of a new party to it.

3. Paragraph 2 shall not require such advantage to be accorded in respect of a preference in force or implemented after the date referred to in Article 8.1 of Chapter 15 (Final Provisions) by the Federated States of Micronesia, the Republic of the Marshall Islands or Palau which is extended to the United States of America in respect of:

(a) a regional trade agreement with another non-Party pursuant to the most-favoured-nation clause in such countries’ respective Compacts of Free Association or successor agreements, where the regional trade agreement concerned fulfils the requirements of paragraph 2(b) or 2(c); or

(b) a regional trade agreement established under such countries’ respective Compacts of Free Association or successor agreements.2

From the bolded text you can see that this provision excludes preferential treatment under existing “regional trade agreement[s]”.3 It also provides exceptions for, among other things, preferences given in favour of least-developed countries, under trade agreements involving just Pacific Island countries (past and future), and certain agreements involving just developing countries.

Doing a quick search of Legal.TINA, I discovered that there are some other agreements that include a goods MFN provision out there, including the:

• Eurasian Economic Union - Iran Free Trade Agreement (see Article 2.1);

• Eurasian Economic Union - Viet Nam Free Trade Agreement (see Article 2.1); and

• United States - Vietnam Agreement on Trade Relations (see Article 1).

However, each of these agreements all appear to entirely exclude treatment accorded to other countries pursuant to trade agreements (both existing agreements and any future ones). For example, the US-Vietnam Agreement excludes “advantages accorded by either Party by virtue of such Party's full membership in a customs union or free trade area” (see Article 1(3)(A)).

For WTO Members,4 excluding preferences under all future trade agreements from an MFN provision severely limits its value. All WTO Members are subject to an MFN obligation under the GATT, subject to allowances for customs unions and free trade agreements. So a MFN provision in a trade agreement between WTO Members would only duplicate the existing obligation the parties already have to each other under the GATT (and indeed neither party could provide preferences to third parties outside of a trade agreement without breaching their GATT obligations).

With the state of the WTO at the moment, including its dispute settlement body, duplicating the GATT’s MFN obligation is not of zero value. However, it is still quite different to the PACER Plus style of MFN, which does pick up treatment given under future trade agreements the parties enter into.5

Others have also pointed out a couple of other MFN and MFN-adjacent provisions:

• Under the Australia-India Economic Cooperation and Trade Agreement there is a side letter under which India commits to providing Australian wine with MFN treatment with respect to customs duties and charges (without any carve-out for past or future trade agreements); and

• Under the European Union-Japan Free Trade Agreement, Article 2.8(4) obliges the parties to commence a review of their tariff commitments if either party enters into a future trade agreement that provides more favourable treatment to certain goods. There is similar language in the EU’s agreements with Vietnam (Article 2.11(3)).

However, I still haven’t seen anything as broad as the PACER Plus example and indeed none as broad as the GATT version of MFN - which covers a much broader range of treatment than just customs duties and charges.

I welcome contributions of examples I’ve missed!

It has chapters on ASEAN, Australia, China, Japan, Europe and others (all worth a read), but I wanted to particularly highlight an interesting chapter that has verbatim answers from RCEP negotiators to a serious of questions put them regarding RCEP.1 These provide interesting insights into the motivations of negotiators and countries when approaching the RCEP negotiations, their views of how negotiations progressed (including hold-ups and strategic decisions made), and the relationships between countries on different issues and at different times.

I’ve extracted some particularly interesting comments in this post.

First, comments from Dato Lim Jock Hoi (ASEAN’s Secretary-General in the final years of the RCEP negotiations) demonstrate the key role of the ASEAN Secretariat in keeping the negotiations on track:

I took on a constructive role at the ministerial meetings, by creating and maintaining momentum of the RCEP negotiations, moderating views among the RCEP participating countries, gaining broad base support from relevant stakeholders, coordinating efforts within ASEAN, ensuring continuous support to the RCEP Chair, and tabling possible “landing zones” until the negotiations were concluded and the RCEP Agreement signed in 2020.

Second, there are a range of comments emphasising the ASEAN-led nature of RCEP and frustration at the commentary from outside of the negotiations that RCEP was an initiative of China:

Dato Lim Jock Hoi: ASEAN was the original initiator for the establishment RCEP as a part of its original workplan under the AEC Blueprint 2025 with a view to consolidating the ASEAN economic integration. From its conception, throughout the negotiations, and to its current progress, RCEP continues to remain an ASEAN-led process.

Sopheap Chan [Cambodia]: RCEP, which is often mistakenly viewed to as “China- or Japan-led”, was born out of the milestone of ASEAN’s middle-power diplomacy. It undeniably came from all ASEAN-plus one FTAs.

Tetsuya Watanabe [Japan]: The fact that [RCEP as a framework for regional cooperation with ASEAN at its core] was respected is of great significance to ASEAN centrality. There was a case where India withdrew at in the final phase, but many people in Japan originally explained that it had a geopolitical significance to balance China, and many people said that Japan should not participate in the conclusion of negotiations. However, this is a central project of ASEAN, and in that context, it is important for Japan to cooperate in the completion of the project. In the end, Japan also made efforts to conclude the negotiations, as this was something Japan should be actively involved in. In the midst of friction between the US and China, there were evaluations of a China-led framework or a framework without the US, but I think this was a regional project of ASEAN and that it was important for Japan to be involved as a member of the region.

Indeed, recalling the history of RCEP, Rebecca Maria from Malaysia notes that ASEAN deliberately chose a broader grouping for RCEP as compared to a narrower ‘ASEAN+3’ arrangement favoured by China:

… there were two competing proposals for this, namely ASEAN+6 (or Comprehensive Economic Partnership for ASEAN and East Asia, CEPEA) and ASEAN+3 (East Asia Free Trade Area, EAFTA). CEPEA was driven by Japan, while EAFTA, China. It was then that we decided that an ASEAN+6 arrangement would be in ASEAN’s interest. Wanting to break free of the Tug-of-War between CEPEA and EAFTA, we decided to call the arrangement the Regional Comprehensive Economic Partnership or RCEP.

… RCEP suffered constant comparison with TPP and later CPTPP. First, there was the perception that RCEP was China’s response to US-led TPP. This was an assertion that we had to constantly debunk …

While RCEP may have been an ASEAN-led project, there are also a number of comments on how the negotiations tested ASEAN centrality:

Milton Churche [Australia[: However, ASEAN centrality was tested throughout the RCEP negotiations. There was often a sense that ASEAN Member States would look to promote national interests rather than seriously seek to pursue these interests through a common ASEAN position. This suggests weaknesses in ASE AN’s institutional processes and leadership and that these processes need strengthening to give greater weight to the goal of ASEAN as a single market and production base, as well to the goal of equitable economic development.

Third, there are references to ‘trade tensions’ driving the negotiations, perhaps indicating that today’s trade tensions may also drive support for deeper economic integration in the region:

Dato Lim Jock Hoi: … two external drivers helped provide a sense of urgency to conclude the negotiations. First, the continuing trade tension among some parties. This situation urged ASEAN and ASEAN’s other major partners to look for alternative ways to ensure global trade would continue to grow. Second, the pandemic that severely hit the global community. This unprecedented event finally brought home the need to keep markets open, bringing even greater reasons to conclude the negotiations. … RCEP is also expected to offset the economic loss caused by trade tensions between major economies.

Milton Churche: Trump administration’s trade policy – its disruptive nature while continuing to abide by most trade commitments – probably strengthened the determination of most RCEP participants to achieving a successful outcome given the need to shore up the rules-based trading system.

Fourth, negotiators were asked about negotiation dynamics and the waxing and waning of momentum (including being asked to score the momentum of the negotiations on a scale from 1 to 10):

Iman Pambagyo (Chair of the RCEP Trade Negotiating Committee): In this regards, ASEAN unity was crucial in steering the directions of the negotiation. In fact, during the negotiation, issues concerning TPP and CPTPP, trade tension between Japan and South Korea, unresolved issues in the CJK trade negotiation, and uneasy relations between India and China all could be neutralized only with ASEAN’s strong stance in keeping the RCEP negotiation relatively sterile from non-RCEP issues. … Between 2018 and early 2020, the negotiation process entered into its critical stage (score 7, 8 and 9, respectively). It was the phase when ASEAN should decide on the negative approach to services commitments; Japan to compromise its high calls on IPR and e-commerce; New Zealand on the scope of tariff commitments; Indonesia on partners’ RCEP tariff commitments versus their respective commitments under respective ASEAN Plus One FTAs; and India’s further engagement in the negotiation. I believe I should score “9” for the situation I encountered in late 2019 through early 2020 when India decided to leave the negotiation table, followed by potential domino effects with Japan showing indifference whether to go with RCEP-15 or just leave the negotiation, and possible Australia’s response should Japan decided to leave the RCEP and focusing instead on TPP/CPTPP.

Anna Robeniol [Philippines]: From the perspective of a lead negotiator for an RPC, engaging at the bilateral level and at the level of the TNC with a limited negotiating bandwidth has been quite difficult. From the perspective of an ASEAN Secretariat officer, finding landing zones to come up with an ASEAN position and subsequently reconciling this ASEAN position with that of the six non-ASEAN RPCs have been most challenging. It was nearly impossible to achieve comprehensive and balanced outcomes when the 16 countries participating in the negotiations have significant development gaps, divergent national interests and expectations.

Rebecca Maria: There was optimism at the start so I would give that a score of 8. However, as the reality dawned and we kept missing deadlines, it went down to 4 or 5. Towards the end, when India left, it went down to 3 (from a political perspective) but possibly 8 for some of the negotiators as the albatross was taken off their backs!

Milton Churche: Another important challenge was that initially there was a tendency for ASEAN to prioritise the goods negotiations and to downplay the importance of ambition levels in other areas including services. Pressure from India was important in ASEAN accepting that a modern FTA must also adequately cover services. The fact that by 2014 China had come to see RCEP as central to its approach to regional economic integration, and to developing its bilateral economic relationship with India, deepened the pressure on ASEAN to accept the need for more ambition on services as part of the effort to ensure Indian participation in the outcome. As negotiations proceeded, it became clear that India was primarily focused on temporary movement of natural persons, but other countries maintained the pressure for all areas of services to be adequately covered.

Rebecca Maria: The media from one Dialogue Partner kept releasing news about the state of play in the negotiations. This affected the “trust” among the negotiators and impacted some of the more sensitive aspects of the negotiations, driving a wedge among the negotiators.

Michael Mugliston [Australia]: Throughout the RCEP negotiations, competitive pressure alternated between the RCEP and TPP negotiations. Initially it was TPP that put pressure on RCEP and a significant development in 2014 was China adopting RCEP as a key vehicle to advance its regional economic integration objectives, towards development of a Free Trade Area of the Asia-Pacific (FTAAP).

Sopheap Chan [Cambodia]: Among CPTPP, BRI, Indo-Pacific, US–China conflict, digitalization, SDGs and other development, CPTPP was the most pressing factor for RCEP negotiation team. During the negotiations of RCEP, the early TPP or later CPTPP conclusion had put lots of pressures to the RCEP negotiation teams to catch up and fulfill the mandate given by the RCEP Leaders. … Yet, not all agreed elements from CPTPP were useful to RCEP negotiations because it sometime had caused distraction and prolong negotiations as well. … RCEP is one of the two mega-regional trading blocs in the Asia-Pacific that all ASEAN Member States are parties to that agreement, while the other one has been left out several ASEAN Member States. This kind of separation will only harm ASEAN Community which we have been built over a number of years in order to reach our common destination for the shared future.

These are just a few of the comments I found of particular interest, there’s much more in the chapter (and rest of the book), including a detailed history of rules of origin negotiations from an Australian goods negotiators and further detail on the various positions countries took across different chapters and issues.

First, a few countries tried to pre-empt new US tariffs by dropping their own tariffs or removing other trade irritants before the tariffs were announced (e.g. Israel removed its tariffs on all US imports, India also lowered or removed some of its trade barriers). These made no difference given the mechanical application of the USTR’s tariff formula. And indeed, given the Trump Administration’s past practice, it may be that these good faith attempts have just been pocketed and more will be demanded as part of negotiating a reduction in the new tariffs.

Second, most responses either explicitly rejected the idea of retaliations or did not mention them at all. Canada, China, the European Union (EU) and Mexico are the exceptions to this, and Brazil also passed a law enabling it to impose countermeasures. This makes sense given the trade exposure of each of these economies to the US and their ability to inflict meaningful pain on the US. It also raises some interesting question on the limits the WTO places on countermeasures.1

Relatedly, very few countries explicitly raised the prospect of formal WTO or FTA disputes to contest the new tariffs (I only saw this from Australia, Brazil, Canada, and China). Singapore did the opposite, stating it would not be bringing a dispute.

Some countries also seemed almost happy to fall in a lower tier of tariffs while their competitors were slugged with more heavy duties. Although I expect this positivity dissipated with the pause and levelling of the tariffs to 10% for all except China.

Third, as the Administration has trumpeted, virtually all of the countries’ that have publicly responded have sought to negotiate a reduction in the tariffs with the US.2 Some offered specific deals (such as Argentina offering zero tariffs on 50 lines or Cambodia offering 5% duties on 19 lines), others are seeking a trade agreement (either a sectoral agreement such as the one India is negotiating3 or a full FTA like Argentina is hoping for).4 The key question with these concessions and ‘deals’ is whether the outcomes will be preferential to the US or done on an MFN-basis and in compliance with WTO obligations.

Fifth, there have also been various announcements on domestic measures to mitigate the impact of tariffs. Trade diversification strategies featured heavily. Other announcements included new export finance support, temporary loans to affected businesses, support to diversify and find new markets, and industrial policy measures. Australia is also strengthening its anti-dumping system, getting ready for trade diversion as exports originally destined for the US need to find other markets.

Finally - and perhaps of most interest to me - we saw at least two emerging initiatives to coordinate responses and reaffirm support for rules-based international trade.5 ASEAN was first out of the blocks, holding a virtual ASEAN Economic Ministers meeting and issuing a joint statement on the new tariffs. The statement included a reaffirmation of support for rules-based trade, regional economic integration, and working with Dialogue Partners to deepen economic links. News of an ASEAN Geoeconomic Taskforce also emerged, which will monitor, evaluate and recommend policies for ASEAN to respond effectively to the US.

New Zealand has also taken the lead on pushing forward work with like-mindeds to support free trade and rules in the face of the new tariffs. New Zealand’s Prime Minister held conversations with the EU, Malaysia, Vietnam, Singapore, the Philippines, Thailand, Ireland and Fiji in a whirlwind 48 hours. The EU’s readout of the call referred to discussions of “prospects for closer cooperation between” the EU and the CPTPP, so the idea of EU-CPTPP joint work (which has been percolating around various circles in various forms6) looks to be getting some traction.

Australia’s Foreign Minister also said she has been in discussions with “Southeast Asian nations, Japan, Korea, India and the EU” although Australia’s proposed approach here is less clear. As I said on LinkedIn, Australia is chairing the CPTPP Commission this year, so this would be a great opportunity for them to lead - although an election in a few weeks plus I assume some nervousness about drawing too much attention from the US could hold things back.

China’s Xi Jinping will be visiting Cambodia, Malaysia and Vietnam this coming week and China has expressed a desire to work more closely with ASEAN on trade. Closer ties with China will put these countries more in the spotlight for the US (something they’ll want to avoid if possible). Indeed, Vietnam is reported as considering cracking down on Chinese trans-shipments and tightening export controls on exports to China. Australia has also turned down an offer from China to “join hands” against the new tariffs.

All in all, there are some commonalities and lots of differences in how countries are approaching the new tariffs. It’s good to see the emergence of cooperative initiatives and also many countries looking to deepen integration outside of the US. US-China rivalry casts a long shadow over a lot of this work, and the full impact of that will also need to be taken into account as countries calibrate their responses. And of course, the problem with commenting on any of this is that it will all likely be out-of-date in the next 24 hours.

I’ve set out what I’ve seen today in the table below and will endeavour to update this as new information comes in (I have stopped updating the table as of 11 April). I also welcome corrections, additions and suggestions via email, in the comments, or by social media.

Update: Global Trade Alert also have a more thorough tracker of responses to the Trump Administration’s trade measures more generally.

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In line with past US concerns, the Memorandum targets digital services taxes (DSTs), discriminatory regulations, data flow restrictions, and local content requirements. But the Memorandum also goes further, requiring an investigation into European Union countries and United Kingdom measures that require or incentivise the “use or development of United States companies’ products or services in ways that undermine freedom of speech and political engagement or otherwise moderate content” and its operative language capturing any measure that “could inhibit the growth or intended operation of United States companies”.

The response to these measures will be tariffs and “such other responsive actions necessary to mitigate the harm to the United States and repair any resulting imbalance.” For now, though, the Memorandum requires the:

• United States Trade Representative (USTR) to look at renewing its section 301 investigations into DSTs in the European Union and United Kingdom, and commence new investigations into any other country that has a DST;

• USTR to determine whether to pursue a “panel under the United States-Mexico-Canada Agreement” on Canada’s digital services tax (following a process started in August last year), this being the Memorandum’s one recognition that international trade agreements can be useful tools to deal with trade irritants;1

• USTR, Treasury Secretary and Secretary of Commerce to report on problematic digital trade regulations and recommend further actions as part of the American First Trade Policy report that is coming in April;

• Treasury Secretary, in consultation with the Secretary of Commerce and USTR, to also look at countries that apply “discriminatory or extraterritorial taxes” to US citizens or companies or “has any tax measures in place that otherwise undermines the global competitiveness of United States companies…”;

• USTR to identify how the US could get its trading partners to agree “a permanent moratorium on customs duties on electronic transmissions”; and

• USTR, in consultation with others, to put in place a process for American business to report taxes and regulations of concern to the USTR.

It makes sense for the US to be a strong advocate against protectionist digital trade measures, so from that perspective the Memorandum is directionally correct in re-emphasising the size and importance of the US’s digital economy for the US’s broader economic interests. However, the Memorandum’s framing of these issues2 and the resulting measures that we can expect to see are likely to be counterproductive to finding real solutions to its concerns.

One of the difficulties of negotiating international digital trade rules is finding the right balance between clear rules against improper protectionism and ensuring that legitimate regulations can still be implemented. It is hard to see how other jurisdictions will just accept the unilateral imposition of US rules, standards and norms, particularly in relation what are extremely sensitive policy issues. Indeed, the many references to violations of US ‘sovereignty’ and illegitimate ‘extraterritorial authority’ are somewhat ironic given that one reading of the Memorandum is that it seeks to impose America’s particular model of digital trade regulation on the rest of the world.

That said, these moves by the Trump Administration will likely make many governments think twice about imposing new regulations on digital trade and social media (although this may also be muddied somewhat by the imposition of the other tariffs that are expected as part of the so-called “Fair and Reciprocal Plan”). But, as others have noted, unilateral measures by the US also have a mixed track record in achieving durable results and countries may determine that conceding to unilateral threats may only serve to encourage further such threats.3

Conversely, international processes have been making progress on digital trade issues and international agreements do affect domestic policy-making, including in ways that are in the US’s interest. The WTO’s e-commerce plurilateral is close to having 80+ economies agree not to impose customs duties on electronic transmissions. Australia recently held off on imposing local content requirements on online streaming companies, in part due to concerns about its trade agreement with the US. And the USMCA dispute settlement process was being pursued to contest Canada’s DST. Unilateral action undermines these processes and deals. It also harms the US’s ability to work with others that share an interest in promoting open digital trade.

In the end, the Memorandum takes what could have been done through negotiations or specific disputes to enforce trade rules, and instead wraps these issues up into an unnecessarily antagonistic escalation of trade tensions. Hopefully there is a grand bargain to be found in all of this after 2 April.

As expected, Australia was successful in the arbitration, meaning it can proceed to just cross-reference the Services DR JI paper in its GATS Schedule rather than copying and pasting in the entire document as India convinced others to do. The decision itself is relatively straightforward, without any major surprises. For those interested in how it played out, though, in this post I walk through some of the highlights (Peter Ungphakorn has also provided a good write-up of the arbitration that is worth a read).

India always had minimal chances of winning this arbitration (see some background here). GATS Article XXI and the associated arbitration procedures2 are focused on ensuring that modifications to GATS Schedules maintain a “general level of … commitments” that is not less favourable to trade and “compensatory adjustments” where amendments do take commitments backwards. India’s concern with the Services DR JI, however, was that its negotiation more broadly was not legal.3 India had also already accepted the substance of the Services DR JI being included in other WTO Members’ GATS Schedule, with some minor clarifications and a change of form. This made it difficult for India to argue that the content of the proposed modification to Australia’s GAT Schedule really changed the level of commitments or was less favourable to trade.

As an aside (and given my previous pleas for greater transparency in trade), I'll note that we don’t have the benefit of Australia or India’s submissions to see exactly how they argued their cases. However, the Working Procedures of the Arbitration Body do allow each party to disclose their statements to the public now that the Findings have been circulated. So, there's nothing stopping either party from doing the right thing and letting us see the documents now. 

Arguments over jurisdiction

At the outset, Australia had two wins and a loss on its jurisdictional arguments, knocking out two of India’s arguments but not being successful on having the entire request for arbitration rejected.

India had asked the Arbitration Body to decide upon its arguments that Australia’s proposed modification “violates the structural consistency of the GATS multilateral framework” and “undermines the single undertaking principle” (para. 3.53). However, the Arbitration Body agreed with Australia that neither of these matters are “benefits under the GATS within the meaning of Article XX:2(a)” and so found that India had not “demonstrated how or why a discourse on [these issues] … would contribute towards establishing whether compensatory adjustments would be warranted in this case” (para. 3.30). Thus, the Arbitration Body refused to consider these arguments.

Australia was not successful, though, on its broader attempt to have India’s entire request for arbitration rejected (para. 3.31). Australia argued that none of India’s concerns were about Australia’s overall levels of commitments or their favourability to trade (and in fact Australia’s modifications were entirely trade liberalising). As such, according to Australia, there was no issue or debate regarding a need for compensatory adjustments that the Arbitration Body could rule on.

The Arbitration Body disagreed with Australia on this - essentially saying that it had to decide for itself whether India’s benefits had been impacted and if there was a resulting need for compensatory adjustments. The Arbitration Body did, though, severely limit the scope of the matter it would consider (following its terms of reference) to:

3.31. … (i) examining the compensatory adjustments requested by India; and (ii) finding a resulting balance of rights and obligations which maintains a general level of mutually advantageous commitments not less favourable to trade than that provided for in GATS Schedules prior to the negotiations.

In doing so the Arbitration Body also emphasised that to succeed India had to not just show that its benefits under the GATS may be impacted but to also demonstrate that “its benefits under the GATS would be so affected as to alter the ‘level of mutually advantageous commitments’ resulting in a situation less favourable to trade”.

India was obviously hamstrung in its ability to do this given that (a) the Services DR JI clearly does not in any way reduce the participants’ levels of commitments or restrict trade, and (b) as noted above, India had accepted the substance of the Services DR JI being included in other WTO Members’ GATS Schedules (so at most this was a disagreement over form not substance).

Clarity and specificity of the proposed modifications

Before dealing with whether Australia’s proposed modifications impacted India’s benefits, the Arbitration Body decided it first had to consider whether Australia’s amended GATS Schedule was “sufficiently clear” to allow a comparison between it and Australia’s original commitments.4 The lack of “clarity and specificity” was also one of India’s arguments that its benefits under the GATS had been impacted (para. 3.53).

The three “clarity and specificity” arguments were:

1. First, India argued that cross-referencing to another document did not “reasonably communicate the substance of the commitments” (para. 3.32) and could result in the automatic incorporation of future amendments to the Services DR JI. The Arbitration Body rejected this argument, finding that the reference to “INF/SDR/2” clearly identified the document that was being incorporated at a specific point in time and that any future changes to Australia’s commitments would need to follow GATS Article XXI before becoming effective.

2. Second, India argued that cross-referencing to the Services DR JI “would create two separate regimes” (one for the Services DR JI commitments and the other for Australia’s existing GATS Schedule commitments) and “any conflict arising between the two regimes may not be reconciled effectively” (para. 3.38). However, India did not identify “any specific instance” where the modifications would actually conflict with existing commitments (despite the Arbitration Body’s invitation for India to do so). The Arbitration Body also agreed with Australia that as the modification concerned “Additional Commitments” under GATS Article XVIII these were necessarily distinct from and couldn’t conflict with Australia’s existing Market Access and National Treatment commitments.

3. Third, India argued that the drafting of the Services DR JI (particularly its use of the word ‘Member’ in various ways) could be read as creating new commitments for other WTO Members or make Australia’s new commitments more favourable for Services DR JI participants as compared to other WTO Members (in contravention of MFN) (para. 3.43).5 The Arbitration Body disagreed, noting that Additional Commitments only bind the Member that scheduled them, and that MFN treatment is a general obligation that cannot be modified via GATS Schedules (only by specific MFN Exemptions Lists). Australia also clarified the reading of its new commitments through a “‘without prejudice’ draft letter”.6 As a result, the Arbitration Body ultimately found that the modification was “sufficiently clear”.

Did the proposed modification restrict trade?

Resolving the above issues then allowed the Arbitration Body to turn to the heart of the matter - India’s argument that the proposed modifications “restricts trade in services rather than facilitating it” (para. 3.54).7 However, given that the Arbitration Body had essentially struck out India’s broader, systemic claims (around structural consistency and the single undertaking) and then found no issues around clarity and specificity, it dealt with this point very quickly. The Arbitration Body noted that “India had not identified any instance where the additional commitments referred to in the proposed modification would conflict with existing commitments in Australia’s Schedule” (para. 3.53). This was despite the Arbitration Body requesting specific examples from India.

Given all of the above, the Arbitration Body concluded that India had not demonstrated that the proposed modification would result in a situation less favourable to trade and thus found that no compensatory adjustments were warranted.

This was a fascinating little dispute given how small the stakes seemed for Australia but also how clear it was that India had so little to rely on to make out a claim for compensation.8

In the end, going through with the arbitration means that Australia saved itself the trouble of redoing its schedule and it also hasn’t had to acknowledge that its modification “does not create[s] a precedent for incorporating outcomes in the WTO, including from the Joint Statement Initiatives” (which was language India required the other participants include in their certification documentation). Although I’m not sure how useful this would actually be in practice, and I doubt this was a driving force behind defending the arbitration. Perhaps it really was just about the principle of what was being alleged (and the satisfaction of being in the right) that saw this through to conclusion.

Given what are apparently India’s true concerns regarding the plurilateral agreements, it would seem more appropriate for it to bring a dispute regarding the WTO Agreement itself rather than use these ancillary processes. This course of action - though - would obviously be a much more contentious on India’s part. India likely sees itself as being able to hold off the incorporation of the other Joint Statement Initiatives (JSIs) (on E-Commerce and the Investment Facilitation for Development Agreement) without resorting to this, as implementing these in schedules would require some radical changes to their content. Based on the latest General Council meeting, India’s strategy seems to be working. At that meeting, the incorporation of the two other JSIs into the WTO Agreement was blocked by a small number of WTO Members.

🇺🇸 Trump

Of course, everyone will be watching all of Trump’s moves with interest (and there has already been much to watch and comment on already - see Simon Lester’s take on Trump’s memo as a good start). For Trade Notes, I’m particularly interested in what Trump will do on digital trade.

Under Trump’s first presidency the US signed the US-Japan Digital Trade Agreement and modernised NAFTA/USMCA’s digital trade provisions. Initial headlines have also indicated Trump will use his favourite tool of tariffs against restrictions such as Canada’s digital services tax and the EU’s aggressive regulation of technology companies such as Apple, Google and Facebook. While the Republicans and Trump have a mixed history with Silicon Valley and ‘Big Tech’, tech leaders seem to be deliberating cultivating relationships with the new administration and are already seeing some dividends from this.

This suggests the ‘America First’ agenda includes pushing for digital market access and against regulations/taxes that hurt America’s technology sector. However, it’s harder to see this translating into broader, multilateral leadership or regional leadership on digital trade. Trump’s enthusiasm for ‘deal making’ seems to seek out bilateral outcomes that he can ‘win’, rather than aiming for broader, longer-term norm setting.

The other Trump trade issue I’m interested in is how he will treat the Indo-Pacific Economic Framework for Prosperity (IPEF), or “TPP Two” as Trump called it. He promised that IPEF would be “dead on day one”, but I haven’t seen any official withdrawal yet.1 As IPEF was a signature Biden administration deal you’d expect this to happen at some point (although could Trump dump the Clean Economy Pillar, officially announce the Trade Pillar as dead, and tweak the other two Pillars to say he ‘fixed’ things?).

The key question then will be what IPEF parties do with an IPEF without the US? The benefits of continuing on without the US are far less clear than those associated with continuing the Trans-Pacific Partnership as the CPTPP, but the costs may also be low enough that IPEF could limp on (or indeed find new life?) following a US withdrawal.

🌏Regional trade agreements

Last year continued the trend of only marginal movements in regional trade agreements (there were plenty of bilateral negotiations, particularly in the Indo-Pacific, with the trend set to continue in 2025).

CPTPP finally announced the commencement of its next set of formal accession negotiations - with Costa Rica. But otherwise 2024 for CPTPP was, as Deborah Elms said, “a seriously missed opportunity”. Australia is chairing CPTPP in 2025, although I haven’t seen any foreshadowing yet of what is planned. RCEP faces similar doldrums, driven by its own geopolitical issues around accessions and the slow pace of establishing an RCEP Secretariat.

Hopefully Trump won’t be too much of a distraction to keep implementation of and engagement under these agreements continuing. The planned general reviews of both CPTPP and RCEP would be good opportunities to see what needs to change or be added to keep their rules relevant to and supportive of trade between their parties. There is also the question of whether Trump’s disregard for trade rules will embolden others or instead galvanise interest in supporting “rules-based” trade?

More positively, implementation of the African Continental Free Trade Area (AfCFTA) seemed to maintain pace in 2024 including on digital trade issues. I’m looking forward to seeing what is in the various annexes contemplated in AfCFTA’s Digital Trade Protocol, which will determine how useful that Protocol actually will be in practice.

I’ll probably also continue to complain about how difficult it is to keep track of developments across all of these various agreements and negotiations…

💻 Digital trade

Apart from the digital trade issues already mentioned, I’m also closely tracking ASEAN’s negotiation of its Digital Economy Framework Agreement (DEFA). The DEFA has been under negotiation since 2023, and the aim is to finish it this year (a goal that was recently reiterated by Malaysia as ASEAN’s 2025 Chair). The key question is the extent to which DEFA can go beyond RCEP and (more particularly) the recent upgrade of the ASEAN-Australia-New Zealand trade agreement. Both of those agreements already apply between all the ASEAN Member States, so to be meaningful DEFA really needs to not just replicate but improve upon or innovate as compared to those outcomes.

The Digital Economy Partnership Agreement (DEPA) will also be a good one to watch. Costa Rica is the latest accession candidate to complete its negotiations (following Korea). China, Canada and Peru have all had Accession Working Groups (AWG) established - which are assessing their requests in line with the DEPA accession guidelines.2 The United Arab Emirates, El Salvador and Ukraine have all also formally lodged requests to accede.

It would also be good to understand how much implementation of the DEPA has taken place - there are many references within DEPA to the parties undertaking cooperation on matters such as electronic exchange of trade administration documents, e-invoicing, cybersecurity, unsolicited e-mails, competition policy, and digital inclusion. But I’m not aware of any DEPA-specific initiatives that are actually underway.

The WTO’s plurilateral e-commerce negotiations will also be of interest, particularly now that there is a stabilised text. There are no signs of any weakening of India’s opposition to integrating that text into the WTO framework. The Trump administration means a return of the US to the negotiation is likely totally off the table now. But can the participants maintain momentum and interest from participants in what will be a very contested trade policy environment and find a path to implementation in 2025?

So those are some of my areas of interest heading into 2025. Hopefully some of these are also of interest to you. There are also other matters such as WTO reform (including on dispute settlement), economic security, and non-traditional trade agreements, that I’m sure there will also be a lot to say on as the year progresses. Don’t forget feedback is always welcomed, including through the chat function:

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For those interested in DTAs, I’d also recommend reading Simon Lester’s observations on the EU-Singapore DTA’s approach to data flows and exceptions.

More is more when it comes to clarifying data flow obligations and exceptions

First, the EU-Singapore DTA highlights again how detailed the EU’s approach to data flow rules are. The EU agreements tend to set out in detail exactly what measures the relevant data flow rules prohibit and then also explicitly clarify the range of exceptions that apply, with examples of precisely what measures are covered by those exceptions.

It also seems that EU agreements with more explicit obligations to allow data to flow, also include more detailed clarification of the policy space that is still preserved. You can see this, for example, in the EU-Japan agreement, which has explicit language requiring the parties to not prohibit “(e)…the transfer of information into [its territory]” or require approval “(f)…prior to the transfer of information to the territory of the other Party” (Article 8.81). This is then accompanied by additional clarifications specifying in detail that these obligations are subject to personal data and privacy exceptions:

The EU-Singapore DTA doesn’t go this far but it does clarify the meaning of “legitimate public policy objective” with an expanded list of examples of ‘legitimate’ objectives (now including reference to artificial intelligence and disinformation):1

FN1: For the purpose of this Article, “legitimate public policy objective” shall be interpreted in an objective manner and shall enable the pursuit of objectives such as to protect public security, public morals, or human, animal or plant life or health, to maintain public order, to protect other fundamental interests of society such as social cohesion, online safety, cybersecurity, safe and trustworthy artificial intelligence, or protecting against the dissemination of disinformation, or other comparable objectives of public interest, taking into account the evolving nature of digital technologies and related challenges.

It also explicitly states that the legitimate public policy exception “does not affect the interpretation of other exceptions…and their application to this Article and the right of the Party to invoke any of them”, and then adds a broad privacy exception allowing for any personal data protection measures that a Party “deems appropriate”.

This goes quite a bit further than, for example, the recently signed Australia-UAE CEPA Digital Trade Chapter which instead adopts a high-level, broad rule on data flows, and a similarly high-level exception for “legitimate public policy objectives” (in addition to the agreement’s general and security exceptions).

As Simon notes, the various exceptions within the data rules, layered on top of the general exceptions will likely be complex to interpret. This probably bolsters the case for greater detail to avoid overly narrow interpretations, particularly given the EU’s higher sensitivity around data and privacy.

The increased level of detail, often couched as ‘clarifications’, in the EU agreements also make clear that these data rules are not rigid impositions upon governments’ policy space requiring a data flow ‘free for all’. It also makes me wonder what the equivalent clarifications might look like for other jurisdictions where the concerns may relate more to putative security or ‘public order’ concerns rather than privacy and data protection. Even if not ultimately reflected in any text, it wouldn’t surprise me if these clarifications provide inspiration for others on how to they should justify their restrictive measures.

A slightly different model for digital trade agreements

Second, the EU-Singapore DTA provides a slightly different model for how to do digital trade agreements. To recap, the approaches for concluding DTAs that have been used to-date are:

1. Digital trade rules included within a free trade agreement (FTA), such as the digital trade and electronic commerce chapters in agreements such as the CPTPP or EU-New Zealand FTA, or the African Continental Free Area’s Digital Trade Protocol;

   1. This also includes agreements that amend existing FTAs to include or improve digital trade rules,2 such as the Australia-Singapore Digital Economy Agreement, the United Kingdom-Ukraine Digital Trade Agreement, or Korea-Singapore Digital Partnership Agreement; and

2. Standalone agreements in the form of a entirely separate treaty, this includes the Digital Economy Partnership Agreement and the US-Japan Digital Trade Agreement.

The key difference between these is that it is much harder to argue that the exceptions for FTAs under the WTO apply to standalone agreements. As such, where the intention is to apply the digital trade rules preferentially, the most straightforward route is to include them in a broader FTA.

The EU-Singapore DTA has taken something of a middle ground between a full standalone agreement and amending the existing EU-Singapore FTA to insert these new rules:3

ARTICLE 1 - Objectives

The objective of this Agreement is to facilitate digital trade in goods and services between the Parties in accordance with the provisions of this Agreement. This Agreement shall be applied within the framework of the Partnership and Cooperation Agreement and shall, together with the Free Trade Agreement, form the free trade area consistent with Article XXIV of the GATT 1994 and Article V of the GATS.

ARTICLE 41 - Relations with Other Agreements

1. This Agreement shall be an integral part of the overall relations between the Union and its Member States, of the one part, and Singapore, of the other part, as governed by the Partnership and Cooperation Agreement and the Free Trade Agreement and shall form part of a common institutional framework. It constitutes a specific agreement giving effect to the trade provisions of the Partnership and Cooperation Agreement and, together with the Free Trade Agreement, forms the free trade area consistent with Article XXIV of the GATT 1994 and Article V of the GATS.

These provisions make clear that the DTA itself is a separate agreement to the FTA but still forms part of the overall relationship between the EU and Singapore on trade matters, including under the broader Partnership and Cooperation Agreement.4 This allows the DTA to rely on the services liberalisation provided under the EU-Singapore FTA to ensure that any preferential treatment provided is covered by Article V of GATS.

This seems largely like a change in form without a large impact on substance. Although, there are some minor implications from taking this approach:

1. A separate agreement can make it much easier to clearly establish the scope and nature of the obligations in the DTA. Trying to integrate new digital trade rules into an FTA that might be over a decade old can require careful consideration of definitions, scope provisions and implications for other chapters. By setting up an entirely new agreement that work can be minimised.

2. Depending on domestic treaty-making requirements, it may be easier to enter into a new treaty rather than go back and amend an existing one (particularly in the case of the EU given its particularly competencies vis-a-vis its member States).

3. As a separate agreement, the DTA itself can be terminated independently of the FTA (see Article 39). While it is possible to allow for termination/suspension of specific FTA Chapters or provisions, this is less common and potentially contentious.

It is always interesting to see how practice on digital trade rules is evolving, particularly the variations seen across jurisdictions, where differing policy interests and sensitivities are certainly making themselves evident in the texts.5

The issues this creates are particularly obvious for the CPTPP given its broad membership and the fact that different Parties take different approaches to their publication of CPTPP records. In what will likely be one of the more niche posts on this Substack, this post is a long (but mild) complaint about CPTPP document management and recording sharing. In particular, I have looked at the CPTPP legal texts, CPTPP Commission decisions and reports, and the work of the CPTPP Committees, to see how easy these are to access.1 I found that properly following CPTPP implementation (or searching CPTPP records) requires jumping across various government websites and often knowing specifically where to look. As such, I humbly suggest that a small investment in centralising this information into one authoritative location would provide a big improvement for transparency and accessibility.2

I should also say I’ve focused my searches on Australia’s, Japan’s, New Zealand’s and Singapore’s websites.3 Apologies to any other CPTPP Party that maintains a proper public database of these records.

The CPTPP’s legal texts

Beginning with the texts that make up the CPTPP itself, the core CPTPP legal texts are generally available online from most of the Parties. New Zealand also hosts the texts as the agreement’s depositary.4

Interestingly, it appears that only New Zealand hosts the TPP-era “Note on Interpretation of Like Circumstances”, which explains the Parties’ understanding on what ‘like circumstances’ means for the purposes of the Investment Chapter’s non-discrimination provisions. I assume this was a particular interest of New Zealand, which is why it has published the Note online. This does mean, though, that you may not be aware this even exists unless you’ve browsed New Zealand’s CPTPP webpage.

Apart from the legal texts that apply to all CPTPP Parties, there are also a range of bilateral side letters that were done in association with the signing of the CPTPP. For example, there are letters that bilaterally disapply ISDS, set out specific agreements on things like quota administration, or set out common understandings on compliance. These side letters do not appear to be accessible at one, central location. Instead, each Party has published only the side letters that it is party to. This is understandable - why should Australia host a side letter that is only between Japan and Chile - but it also makes it more difficult to get a full picture of the precise balance of rights and obligations that actually exist between all CPTPP Parties (not to mention to assess any interpretative implications).

On the whole - as you would hope - the accessibility of the CPTPP’s legal texts is not terrible. But even here the decentralised approach to publication begins to create some limitations to properly understanding the agreement.

CPTPP Commission and Committee documents

In addition to the CPTPP legal texts, after almost five years of being in force there are now a range of documents being produced on at least an annual basis by the CPTPP’s various bodies, in particular the CPTPP Commission and the CPTPP’s Committees. In my review, each Parties’ online publication of these documents has been variable, and even finding where the relevant documents are hosted by each Party sometimes requires some effort.5

The CPTPP Commission

For the CPTPP Commission, each Party seems to publish its reports and decisions in different ways - often as part of a chronological ‘news’ webpage - making it difficult to search or follow these properly.

Gaps in each Party’s disclosure of Commission documents appear to be largely inadvertent as it is not clear why some documents are published by some Parties but not others. For example:

• The Second Commission Report (CPTPP/COM/2019/REPORT) is published by New Zealand, Japan and Singapore, but is absent from Australia’s CPTPP webpage.

• Japan published the Third Commission Report (CPTPP/COM/2020/REPORT), Fourth Commission Report (CPTPP/COM/2021/R001), and Fifth Commission Report (CPTPP/COM/2021/R001).6 However, these but do not appear to be available on Australia’s, New Zealand’s and Singapore’s equivalent CPTPP pages.

• Australia and Japan published a decision of the Fifth Commission to establish a Committee on Electronic Commerce (CPTPP/COM/2021/D002), while New Zealand and Singapore have not.

• The Sixth Commission Report (CPTPP/COM/2022/R001) is published by Singapore, but not by Australia, Japan or New Zealand.

There also appears to potentially be a decision of the CPTPP’s Seventh Commission from 2023 that I can’t find anywhere online. While the Commission’s decision on the United Kingdom’s accession is CPTPP/COM/2023/D002, none of the examined Party websites publish CPTPP/COM/2023/D001. This could be a document numbering issue, or it could be a restricted decision deliberately not being made public. The lack of a formal document management and publication system makes it difficult to tell.

The CPTPP Committees

Moving to the CPTPP’s Committees, the situation is arguably worse. The practice appears to be that reports and documents issued by CPTPP Committees are published by whichever Party is CPTPP Chair at the time (the CPTPP Chair rotates on an annual basis).

This results in needing to jump from Japan to see what the Committees did in 2021, to Singapore see what happened in 2022, and to New Zealand to follow the 2023 developments. I’m not sure if the bodies didn’t issue reports in 2020, or if I can’t just find them on Mexico’s CPTPP webpage. But in any case, all of this makes it more difficult than it should be to follow what these bodies are actually doing.

Each of those pages also takes its own distinctive approach to providing the information. Japan has a fulsome list of CPTPP-related events in each year, including its own bilateral meetings and summaries of each Commission meeting. New Zealand has its own meeting summaries for each individual meeting that it hosted while Chair. While Singapore just appears to list the formally agreed documents.

A good example of the disparity this can create is from the United Kingdom’s accession to the CPTPP. While Japan’s Cabinet Secretariat published the reports of the Accession Working Group (in 2022 and 2023), these are much more difficult to find on other Parties’ websites. The reports themselves are largely anodyne but having them would have enable interested observers to keep track of the accession negotiations and are also potentially of some interest to current accession candidates.

Does any of this matter?

None of the above suggests major failings by any CPTPP Party or deliberate hiding of critical documents. There is no legal requirement within the CPTPP that these documents be made public. There are also likely to be a range of informal or sensitive documents that Parties should not be required to publish. My point in setting out all of the above is not to criticise the approach of any CPTPP Party or the public servants tasked with maintaining these websites (most of which just aren’t designed to host a proper records database).

Instead, what I hope the above shows is that an ad hoc and informal approach to document disclosure and records management under these trade agreements has downsides. It also, perhaps, isn’t appropriate for a plurilateral agreement that is aiming to be the key institution for trade discussions in the region. Indeed, the lack of transparency and accessibility of CPTPP documents has implications both for outsiders wanting to understand the point of these agreements and also the ability of future officials to build upon past work.7

A more consistent approach to publication could also help highlight the benefits of these agreements. For example, in 2022 CPTPP Parties agreed guidelines on mutual recognition agreements/arrangements for professional services. This is a useful contribution of the agreement, however, it would seem to only be linked to from Singapore’s CPTPP webpage. Australia places it on an entirely different part of its foreign affairs website, and I couldn’t easily find it on New Zealand’s or Japan’s CPTPP webpages.

So, my modest suggestion is that a small investment in a proper online document management system that collects of all these CPTPP documents in one place, organises them and makes them searchable, could go a long way to improving transparency and public understanding of the agreement. A formal Secretariat (such as that envisioned under the Regional Comprehensive Economic Partnership8) might be too costly at this stage. However, even a simple website would be a useful start.

Before Peru, five other CPTPP members ratified the terms of the UK’s accession: Japan, Singapore, Chile, New Zealand and Vietnam. This means the agreement will come into force with those members by 15 December, and subsequently with other members as they ratify.

This means that until the other five CPTPP Parties (the non-ratifying Parties) ratify the Protocol, they won’t have treaty relations with the UK under the CPTPP and won’t have to treat the UK as a full CPTPP Party (i.e. their commitments won’t apply in relation to the UK and vice-versa).

Given the plurilateral nature of the CPTPP, I was wondering if this could cause some potential complications for the operation of the agreement. In this post, I’ve sketched out two potential issues that the CPTPP Parties could face in implementing the UK’s membership during this transitional period.1

Rules of origin

First, CPTPP’s rules of origin (which determine if a good gets access to preferential tariff commitments), allow for a good to use inputs from and production in multiple CPTPP Parties to establish its ‘originating good’ status and thereby obtain preferential tariff treatment. The rules of origin provisions all refer to “the Parties” - e.g. referring to processing of materials in the “territory of one or more of the Parties” or referring to goods “produced in the territory of one or more of the Parties”.

Given that for the non-ratifying Parties the UK is not yet a CPTPP ‘Party’, they don’t have to recognise UK inputs into goods when determining origin. On the reverse, the UK doesn’t have to recognise non-ratifying CPTPP Parties’ inputs into goods when it applies the CPTPP’s rules of origin.2

This means when implementing CPTPP tariff preferences, there could be some additional complexity around meeting origin requirements during this transitional period. Particularly for any supply chains structured around CPTPP Parties, the usual benefits of cumulation may not immediately extend to exports to the UK depending on the Parties involved.

Institutional decision-making

Second, each CPTPP body (such as the various committees or the CPTPP Commission) is made up of representatives of each Party. Article 27.3 specifies that the default rules is that these bodies are to “take all decisions by consensus” of the Parties present at the relevant meeting.

While the UK is a “Party” for all the CPTPP Parties that have ratified its Accession Protocol, could the non-ratifying Parties object if the UK ever sought to break consensus at a meeting?

In practice, this is unlikely to a major problem. The experience with the CPTPP while waiting for some signatories to ratify the original agreement indicates a level of flexibility in terms of accommodating those signatories in decision-making. However, things could get more complicated if/when the next accessions start in earnest or more contentious decisions have to be made.

It will also be interesting to see if the entry-into-force thresholds for the next CPTPP accession are any different to what was agreed for the UK.3 The original Trans-Pacific Partnership Agreement (TPP) required all Parties to have ratified each accession candidate’s “terms and conditions” of accession:

That approach avoided the issues set out above, although could also lead to lengthy delays for new CPTPP Members (on top of the long time candidates have already waited just to start their accession negotiations).

While the released text is ‘stabilised’ it is still far from being a legally binding agreement. Participants are now undertaking their domestic processes and are working out how to integrate it into the WTO legal framework (a hard task in the current climate in Geneva). Nine participants were also unable to put their names to the text, including the United States.

In this post, I take a look at what the proposed Agreement on Electronic Commerce would deliver for digital trade, what might be driving the nine participants who couldn’t support the text, and what the next steps are for turning the Stabilised Text into a binding treaty.

The substance: what’s in the proposed Agreement on E-Commerce?

On substance, the Stabilised Text is virtually identical to the 28 June leaked text, except for the removal of “WTO” from the title of the proposed Agreement.

As has been covered ad nauseum, following a change in the United States’ position, the E-Commerce JSI was unable to agree meaningful rules on data flows and data localisation, which will blunt some of its headline impact. However, the Stabilised Text still contains other useful commitments for digital trade and that will facilitate physical trade as well. These include commitments to support the use of electronic signatures, make customs forms available electronically and accept their electronic submission, protect personal data, and adopt consumer protection measures. The Stabilised Text also includes telecommunications commitments based on the GATS Telecommunications Reference Paper (covering matters such as competitive safeguards, interconnection, licensing processes, and regulator independence).2

The most noteworthy outcome, though, is the commitment to not apply customs duties to electronic transmissions (subject to a review after five years). This would prevent participants from imposing ‘import taxes’ on purely digital cross-border transactions (such as streaming a movie or downloading an app on to your phone). In addition to being a meaningful outcome for digital trade, this could also take some of the heat out of the usual Ministerial tussle over renewing the temporary customs duties moratorium that takes place every two years.3

The Stabilised Text also contains a range of “endeavour” or heavily hedged commitments (with 32 references to “endeavour” and 11 to “encourage” according to Chris Horseman at Borderlex). This includes on matters such as adopting the UNCITRAL Model Laws on Electronic Commerce and Electronic Transferable Records, avoiding undue regulatory burden on electronic transactions, accepting electronic invoices, and providing greater access to government data.

There are also a number of ‘recognition’ provisions, which set out agreed principles associated with digital trade and e-commerce (such as on the use of international standards, the benefits of open government data, access to and use of the internet, and the importance of personal data protection). These don’t require action on the part of any participant but will likely support the development of norms around internet regulation and be useful for encouraging a level of regulatory consistency.

While there is not much that is revolutionary in these commitments and provisions,4 their agreement by 80-plus WTO Members is a substantial and important development bringing some level of consistency and certainty for global digital trade. The E-Commerce JSI’s broad and diverse membership will also hopefully help to establish these outcomes as the basis for new global norms on digital trade issues.

Beyond the commitments it contains, it is also worth mentioning that the Stabilised Text contains specific development-related provisions. It recognises the importance of bridging the “digital divide” and of the need for technical assistance and capacity building to achieve this. It provides for a transitional regime for developing and least-developed Parties and encourages Parties to provide them with the support needed to implement the Agreement. This is supported by the proposed institutional arrangements, including a Committee on Trade-Related Aspects of Electronic Commerce, which will also be key to enabling the Agreement to stay relevant as technology and trade continues to evolve.

The nine non-supporters

Nine E-Commerce JSI participants were not able to put their names to the release of the Stabilised Text “due to ongoing domestic consultations and considerations”. These are Brazil, Colombia, El Salvador, Guatemala, Indonesia, Paraguay, the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu, Türkiye and United States (see map below).

Technically these participants have not yet dropped out of the negotiations, and for some their domestic consultations may enable them to ultimately support the Agreement (particularly if they are facing specific domestic political difficulties that may be able to be resolved over time). However, for many of these participants, their non-support of the Stabilised Text is not a surprise.

Most of the nine non-supporters are reportedly concerned by the prohibition on customs duties on electronic transactions, including Indonesia (which has been vocal in the past with its concerns), Brazil and Türkiye. Türkiye has also more recently joined India and South Africa’s opposition to a different plurilateral agreement - the Investment Facilitation for Development Agreement (IFDA) - being incorporated into the WTO Agreement.

Colombia and Taiwan are more interesting cases. Colombia has already agreed to higher standard digital trade rules in the Pacific Alliance-Singapore FTA (signed but not yet in force). Taiwan has agreed to the customs duties prohibition and other digital trade rules in its Singapore FTA as well. While an FTA outcome does not guarantee support for the same rule among a much larger set of economies (particularly for Colombia where the FTA hasn’t entered into force), this may give some hope that their concerns with the Stabilised Text could be overcome. That said, both of these FTAs contain a broader security exception than the GATT and GATS exceptions that are incorporated into the Stabilised Text, so there may also be some alignment between Colombia and Taiwan with the United States’ concerns around security.

On the United States, it’s statement on the Stabilised Text noted that it “remains committed to working with the … co-conveners and participants to achieve a high-standard outcome” and that the text “represents an important step forward for the WTO in a sector of growing importance to the global economy while demonstrating the supportive role that JSIs can play in revitalizing the WTO’s negotiating function”. But it also said that “the current text falls short and more work is needed, including with respect to the essential security exception” and that it hopes to work with Members to find solutions and move the negotiations to a timely conclusion.

It would not appear to be very realistic to expect substantive changes to the Stabilised Text at this stage, with domestic processes underway and participants focusing on next steps. However, even if this was possible, beyond the security exception it isn’t clear exactly what the United States needs to enable it to join the fold.

Looking for higher ambition would be strange given the United States’ role in removing the rules around data flows and localisation. Wanting to lower ambition would also be unexpected given the extent of flexibilities in the text and the content of the binding rules.

The concrete issue identified by the United States’ statement is the security exception and on this you’d assume that it was seeking clearer, broader and more deferential language based on its FTA-practice. This is notwithstanding that it continues to maintain that the GATT and GATS security exceptions (which are both incorporated into the Stabilised Text) are self-judging. What would be interesting to know is whether this is just a matter of principle or if there are actual provisions in the text that are causing concerns5 (noting that China is a JSI participant).

It may also be that the United States has technical issues around specific drafting, or with provisions such as the “Personal Data Protection Exception” (which is based on European Union practice), and that these are holding up the United States’ support.

Ultimately for the United States, though, this move just reaffirms the difficulties it faces domestically in agreeing to new rules on digital trade (and these difficulties are only be amplified in an election year). As former head of the EU Delegation to the WTO and UN John Clarke noted on X/Twitter, non-participation by the United States is not necessarily a cause for alarm for the rest of the participants. However, it is a worry if the United States’ domestic politics continue to prevent it from participating (if not leading) the global development of these rules.

Next steps

Now that the E-Commerce JSI has a Stabilised Text, its participants are undertaking domestic processes “with a view to integrating the outcome of negotiations in the WTO legal framework”. Annex 4 of the WTO Agreement - containing the WTO’s Plurilateral Trade Agreements - would be the most natural fit for the proposed Agreement on Electronic Commerce. However, adding an agreement to Annex 4 requires consensus of all WTO Members, and India and South Africa remain key obstacles to achieving this. Given the cross-cutting nature of the Stabilised Text’s commitments (relating to goods and services) amending GATT or GATS schedules to include it would be messy. So, the route taken by the Services Domestic Regulation JSI is unlikely to be viable.

As I noted in regard to the IFDA, it’s also possible for the Stabilised Text to be done as a standalone treaty. However, this means missing out on the WTO’s institutional backing, including support from the WTO Secretariat and WTO dispute settlement (although the Appellate Body issues mean this is perhaps less of an incentive than it once was).

Also, while others have suggested the proposed agreement would be applied on a Most-Favoured-Nation (MFN) basis (i.e. its commitments would be applied to benefit non-participants as well as participants), I haven’t seen this explicitly stated by the Co-convenors or any participants. Not applying the agreement on an MFN basis would create another hurdle to convincing the WTO membership to add the agreement to Annex 4, and also potentially make it more difficult to implement the Stabilised Text via a standalone treaty.

This all means there is a difficult road ahead for working out how to transform what are currently good rules on paper, into binding ‘trade law’ for the participants.

In the end, getting to a Stabilised Text that around half of the WTO’s Members were able to support is an important achievement that took a great deal of hard work by all participants and particularly Australia, Singapore and Japan as Co-convenors. There are therefore some justifiably celebratory messages doing the rounds. Both concretely for trade and systemically for the WTO, though, here’s hoping the participants can also find a path to having their agreement enter into force soon.

First, the change that has already gotten some attention, there is now a commitment to review the prohibition on customs duties on electronic transmissions:

Article 11: Customs Duties on Electronic Transmissions

11.1 For the purposes of this Article, "electronic transmission" means a transmission made using any electromagnetic means and includes the content of the transmission.

11.2 The Parties acknowledge the importance of the Work Programme on Electronic Commerce (WT/L/274) and recognise that the practice of not imposing customs duties on electronic transmissions has played an important role in the development of the digital economy

11.3 No Party shall impose customs duties on electronic transmissions between a person of one Party and a person of another Party.

11.4 For greater certainty, paragraph 16.3 shall not preclude a Party from imposing internal taxes, fees or other charges on electronic transmissions in a manner consistent with the WTO Agreement.

11.5 Taking into account the evolving nature of electronic commerce and digital technology, the Parties shall review this Article in the fifth year after the date of entry into force of this Agreement, and periodically thereafter, with a view to assessing the impacts of this Article and whether any amendments are appropriate.

Some have suggested this change means the customs duties prohibition is “not permanent”, but Article 11.5 seems much more modest than this. The new language does not make the obligation in Article 11.3 cease operation after five years, it just obliges the Parties to meet and review “whether any amendments are appropriate”. Unless the Parties agree to amend or delete the Article - which would require consensus - the obligation will remain on foot.

Indeed, while the new Article 11.5 explicitly requires a review of the customs duties prohibition after five year, Article 35 of the Agreement already established a review of the entire agreement after two years. There was always the possibility of reconsidering of the customs duties prohibition through that process even in the absence of this new explicit language.

Second, there is a small tweak to the Relation to Other Agreements provision with a new footnote clarifying that the JSI’s exceptions on measures regarding Personal Data Protection and Indigenous Peoples don’t diminish a Party’s rights or obligations under the WTO Agreement:

Article 3: Relation to Other Agreements

3.1 The Parties affirm their rights and obligations under the WTO Agreement. The Parties further affirm that this Agreement does not create either obligations or rights for Members of the WTO that have not accepted it.

3.2 Nothing in this Agreement shall be construed as diminishing a Party's rights and obligations under the WTO Agreement, including any market access commitments inscribed in a Party's schedule of commitments to the GATT 1994 or the GATS, respectively.[fn1]

[fn1] For greater certainty, this provision also applies to the exceptions set out in Articles 25 and 26.

Article 25 is an exception allowing Parties to adopt or maintain “measures on the protection of personal data and privacy”. Article 26 is an exception for measures a Party “considers necessary to accord more favourable treatment to Indigenous Peoples in its territory”.2

I wonder if this change was driven by concerns around the new exceptions suggesting that similar policy space is not available under the WTO Agreement (given this language is not found in, for example, the GATT or the GATS). I also note that the issues identified in Ines Willemyns’ IELP Blog post have not been addressed.

Third, the provisions on telecommunications has had a range of drafting changes, but the one I’ll highlight here is a slight lowering of ambition:

Article 21: Telecommunications

…

21.6 Each Party shall endeavour to:

(a) ensure that the assignment of frequency bands for public telecommunication services are carried out through an open process that takes into account the public interest, including the promotion of competition; and

(b) carry out such assignment using market-based approaches, such as bidding procedures where appropriate.

Previously the obligations in sub-paragraphs (a) and (b) were entirely separate paragraphs - with Parties being under a clear obligation to “ensure” that frequency bands are assigned through an open process, and only being required to “endeavour to ensure” that the assignment used market-based approaches. In merging the two paragraphs together, the lower ‘endeavour’ standard now applies to both obligations.

Fourth, there has been some streamlining of the dispute settlement provision:

Article 27: Dispute Settlement

27.1 Articles XXII and XXIII of the GATT 1994 or a̶n̶d̶ Articles XXII and XXIII of the GATS, as elaborated and applied by the Dispute Settlement Understanding, shall apply to consultations and the settlement of disputes arising under this Agreement.

27.2 The Dispute Settlement Understanding shall apply to disputes brought pursuant to paragraph 1. F̶o̶r̶ ̶a̶n̶y̶ ̶d̶i̶s̶p̶u̶t̶e̶ ̶c̶o̶n̶c̶e̶r̶n̶i̶n̶g̶ ̶t̶h̶e̶ ̶i̶n̶t̶e̶r̶p̶r̶e̶t̶a̶t̶i̶o̶n̶ ̶o̶r̶ ̶a̶p̶p̶l̶i̶c̶a̶t̶i̶o̶n̶ ̶o̶f̶ ̶t̶h̶e̶ ̶p̶r̶o̶v̶i̶s̶i̶o̶n̶s̶ ̶o̶f̶ ̶t̶h̶i̶s̶ ̶A̶g̶r̶e̶e̶m̶e̶n̶t̶,̶ ̶P̶a̶r̶t̶i̶e̶s̶ ̶m̶a̶y̶ ̶h̶a̶v̶e̶ ̶r̶e̶c̶o̶u̶r̶s̶e̶ ̶t̶o̶ ̶t̶h̶e̶ ̶D̶i̶s̶p̶u̶t̶e̶ ̶S̶e̶t̶t̶l̶e̶m̶e̶n̶t̶ ̶U̶n̶d̶e̶r̶s̶t̶a̶n̶d̶i̶n̶g̶.̶

I don’t have much to say on this - although at first glance the Article would appear to go further than, e.g., the CPTPP insofar as it allows for non-violation complaints to be brought in relation to electronic commerce rules (see in contrast CPTPP, Article 28.3(1)(c) which limits non-violation complaints to specific chapters, not including the Electronic Commerce Chapter).

Finally, while not substantive, I believe this is the first time the formal title of “WTO Electronic Commerce Agreement” has been used for the JSI. This makes clear again the participants’ intentions to keep the Agreement within the WTO, although there are not yet any public signs that opponents are showing flexibility.

2

Article 26 is essentially a multilateralised version of New Zealand’s Treaty of Waitangi exception, see, e.g., Article 29.6 from the CPTPP:

As I mentioned on X/Twitter, this will be an interesting report to watch. The trade angle is that non-binding arrangements are common tools used in negotiations, including to:

• Capture early outcomes and ‘agreements’ on the way to a final agreement;

• Avoid lengthy or more difficult domestic approval procedures that apply to legally binding agreements;

• Reflect outcomes that may not need to be in the form of legal rights and obligations, for example agreements to meet or cooperate;

• Provide comfort on sensitive or contentious issues that one side can’t agree to legally binding outcomes on.

More cynically, it may also be that governments realise that it’s just as possible to get a headline with a non-legally binding outcome as a legally binding one.

These arrangements can be done in standalone instruments, such as the UK’s MOUs with American states like Florida, the Australia-Singapore Green Economy Agreement, or the Canada-Korea MOU on Critical Mineral Supply Chains, Clean Energy Transition and Energy Security. They can also be done in association with a legally binding trade agreement, such as the Australia-Indonesia MOU on engineer mutual recognition; or indeed while the trade agreement is trying to get settled, such as the Australia-EU MOU on critical minerals.

Sometimes the legal status of these documents isn’t crystal clear from their text - particularly if they done in association with trade agreement negotiation (where often they are done to record something that was too sensitive or difficult to put into legal text, but one side may really want the outcome to be legally binding). There are lengthy guides with particular phrases to use/avoid to make sure the document is/isn’t legally binding (see e.g. Australia’s here and here, Canada’s here, New Zealand’s here, and an older US one here). But views can differ and there tends to be a degree of flexibility to accommodate strategically ambiguous outcomes at times.

Non-binding arrangements can be interesting things to negotiate and advise on. There can be a tension if one side wants legally enforceable commitments and the other really doesn’t - the outcome can sometimes be ambiguous or perhaps a mess. Even if both sides don’t want a legally binding text, they may think highlighting this too prominently will undermine the credibility of the outcome - similarly leading to complicated or unclear drafting. Negotiators may also be less worried about the content of a non-legally binding text as compared to a ‘real agreement’.

However, ‘non-binding’ instruments can still have legal effects (and of course even breaking a ‘political’ commitment can be difficult and have serious consequences).

As the First Report notes:

135. First, in view of the Commission’s prior work, it should at least be established that the fact that an international agreement is non-binding does not prevent it from producing or being attributed some legal effects. … the Commission considered that non legally binding agreements could be taken into account within the framework of the general rule of treaty interpretation reflected in article 31 of the 1969 Vienna Convention. This amounts to endowing such agreements with a greater interpretative effect than, for example, preparatory work, which is referred to only in the context of supplementary means of interpretation in article 32 of the Convention. Similarly, the Commission’s work relating to customary international law strongly suggests … that such agreements can constitute means of establishing customary international law. It would be worthwhile to re-examine this issue more explicitly.

Some of the potential legal effects could be substantive and relevant to instruments used in the trade context (especially where the instrument is done in association with a full trade agreement).

For example, the First Report notes that:

138. The (potential) legal effects that appear to merit consideration include the following:

(a) It would be useful to examine whether good faith (as a legal and not just a moral or political principle or obligation) applies to these agreements. Article 13 of the draft declaration of the rights and duties of States, adopted by the Commission in 1949, limited the exercise of good faith to “obligations arising from treaties and other sources of international law”. Since then, the question of whether this should be extended to non-binding commitments has regularly been raised, without that leading to a non-binding agreement becoming a binding agreement;

(b) The same question could be posed in connection with the obligation to cooperate: in a situation (arising in practice) where an institutionalized mechanism for monitoring (or settling disputes resulting from) a non-legally binding international agreement is established, the existence of such a mechanism is likely to generate some legal effects, which should be identified;

…

(d) The extent to which non-legally binding international agreements can be taken into account for the purposes of interpreting other international rules, and more broadly as “applicable law” in the international order, deserves to be examined in detail. In particular, the effects of interpretative agreements and their relationship with the concept of authentic interpretation will need to be explored, as will the legal relationship between non-legally binding agreements and the various means of interpretation (and not just subsequent agreements) of international norms. The legal parameters for (and possible limits on) the use of non-legally binding agreements as a means of interpretation should also be identified, indeed given the non-binding nature of such agreements;

…

(g) A recurrent debate among authors concerns the applicability of estoppel and acquiescence (or, more broadly, of all the mechanisms that can be linked to the protection of legitimate expectations) to non-legally binding international agreements;

(h) It is also worth asking to what extent a non-legally binding agreement can suffice to constitute consent precluding wrongfulness under the law of responsibility;

(i) Some authors also recognize that non-legally binding agreements have a permissive or “legality” effect, in the sense that their conclusion would authorize the parties thereto to act in the manner provided for in the agreement – at the very least (although authors are divided as to this limitation) as long as that does not lead them to violate other obligations that are otherwise applicable to them; …

It will be interesting to see the Special Rapporteur’s conclusions/recommendations and how they inform practice in this area, as well as what relevance they’ll have for the related issue of purportedly ‘non-binding’ provisions in an otherwise binding agreement.

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Plurilateral agreements are not new to the WTO or to its predecessor the General Agreement on Tariffs and Trade. There are many ways in which they can be negotiated. Article V of the General Agreement on Trade in Services, which experts strongly suggest could also apply to an e-commerce agreement, states that no member can be prevented from “being a party to or entering into an agreement liberalizing trade in services between or among the parties to such an agreement.” It also states the coverage of the agreement must be broad and that its terms do not discriminate against those which are not party to the pact. It is for this reason that so many favor a different tack for the e-commerce plurilateral.

As context, GATS Most-Favoured-Nation treatment (MFN) requires each WTO Member to treat service suppliers from all other WTO Members at least as well as they treat service suppliers from other (WTO and non-WTO) countries. In the language of GATS Article II, WTO Members must “accord immediately and unconditionally to services and service suppliers of any other Member treatment no less favourable than that it accords to like services and service suppliers of any other country”.

This would mean that if a WTO Member enters into a digital trade agreement, to the extent that it results in more favourable treatment for service suppliers, that WTO Member needs to give that treatment to service suppliers from all WTO Members (even those not participating in or bound by the agreement). For example, in the case of the JSI E-Commerce it looks like the concern is the prohibition on customs duties on electronic transmissions (i.e. some participants want the freedom to apply custom duties on transmissions from non-participants).1

GATS Article V is an exception to the MFN rule. It allows WTO Members to enter into preferential trade agreements even if this results in better treatment being given to the parties of the agreement as compared to that given to other WTO Members. The key parts of Article V are:

Text within this block will maintain its original spacing when published

                                                                 Article V
                                                        Economic Integration
1. This Agreement shall not prevent any of its Members from being a party to or entering into an agreement liberalizing trade in services between or among the parties to such an agreement, provided that such an agreement: 

(a) has substantial sectoral coverage[1], and 

(b) provides for the absence or elimination of substantially all discrimination, in the sense of Article XVII, between or among the parties, in the sectors covered under sub-paragraph (a), through: 

(i) elimination of existing discriminatory measures, and/or 

(ii) prohibition of new or more discriminatory measures, either at the entry into force of that agreement or on the basis of a reasonable time-frame, except for measures permitted under Articles XI, XII, XIV and XIV bis. 

2. In evaluating whether the conditions under paragraph 1(b) are met, consideration may be given to the relationship of the agreement to a wider process of economic integration or trade liberalization among the countries concerned.

[1] This condition is understood in terms of number of sectors, volume of trade affected and modes of supply. In order to meet this condition, agreements should not provide for the a priori exclusion of any mode of supply

From these paragraphs, the two key conditions for using Article V are that the agreement must:

1. Have “substantial sectoral coverage” in terms of the number of sectors, volume of trade affected and modes of supply (with no mode of supply a priori excluded); and

2. Provide “for the absence or elimination of substantially all discrimination, in the sense of Article XVII [National Treatment], between or among the parties” in the covered sectors.

Could a standalone e-commerce agreement (like the JSI E-Commerce) meet these requirements? Not without a pretty innovative reading of Article V.

In relation to substantial sectoral coverage, looking at the latest draft of the JSI E-Commerce agreement (which is in line with other digital trade agreements): it applies to all “measures…affecting trade by electronic means” (Article 1.1), doesn’t have any major sector carved out, and its commitments aren’t limited to scheduled sectors.2 So you could argue that the number of sectors covered shouldn’t be an issue.

On modes of supply - digital trade rules are most commonly thought of in the context of cross-border supply (Mode 1) as compared to say consumption abroad (Mode 2), commercial presence (Mode 3) or through the presence of natural persons (Mode 4). However, “trade by electronic means” doesn’t necessarily exclude those other modes of supply, all of which arguably could be impacted by measures affecting trade by “electronic means”. So perhaps there’s also an argument to be made that this limb is covered.

The requirement for eliminating substantially all discrimination, though, is likely to be more difficult to meet. The scope provision of the JSI E-Commerce (as just shown) limits the agreement to “measures…affecting trade by electronic means”, meaning any discrimination that doesn’t affect “trade by electronic means” can’t be eliminated or prohibited by the agreement (and there’s a bunch of such measures).

Also, the latest draft text of the JSI E-Commerce contains few if any rules that actually aim at reducing discrimination, particularly in a national treatment sense. Perhaps it could be argued that the substantive rules reduce discrimination by harmonising regulatory approaches on some issues - but this would seem a way off eliminating “substantially all discrimination” or even prohibiting “new or more discriminatory measures”. Other digital trade agreements (like the US-Japan Digital Trade Agreement3) go further with rules like the Non-Discriminatory Treatment of Digital Products Article. But even this still seems a far cry from what is typically envisaged by this limb.

So - I think trying to fit a standalone digital trade agreement into Article V would be difficult (though would love to see what others are thinking on this - particularly the experts referred to by Rockwell). I also think that even if it was possible to use Article V for something like the JSI E-Commerce, this would require such a broad reading of Article V that it would seem to make it far too easy for other narrowly focused agreements to similarly provide cover for avoiding MFN.

It’s also worth noting that Article V is typically aimed at non-WTO Agreements. Pursuing this route for the JSI E-Commerce is part of the frustration at India and South Africa blocking consensus on initiatives such as the Investment Facilitation for Development Agreement (which would apply on an MFN basis). But using Article V would presumably mean that the agreement won’t be part of the WTO any more - i.e. it won’t benefit from WTO dispute settlement, Secretariat support, or being part of the broader WTO project. This would be big step and one that some of the 71 participants are likely to be hesitant to take.

A few other digital trade/MFN points:

• Article V is not the only way to justify preferential treatment under the GATS - e.g. WTO Members can have their own specific MFN exemptions (Article II:2), they can use recognition arrangements (Article VII), and of course there are always the general and security exceptions (Articles XIV and XIV bis).

• In the addition to the WTO, preferential trade agreements often also have MFN obligations, many without an Article V-type exception. So many JSI E-Commerce participants will have broader MFN commitments than just those under the GATS/WTO.

• The extent of the ‘MFN risk’ will often depend on each government’s consideration of the specific rule/treatment, their MFN obligations, how this is implemented domestically, and the reasons for not affording that same treatment to specific non-Members. For example, one can imagine security or privacy law arguments under the exceptions that could apply to allow a government to justify not offering the same data flow treatment to all WTO Members.

• While Article V may be a handy catch-all approach to telling JSI E-Commerce participants they don’t have to worry about MFN, even without it each participant may still be able to put together its own defence of any preferential implementation that it decides it needs to undertake.

Finally, Rockwell’s piece suggests that limiting the benefits of the JSI E-Commerce to just its participants “could shake the WTO to its foundations”. I think a preferential outcome was always on the table for this JSI (although perhaps less so once the data rules got dropped), and the bigger issue will be how this justified by participants.

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