A Really Big Button That Doesn't Do Anything? the Anti-NME Clause in US Trade Agreements between Law and Geoeconomics

Abstract

The United States-Mexico-Canada Agreement (USMCA) features a clause, dubbed 'anti-China', which sets out legal consequences in case one of the parties negotiates or enters into a free trade agreement (FTA) with a nonmarket economy (NME). A similarly worded objective appears among the negotiating objectives of the US for FTAs with the European Union, Japan, and the United Kingdom. This article examines the anti-NME clause, arguing that its concrete legal consequences are less relevant than its symbolic effects. The USMCA clause itself is difficult to replicate in bilateral agreements, since it depends on cooperation between the two nonsigning parties. Its operation is nonetheless similar to that of two unilateral remedies available under the law of treaties, permitting a reasonable assessment that the clause, if it follows its original design, will aim to permit termination of bilateral US FTAs in response to the other party entering into an NME FTA. While such a clause would offer little in terms of concrete effects if added to agreements that already permit unilateral withdrawal, its greatest value may not be in its legal effects but in its legitimating and signaling properties, which push USMCA parties to establish a common front in the 'geoeconomic' dispute between the United States and China.