Two days ago, on Sunday, October 26, the White House announced that the United States has concluded trade agreements with Cambodia (Agreement Between the United States of America and the Kingdom of Cambodia on Reciprocal Trade – The White House) and Malaysia (Agreement Between the United States of America and Malaysia on Reciprocal Trade – The White House).  In the 48 hours since, the agreements have attracted substantial commentary, and they likely will continue to do so. 

Unlike trade deals announced by the Trump administration earlier this year, the Cambodia and Malaysia agreements appear to be more than mere “framework agreements” or political understandings.  In both form and substance they bear certain hallmarks of binding international agreements. With respect to some provisions, they even use language that harkens back to an earlier generation of United States trade agreements.  But such passing resemblance aside, these instruments appear to be a new species of trade agreement that will require careful study.  Preliminarily, I note several observations and questions.

1. Entry into force.  The U.S.-Cambodia and U.S.-Malaysia Agreements each contain a provision on entry into force.  Under its article 7.5, the Cambodia Agreement will enter into force upon an exchange of written notifications that “the internal procedures required for entry into force of this Agreement have been completed.”  Similarly, article 7.2 of the Malaysia Agreement contemplates entry into force 60 days after an exchange of written notifications “certifying completion of [the Parties’] applicable legal procedures.”  This raises the question what “internal procedures” or “applicable legal procedures” the White House has in mind for the United States. Will these agreements be submitted to Congress for approval as has been done with other trade agreements to which the United States is a party?  Or will the administration treat these as sole executive agreements that the President can bring into force on his own authority without need for congressional approval?
2. Obligations on the United States.  Of possible relevance to the latter question are the obligations the agreements would impose on the United States.  In general, the vast majority of the obligations under the agreements fall on the non-U.S. Party.  The United States takes on soft obligations to “work with” the other Party on certain matters or “work . . . to consider” other matters.  See, e.g., U.S.-Cambodia Agreement, arts. 5.3.1 & 6.1.2; U.S.-Malaysia Agreement, arts. 5.3.1 & 6.1.2.  But the one obligation of result (as opposed to an obligation of effort) undertaken by the United States is the obligation to “apply a revised reciprocal tariff rate on originating goods of” the other Party, as set forth in an annexed schedule.  See U.S.-Cambodia Agreement, art. 1.1.2; U.S.-Malaysia Agreement, art. 1.1.2. 
   
   These tariff commitments – stated as something that “[t]he United States shall” do – set these agreements apart from trade deals announced by the White House earlier this year.  In those deals, it appeared that the President was exercising his discretion to maintain tariffs at a certain level – pursuant to his asserted authority under the International Emergency Economic Powers Act (IEEPA) – in exchange for the other Party’s commitments.  But in the Cambodia and Malaysia Agreements, the President appears to be binding the United States – not just himself as President – in a way that would seem to tie Congress’s hands.  Query what would happen, then, if Congress does not approve the agreements. Absent such approval, what would happen if Congress were to enact legislation setting tariff rates different from those provided for in the Agreements?
3. The IEEPA tariffs litigation.  Moreover, it must be borne in mind that the tariffs applicable to goods of Cambodia and Malaysia – both as they are in place today and as they would be modified pursuant to the agreements – are not the tariffs legislated by Congress.  They are tariffs imposed by the President, ostensibly in exercise of his authority under IEEPA.  Whether the tariffs were a valid exercise of the President’s IEEPA authority now is before the Supreme Court.  If the Court agrees with the lower courts that IEEPA did not authorize these tariffs, then the premise for the main U.S. undertaking in the Cambodia and Malaysia agreements will have fallen away.  If the President was not authorized to impose these tariffs pursuant to IEEPA in the first place, then surely he cannot salvage them simply by memorializing them in an international agreement that has not been approved by the Congress.
4. Follow-the-leader provisions.  Another much-commented-upon feature of the new agreements is the seemingly unprecedented obligation undertaken by Cambodia and Malaysia to follow the U.S. lead in certain matters related to economic and national security.  Thus, if the United States imposes duties or other import restrictions on goods or services of a third country for economic or national security reasons, it appears that Cambodia and Malaysia will be bound to take “similar measures” (Cambodia) or “measure[s] with equivalent restrictive effect” (Malaysia). See U.S.-Cambodia Agreement, art. 5.1.1; U.S.-Malaysia Agreement, art. 5.1.1.  Curiously, however, the obligations of Cambodia and Malaysia in this regard appear to differ in important respects.  Where the Malaysia Agreement refers to measures “relevant to protecting the economic or national security of the United States,” the Cambodia Agreement refers only to “economic security alignment” (omitting any reference here to national security).  Also, here and elsewhere the Cambodia Agreement contains a qualifier that seems to limit Cambodia to taking action “in a manner that does not infringe on Cambodia’s sovereign interests,” while the Malaysia Agreement contains no such qualifier.
   
   The obligation to follow the U.S. lead appears in other parts of the agreements as well.  Notably, Cambodia and Malaysia are required to follow the U.S. lead when it comes to banning imports from entities designated as producers using forced labor. U.S.-Cambodia Agreement, art. 2.8.1; U.S.-Malaysia Agreement, art. 2.9.1.  And they are required to follow the U.S. lead on sanctions and export controls.  U.S.-Cambodia Agreement, art. 5.2.2; U.S.-Malaysia Agreement, art. 5.2.2.
5. Restrictions on third-country relationships.  In addition to requiring Cambodia and Malaysia to follow the U.S. lead on certain matters, the agreements also purport to restrict their entry into certain trade-related agreements with other countries.  Article 2.2(b) of the Cambodia Agreement does this with respect to certain prospective undertakings related to agricultural trade, and article 5.3.3 does it with respect to trade agreements in general.  Articles 2.3(b) and 5.3.3 of the Malaysia Agreement are to similar effect.
6. References to WTO and other international law instruments.  Both the Cambodia Agreement and the Malaysia Agreement make references to obligations under the World Trade Organization (WTO) agreements as well as other sources of international law, including treaties related to intellectual property rights and core agreements of the International Labor Organization.  This is notable in that it seems to acknowledge these sources of law as authoritative (something that should not necessarily be taken for granted in the current environment).  However, neither the Cambodia Agreement nor the Malaysia Agreement contains a statement characterizing itself as an agreement undertaken in furtherance of a free trade area as provided for in Article XXIV of the WTO’s General Agreement on Tariffs and Trade or Article V of its General Agreement on Trade in Services.
7. Export-contingent subsidies.  Moreover, both agreements contain an unusual provision that appears to excuse the Parties (at least on a bilateral basis) from a key obligation under the WTO’s Agreement on Subsidies and Countervailing Measures (ASCM).  Thus, article 2.11.2 of the Cambodia Agreement states that “Cambodia shall not contest, including through countervailing measures or at the World Trade Organization (WTO), any measure adopted by the United States to rebate or refrain from imposing direct taxes in relation to exports from the United States.” Article 2.12.2 of the Malaysia Agreement contains a similar provision, albeit one that applies reciprocally. Both appear to weaken (if not openly breach) the prohibition on export-contingent subsidies set forth in article 3.1(a) of the ASCM, which seems at odds with other references affirming the Parties’ WTO obligations.
8. Transnational subsidies and other third-country practices.  Another subsidies-related provision of note pertains to so-called transnational subsidies – i.e., subsidies provided by the government of one country to producers located in another country.  The agreements require Cambodia and Malaysia, respectively, to “adopt and implement measures” to address such subsidies and other “unfair practices of companies owned or controlled by third countries” operating in their territory.  U.S.-Cambodia Agreement, art. 5.1.2; U.S.-Malaysia Agreement, art. 5.1.2.  It is not clear whether “companies owned or controlled by third countries” encompasses only companies owned or controlled by foreign governments, or whether the term also encompasses companies owned or controlled by other third-country parties.
9. Rules of origin.  Both agreements contemplate the adoption of customs rules of origin that will allow for benefits of the agreements “to accrue substantially to [the Parties] and their nationals.”  U.S.-Cambodia Agreement, art. 4.1; U.S.-Malaysia Agreement, art. 4.1.  But rather than agree on common rules of origin or establish a forward-looking work program for doing so – as was common historically under free trade agreements to which the United States is party – both agreements contemplate each Party adopting relevant rules of origin unilaterally.
10. Enforcement.  Unusually for a legally binding international agreement, neither the Cambodia Agreement nor the Malaysia Agreement provides a mechanism for dispute settlement.  There is brief mention of “consultations” to be pursued “when practicable.”  Otherwise, when a Party considers the other Party to be in breach of Agreement obligations, it is entitled to “take action in accordance with applicable domestic law.” U.S.-Cambodia Agreement, art. 7.3; U.S.-Malaysia Agreement, art. 7.4.2.

Undoubtedly, there will be much more to be said about the Cambodia and Malysia agreements (and other such agreements that may be announced in the near term) in the days and weeks ahead.  The above are just some quick observations for consideration as we pore over what may just be the first in a new generation of trade agreements.