US “Reciprocal” Trade Agreements and the Seven Sovereignties Constrained for Developing Countries

By Rachel Thrasher and Tim Hirschel-Burns

The United States’ new Agreements on Reciprocal Trade (ARTs) represent a novel form of trade agreement, one with particularly worrying implications for countries in the Global South. Over the last year, ten parties have signed on to ARTs with the United States: Argentina, Bangladesh, Cambodia, Ecuador, El Salvador, Guatemala, Indonesia, Jordan, Malaysia and Taiwan. Most of these countries signed onto ARTs in the wake of the “reciprocal” tariffs introduced under the International Emergency Economic Powers Act (IEEPA), but the Supreme Court struck down those tariffs in February 2025.  More recently, however, Jordan signed even after the IEEPA tariffs were struck down, seemingly in response to new tariffs proposed under Section 301 alleging countries are failing to take action on trade in forced labor goods. Although the legal status of these treaties is somewhat unclear, they could have meaningful and disproportionate impacts on treaty partners.

Despite their name, they are largely non-reciprocal – the agreements grant disproportionate rights to the United States while placing non-reciprocal responsibilities on the non-US party. For example, the ART with Malaysia commits the country to purchase billions of dollars in US goods without any equivalent purchase obligations from the US. It also provides the US with the right to terminate the agreement and reimpose tariffs if Malaysia enters a new trade agreement judged contrary to US interests, while Malaysia receives no such right based on changes in the US choice of trade partners.

Figure 1: Timeline of US Agreements on Reciprocal Trade

Further, ARTs come with unusually intrusive constraints on the policy space needed for development, and countries should seek to protect policy space as they navigate an uncertain ART landscape. Modern free trade agreements tend to “kick away the ladder” to development by restricting some of the tools that industrialized countries used in their own development. While ARTs replicate some of these constraints, some provisions go even further in limiting developing country policy space.

Across the trade agreements, ARTs constrain countries’ policy space in seven key areas: Critical minerals, World Trade Organization (WTO) commitments, trading relations with other countries, intellectual property, access to technology, health and safety standards and government purchasing. These are all areas where developing countries need the flexibility to shape policies around their own development priorities. For a summary table capturing these seven areas of constrained policy space, see Annex Table 1 at the end of the blog.

Some of these constraints require the government to introduce new laws and policies and take on new commitments in other international fora, some require removal or modification of existing domestic regulation, while still others require a direct strain on their fiscal resources through government purchasing or even domestic subsidies.

Critical minerals

The demand for critical minerals has surged in the past few years as countries have sought to secure access to raw materials for low-carbon technologies like batteries, solar panels, wind turbines and electric vehicles. Although developing countries comprise many of the world’s leading sources for these minerals, they face heightened risks associated with the so-called “resource curse” of environmental degradation, stunted development in non-mining sectors and greater financial instability among other impacts. Some countries, like Indonesia, have sought to limit their exports to develop downstream processing capabilities and capture additional value added in the sector. More recently other countries, especially in Africa, have begun to follow suit.

The ARTs limit these efforts as well as countries’ sovereignty over investors in critical minerals. Both Malaysia and Indonesia have committed to remove or not introduce any restrictions on exports to the United States when it comes to critical minerals. In all but two agreements, country partners must “allow and facilitate U.S. investment” in critical minerals and energy resources. Four of the agreements (Argentina, Ecuador, Jordan and Malaysia) further commit the parties to develop a “mechanism to review inbound investment for national security risks” including for critical minerals. Malaysia, which made the most comprehensive commitments in critical minerals, has additionally promised that its multinational corporations will specifically purchase $103 billion worth of critical mineral extraction and processing equipment from the United States (see “Government purchasing” below).

WTO negotiations and commitments

Although negotiations at the WTO are currently stalled, member states continue to pursue several areas of trade liberalization through a “plurilateral” mechanism. This approach bypasses the consensus-based route for negotiating new commitments at the WTO and shifts the balance of power back into the hands of the developed countries. The US and others have advocated for a permanent moratorium on customs duties on electronic transmissions (including digital services taxes) and deeper commitments on domestic regulation of services. Although growing numbers of developing countries are signing on to these plurilateral agreements, researchers have shown that most would benefit from retaining sovereignty over fiscal measures and services regulation.

The ARTs, however, seek to take that decision out of their hands altogether: the ARTs commit trading partners to support the US’ WTO agenda. In all ten agreements, the non-US party has committed to “not impose digital services taxes … that discriminate against US companies in law or in fact”, nor to “impose customs duties on electronic transmissions.” The US has also required that all ten treaty partners “support multilateral adoption of a permanent moratorium on customs duties on electronic transmissions at the WTO.” Six of the ten must “take effective actions to implement the WTO Joint Initiative on Services Domestic Regulation,” and make additional commitments in services sectors. Weaving WTO commitments into bilateral agreements adds a layer of enforceability, tying compliance with the WTO to compliance with the terms of the ART. Even more important, the ARTs allow the power imbalance likely present in bilateral negotiations to influence the trajectory and outcome of multilateral negotiations where power differences may be more diffuse.

Trade relations and trade policy

As the world trading patterns and power structures have shifted, many developing countries are seeking to diversify trade partners to meet their development needs. This includes trading partnerships with China, which provides an opportunity for countries to access  affordable Chinese goods and services and benefit from increasing Chinese inward investment. Beyond China, developing countries are increasingly interested in south-south economic integration.

In conflict with these priorities and goals, each ART demands that trading partners adopt trade measures to protect the “economic or national security of the United States.” They make a clear, if implicit, link to US policies meant to limit China’s role in the global marketplace. Each trading partner is required to adopt domestic measures to address “unfair practices” by third party firms which impact the US trade balance (especially for Malaysia and Indonesia in the steel sector). The treaties likewise expect trading partners to support and adopt US export controls with respect to third countries and restrict transactions with firms on the US Entity List. A more concerning treaty measure also dictates that if a trading partner signs a bilateral free trade agreement that “poses a threat to economic or national security” (as determined by the US) or is with a “non-market country” or “covered nation”, the US may terminate the agreement unilaterally. All ARTs except El Salvador’s and Argentina’s include this termination threat, and four of the countries include the same threat in the case of any “new digital trade agreements” that may jeopardize essential US interests.

Intellectual property

The primary public policy rationale for intellectual property protection is that it will incentivize innovation and eventually result in wide dissemination. Nevertheless, the evidence supporting such a connection suggests that the right amount of protection should vary depending on the development level of a particular country. In fact, a report by the United States International Trade Commission noted that strong patent protection is generally found to be “more beneficial to innovation in the health sector for more developed countries and less for developing countries.”

Most of the ARTs do not have extensive new intellectual property commitments beyond improving enforcement systems and agreeing to membership in various multilateral treaties. For four parties that have signed ARTs, however, the agreements act to boost extraterritorial enforceability of US domestic law. US Special 301 reports are domestic instruments by which the country identifies intellectual property measures in other countries’ laws which it considers to insufficiently “encourage and maintain enabling environments for innovation”. The annual report has been used as a signpost for countries of concern for the US, but it does not have any concrete legal consequences. Argentina, Indonesia, Ecuador and Guatemala, however, have committed in their ARTs to “fully resolve” the issues identified in the most recent reports. Indonesia, for example, has agreed to eliminate local manufacturing and use requirements in its patent law while strengthening data protection requirements. Argentina’s commitments, by far the most extensive, include: repealing resolutions passed to restrict patentability in pharmaceutical and chemical inventions, increase data protection and significantly increasing intellectual property enforcement measures. In so doing, the agreements have become a way to push countries to comply with US standards of intellectual property protection.

Access to technology

Developing countries have an interest in moving up the value chain toward producing higher value-added goods. One crucial aspect of reaching that goal is access to technology. Sometimes that can be facilitated through intellectual property laws; at other times it can be facilitated through investment incentives and requirements. The European Union has recently considered introducing technology transfer requirements for Chinese firms in strategic sectors. Access to technology is often a promised benefit of foreign direct investment, but it does not always occur without the requisite incentive structure or regulatory environment.

However, all ten ARTs strictly prohibit conditioning US foreign direct investment on access to technology. No partner country may “impose any condition or enforce any undertaking requiring U.S. persons to transfer or provide access to a particular technology”. This language is similar to the prohibition on performance requirements that appears in all U.S. free trade agreements. By making this commitment, countries lose the ability to ensure that US direct investment – which they have also committed to “allow and facilitate” on a preferential basis (see above) – results in durable national improvements in the technology and knowledge needed for structural transformation.

Standards and assessments

According to the neoliberal trade policy view, regulatory cooperation, just like tariffs and quota reductions, is an antidote to protectionism. However, regulatory differences are almost never simply trade barriers. Rather, they are the result of domestic political preferences in certain cultural and political contexts. As such, developing countries have a keen interest in maintaining and developing their own regulatory standards.

Given that the current US administration is heavily focused on “correcting” the US trade deficit – importing more than it exports with most trading partners – removing regulatory barriers has become a major aim of these ARTs and a considerable portion of the agreement text is dedicated to it. The main commitment made by each trading partner is to recognize US technical regulations and standards as sufficient for any US-originating imports, that eliminates the need for additional domestic compliance assessments. Following that commitment, trading partners make commitments to recognize or adopt US standards in motor vehicles and parts, agriculture and biotechnology, medical devices and pharmaceuticals, dairy, meat and poultry, and aquatic products (see Annex Table 1). In effect, these provisions establish US technical regulations as the norm and remove space for partner countries to enforce their own standards.

Government purchasing decisions

Last, countries have often used their power of the purse (government procurement) as an important public policy tool. Government procurement makes up a significant proportion of the global economy and has recently been leveraged strategically for sustainable development, national security and innovation promotion. Recent examples of this can be seen in Plan México (heavily leaning on government procurement) and the EU’s circular economy policies. For this reason, government procurement has often been excluded from, or only narrowly covered by, trade agreements.

Within the ARTs, however, trading partners have taken on very specific, concrete commitments around their use of procurement (see Annex Table 1). Most concerning in this respect is that these procurement commitments, instead of building up the domestic strategic industries, push government purchasing to serve the needs of US industry. The lack of reciprocity is particularly striking when the countries being asked to make these purchasing commitments are much more resource poor than the US itself. Malaysia’s ART, for example, has committed the country to spending approximately 2 percent of their gross domestic product on purchases of US products over at least 10 years. Cambodia has committed to purchase 10 Boeing aircraft with the option for 10 more and Guatemala’s ART commits the country to purchase USD 100 million worth of US ethanol annually. Other countries have committed to encourage their own private firms to import more from the US in key industries as well. Both Taiwan and El Salvador have committed to incentivize US imports of liquified natural gas (LNG) by their domestic firms and Indonesia has broadly agreed to support firms in purchasing USD 33 billion worth of industrial and agricultural goods.

Conclusion

Considerable uncertainty surrounds the current status of these ARTs. While countries could still back out, most of them are taking a “wait and see” approach that allows them to respond to changes in US domestic legal proceedings. And while the pace of ARTs has slowed, it remains possible that more developing countries will sign onto agreements that—if they are similar to the 10 existing ARTs—would come at great cost to their sovereignty.

Therefore, although many countries will understandably feel constrained given the United States’ relative power, the ARTs’ legal uncertainty means that even the countries that have signed ARTs in fact possess a range of options to dampen the agreements’ limitations on their sovereignty: repudiating or renegotiating their ARTs, quietly avoiding the implementation of some or all of the provisions, or declining or delaying domestic legal formalization. As countries weigh these options and balance their costs and benefits, countries should prioritize the preservation of policy space for development as much as possible.

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Annex Table 1: Seven Sovereignties Constrained by “Reciprocal” Trade Agreements

Source: Authors’ compilation.