Trade agreements often represent negotiated exchanges between countries, where each party seeks benefits from the deal. Recently, President Trump has shown a preference for securing the advantages from other nations’ agreements without offering compensation in return. This approach has triggered disputes with Brazil and Canada over trade practices. Washington argues that if other countries anticipate the U.S. will claim the best concessions later, they have an incentive to offer less favorable terms initially, particularly to American negotiators.
Trade Conflict with Brazil
Brazil has secured “partial scope” trade agreements with Mexico and India, which reduce tariffs on certain products. This arrangement allows Mexican and Indian exporters to pay lower tariffs compared to their American counterparts. The U.S. Trade Representative has labeled these “preferential tariffs” as unjust in its Section 301 investigation of Brazil, highlighting that Mexico enjoys preferences over more than 1,000 tariff lines and India over hundreds of others. Although partial-scope agreements raise concerns about adherence to the World Trade Organization’s requirement that free trade areas cover “substantially all trade”, Washington’s stance goes further by asserting that American exporters are disadvantaged because other countries secured better terms.
Dispute with Canada
Canada has established its own trade agreements, including the Canada-European Union Comprehensive and Economic Trade Agreement, which grants Europe preferential access for cheese imports. At the same time, the United States crafted a separate dairy arrangement through the United States-Mexico-Canada Agreement (USMCA). The application of Section 338 of the Tariff Act of 1930 against Canada has been based on the disparity favoring European cheese, viewed by Washington as discriminatory toward American commerce. Notably, evidence indicates that Section 338’s founders acknowledged that the U.S. cannot indefinitely claim the preferences negotiated by other countries. Recent failed U.S.-Canada talks reportedly fell apart partly due to an unusual U.S. demand regarding Canada’s future trade agreements.
Emerging U.S. Doctrine
By examining the situations involving Brazil and Canada, a pattern emerges: Washington is using Sections 301 and 338 akin to a “most favored nation” clause that other parties did not consent to. In bilateral investment treaties, “most favored nation” provisions ensure American investors receive treatment no less favorable than what investors from third countries receive, allowing American investors to claim superior treatment later granted to others without compensating for it. While such clauses are agreed upon in the initial deal, Washington’s current actions against Brazil and Canada differ because they imply retroactive claims without consent, akin to free riding on concessions others had negotiated and paid for.
In principle, when countries like Europe secure preferential access for cheese through Comprehensive Economic Trade Agreements and reciprocity in commercial arrangements, it results from negotiated exchanges. If Washington demands equivalent treatment merely because U.S. exporters face competitive disadvantages, it benefits without bearing the negotiated costs. Historically, the postwar framework balanced nondiscrimination and preferential trading, establishing “most favored nation” as the default while permitting deeper preferences where parties engage in comprehensive reciprocal commitments. The United States reaped advantages from these exceptions, such as Mexican goods garnering USMCA preferences absent for Brazilian goods.
Negotiating for Equal Benefits
If Washington desires optimal treatment akin to that which Canada subsequently grants a third country, a simple course of action exists: negotiate for it. Pursuing unilateral tariff statutes to secure outcomes not obtained during negotiations poses credibility issues and signals free-riding behavior. As a result, the questioning arises: Why commit to negotiating schedules and agreements if Sections 301 and 338 can retroactively revise those terms?
The matter is particularly relevant if Washington seeks influence over Canada’s impending agreements. This idea isn’t novel, rather an expansion. USMCA already obliges Canada to provide notice before negotiations with non-market economies, with terms allowing termination upon six months’ notice. August’s demands pushed further, extending from claiming other countries’ benefits to controlling potential agreements. Notably, existing treaties like the Malaysia agreement mandate consultation over future agreements impacting American interests, though specifics remain undefined.
For decades, the U.S. insisted that preferential access must be earned through negotiations. This new doctrine deviates by demanding similar terms or imposing tariffs as leverage. Ultimately, it’s neither traditional most favored nation nor genuine reciprocity but an enforced claim without a ratified “most favored nation” clause.