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07/02/2025 | Press release | Distributed by Public on 07/02/2025 13:04

Trade Liberalizing Efforts in Other Countries Contradict U.S. Policies

Trade Liberalizing Efforts in Other Countries Contradict U.S. Policies

Photo: Nicolas Economou/NurPhoto via Getty Images

Commentary by William Alan Reinsch and Safae Irghis

Published July 2, 2025

An issue currently being debated among economists and trade experts is whether the post-Bretton Woods rules-based international trading system has run its useful life and needs to be replaced with something else. This has been a theme in both the Biden and Trump administrations, though their narratives are different. Biden argued that the system was not serving the interests of workers and the middle class while permitting most of the benefits of liberalized trade to accrue to large companies and their executives. The Trump administration has argued that the United States is a victim of other countries' unfair practices, undermining the U.S. economy, destroying jobs, and compromising our security. They are similar in that both blame the system for having allowed, if not caused, damage to the U.S. economy and its manufacturing base.

The Trump administration has been more aggressive in taking actions to "rebalance" the system, and in the process has conveyed the message that the United States is no longer a reliable trading partner. In addition, the way his policies have been rolled out has maximized uncertainty and left investors and manufacturers confused about how they should proceed. The obvious corollary for other governments is that it might be time to diversify and find new economic partners, and that appears to be happening-with the United States on the sidelines. Here are the most recent examples.

  • United Kingdom-India Free Trade Agreement (FTA)
    Status: Finished.

    Signed in May 2025. India, a notoriously high-tariff country, agreed to cut tariffs on 90 percent of British products, although not to zero. Auto tariffs will decrease from over 100 percent to 10 percent. The agreement is estimated to increase trade by 2040 annually by $34 billion.
  • European Union-India FTA
    Status: Underway.

    Both sides committed to concluding the deal by the end of 2025. So far, 8 of the 20 chapters are finished, primarily the easier ones. Sensitive agricultural products are excluded.
  • EU-Mercosur Trade Agreement
    Status: Concluded (pending ratification).

    The deal includes provisions to eliminate tariffs on over 90 percent of goods traded between the two regions. Mercosur includes Argentina, Brazil, Paraguay, and Uruguay, with Bolivia in the process of joining.
  • UK Accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)
    Status: Entered into force in December 2024.

    More than 99 percent of current UK goods exports to CPTPP members, including Peru, Japan, Singapore, Chile, New Zealand, and Vietnam, will be eligible for tariff-free access.
  • CPTPP Expansion
    Status: Underway.

    Multiple applications are under review or invited. These include Costa Rica (underway); Ecuador, Uruguay, Ukraine, and Indonesia (under consideration); and China and Taiwan (no consensus to proceed).
  • Canada-Indonesia Comprehensive Economic Partnership Agreement (CEPA)
    Status: Finished.

    Signed December 2024; implementation planned for 2026. This is not a true FTA, but once fully implemented, over 95 percent of Canadian exports will receive preferential tariff treatment.
  • Canada-ASEAN FTA
    Status: Under negotiation.

    Intended to conclude in 2025. The most recent negotiating round was held in January 2025.
  • Japan-China-South Korea Trilateral FTA
    Status: Proposed/Ongoing.

    Revived discussions as of March 2025. I'm skeptical this one will ever get across the finish line, but the restart of talks is a positive sign.
  • European Union-Chile Advanced Framework Agreement
    Status: Entered into force in February 2025.

    This modernized agreement replaces the 2002 EU-Chile deal, expanding coverage to services, digital trade, and sustainability provisions. It includes tariff-free access on 99.9 percent of EU exports to Chile and creates enhanced protections for EU geographical indications. It is the European Union's first deal to include binding commitments on gender equality.
  • Eurasian Economic Union (EAEU)-Iran FTA
    Status: Entered into force in May 2025.

    This agreement grants Iran preferential access to EAEU markets (Russia, Kazakhstan, Belarus, Armenia, and Kyrgyzstan), covering 80 percent of traded goods and signaling Tehran's pivot toward eastern and southern economic networks amidst continued Western sanctions.
  • African Continental Free Trade Area (AfCFTA)
    Status: Operational (notified to the World Trade Organization in June 2025).

    While the agreement technically came into force in 2019, full implementation and regional customs arrangements are expected to be in 2025. The agreement aims to eliminate tariffs on 90 percent of intra-African trade and is now being integrated into national legal frameworks across over 40 countries.
  • Türkiye-United Arab Emirates Comprehensive Economic Partnership Agreement (CEPA)
    Status: In force since September 2023.

    The agreement aims to increase bilateral trade to $40 billion by 2028. It includes provisions on goods, services, and investment, and is Türkiye's most expansive CEPA in the Gulf region to date.
  • EU-Kenya Economic Partnership Agreement (EPA)
    Status: Signed in December 2023; pending full implementation.

    This bilateral agreement within the European Union's broader East African Community strategy allows Kenya duty-free access to EU markets and commits both sides to sustainable development and digital cooperation.
  • United Kingdom-Gulf Cooperation Council (GCC) FTA
    Status: Under negotiation.

    The United Kingdom and the GCC (consisting of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates) have completed multiple rounds of negotiations, aiming for conclusion by the end of 2025. The deal would mark one of the United Kingdom's most commercially valuable post-Brexit trade pacts.
  • Indonesia-South Korea CEPA
    Status: In force since January 2023.

    This agreement eliminates tariffs on over 90 percent of goods traded and includes commitments on services and investment, including digital trade and IP protection.

While some of the trade agreements listed above predate the current administration, their recent acceleration and finalization reflect a strategic response to U.S. trade policy uncertainty. Trump-era tariffs and Biden's industrial policy have disrupted expectations of U.S. leadership in global trade. In response, many countries are hedging by deepening trade ties elsewhere-particularly through regional and bilateral agreements that bypass the United States entirely. These efforts aim to secure stable market access, diversify supply chains, and insulate economies from the ripple effects of American protectionism.

Not all of these are going to succeed, and so far, none of them are really "gold standard" free trade agreements. But if you look at the hundreds of FTAs already registered with the World Trade Organization (WTO), most of them are not perfect agreements either, usually because they exclude agriculture. The interesting thing about these new agreements is how much they are like the old ones. They focus on trade liberalization, breaking down trade barriers, and promoting market access-the same goals that administrations prior to those of Trump and Biden pursued. They don't achieve free trade, but neither did the older ones. Progress in that direction has been erratic-two steps forward and one step backward-and current negotiations are no different.

What is noteworthy is that the world is still making progress, in the same way and in the same direction as always. The difference is that the United States is not part of that process. This puts the United States in a new position-being on the sidelines watching as the world moves on in the same direction it has been moving for decades. The picture becomes more compelling when examining the evolution of regional trade agreements worldwide. With 619 cumulative regional trade agreements in force as of 2025, WTO data shows a steady increase in the number of such agreements over time.

Image

William Alan Reinsch

Senior Adviser and Scholl Chair Emeritus, Economics Program and Scholl Chair in International Business

Safae Irghis

Researcher, Economics Program and Scholl Chair in International Business

Programs & Projects

  • Economics Program and Scholl Chair in International Business
  • Economic Security and Technology
Remote Visualization

[Link]

Source: World Trade Organization, Regional Trade Agreements Information System (RTA-IS), accessed July 2, 2025, https://rtais.wto.org/UI/Charts.aspx.

In contrast, the United States has been leading for the past two administrations in a different direction. The last Free Trade Agreement in force between the United States and Panama goes back to 2012, which slows down trade liberalization and promotes industrial policy in the name of national security. This time, however, it appears few others are following, although one conspicuous exception is China, which seems to be pursuing similar policies on its own initiative.

Controversially, China has been benefiting the most from free trade agreements under the WTO ruling system. After joining the WTO in December 2001, China's average tariff rate fell sharply, from over 30  percent to around 7-8 percent. While this reduction made imports cheaper, it also enabled China to integrate more deeply into global value chains. Firms could import high-quality inputs and re-export finished goods at scale. The economic certainty provided by WTO membership enabled an influx of foreign direct investment and access to Western markets, which paved the way for explosive export growth: from $516 billion in 2001 to over $4 trillion by 2017.

While China initially undertook some trade liberalizing measures-benefiting from WTO accession, reduced tariffs, and global supply chain integration-its policy stance has shifted in recent years. The launch of "Made in China 2025" reflects a more state-directed model, with heavy public investment in strategic sectors like semiconductors, renewables, and robotics. The United States responded in kind during the Biden administration, and as a result China and the United States are converging in their embrace of industrial policy, though their paths have been different: China's industrial push accompanied decades of export-led growth, whereas the United States is retreating from trade liberalization more abruptly, citing national security concerns.

The fact that the two biggest national economies in the world are pursuing similar policies that lean heavily on protection in the name of national security doubtless gives other countries pause since so many of them have significant economic stakes in both China and the United States-After the new U.S. tariffs, the WTO estimates a 1 percent contraction in global trade volumes, warning about possible cascading effects from trade diversion as companies reroute goods to countries with preferential access. It is beginning to appear, though, that third-country strategies are additive, emphasizing diversification into new markets while not entirely abandoning their larger partners. This is the time-honored "don't put all your eggs in one basket" approach that has been good advice for centuries.

It is not, however, good news for the United States, particularly U.S. exporters, who will find themselves foreclosed from the market access advantages of other countries' agreements that leave U.S. businesses on the outside looking in. Ironically, the United States' new insistence on preferential agreements rather than those based on the most-favored-nation principle will end up harming U.S. exporters as other agreements adopt the same approach and extend their benefits only to the participating countries.

It means the United States may be left behind as countries find new partners and the world may move on without the United States, but at the same time, this is also surprisingly reassuring. The new negotiations demonstrate that the announcement of the old order's death was greatly exaggerated, and that the case for trade liberalization remains a strong one. Since the current administration is not going to change its worldview, the challenge for U.S. companies is to find ways to stay in the game even as our government has withdrawn from it.

William A. Reinsch holds the Scholl Chair in International Business at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Safae Irghis is a researcher with the Economics Program and Scholl Chair in International Business at CSIS.

Commentary is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).

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