In short, there are at least three ominous implications of revoking PNTR. First, the United States would be reversing a bedrock principle of the global trading system—to avoid discrimination. While regular readers certainly know that the system has been under tremendous pressure, it has continued to function as a brake on all kinds of otherwise possible unilateral actions by all World Trade Organization (WTO) members. This brake will be gone if the US explicitly opts for discrimination. Second, while some supporters of revoking PNTR seem to suggest that this action will be limited to China, once the brake is gone, it is gone for all. There is little reason to think that others will not opt to do something similar, including against the United States. Hence, businesses should be extremely concerned that their “foreign” products and services in markets around the world will suddenly be targets for all sorts of actions, starting with unilateral adjustments in tariff levels and moving towards outright discrimination in treatment over foreign products in markets. Some could argue that firms already face a range of discriminatory actions in different markets, particularly with inconsistent application of non-tariff measures, unequal licensing requirements, or generally unfair trade treatment. However, these measures are actually quite restrained compared to what will happen in the total absence of MFN. Third, as always, the worst damage is likely to be felt by firms and communities that are already at the margins. Poor developing countries and small firms are going to be badly hit by adjustments to the global trading rules. Without a strong network of trade agreements in place to help cushion the blows, sudden adjustments in tariff rates, differentiated customs treatment, denied access to services markets, rejections of licenses or qualifications, and restrictions on movement of business people will make trade increasingly difficult or even impossible across borders.

The CPTPP Expansion Challenge for America

This now puts the US in a particularly awkward position with Chinese entry to the CPTPP on the table. The easiest solution would be for the US to quickly come back to the revised deal. All the schedules have been maintained and could be reactivated. The 20 provisions that were “frozen” in the transition from TPP to CPTPP could be addressed. However, politically in the US, this is viewed as a “non-starter.” If the US were to return at this point, there would need to be additional adjustments made and, even then, it is not clear whether there might be sufficient votes in Congress to approve entry. The US, under the Biden Administration, continues to work on its trade policy dimensions. There is a review of policy with China, specifically, that has been underway for months. Until these are both clarified and supported by Congress, it’s not clear what sort of forward-looking offensive trade items might be possible. It could be something on digital or perhaps on climate. Since the US is neither likely to return to the CPTPP in the near term or have a comprehensive trade strategy in place, the US is in a pickle.