US Trade Actions Put WTO, Existing Free Trade Agreements Into Question, Law Experts Say

For starters, U.S. efforts to establish individual trade deals with separate nations call into question the relevancy of the World Trade Organization, including its ability to set most favored nation status, speakers said.

"You're pulling out from these various agreements between the U.S., the largest economy, and various others, including the second largest, fifth largest," said Gibson Dunn partner Alan M. Smith. "It really sort of undermines some of the WTO strength, power authority system."

"The WTO still is our governing body. ... If we've struck a deal that's that favorable to the U.K., it should be extended to all other members," Gibson Dunn senior counsel Ron Kirk said. Kirk has previously served as U.S. trade representative under former President Barack Obama.

What's also unclear is if and how U.S. trade deals with one nation affect trade deals with other nations, according to Kirk, such as what the new U.S. trade stances mean for existing free trade agreements, such as the one with South Korea, Kirk said.

"I think many of [the countries] are going to be watching and holding their breath to see what the courts do with respect to the IEEPA cases, or [if] Congress will find their voice and step in and say, look, let's come up with a more certain path. But they won't say so publicly," Kirk said. "There are a lot of political dynamics going on."

Another uncertainty is the extent that other nations may develop trade alliances of their own apart from the U.S., Kirk said, particularly as the U.S. reportedly places conditions on other countries that have not traditionally been part of trade negotiations, such as the U.S. rationale for higher tariffs on Brazil (see 2507310021).

"The issue of retaliation is still a threat, and the concern for those of us like me that have been involved ... is for many years, whether it was at the WTO or the G7 or others, the United States has been the force mover for an open rules-based economic system, whatever that may look like," Kirk said. "To the degree that we depart and incorporate all of these new other standards, we should not be surprised if down the road, we don't see other countries use that to either close their market ... because it's kind of hard to argue that the United States is going to hold other countries to a free speech standard when some will argue that ... that's a little bit ironic coming from this administration."

As individual countries face uncertainties, companies and importers are grappling not only with ensuring customs compliance but also with ensuring that they aren't at risk for other penalties via measures like the False Claims Act or efforts by the Justice Department to ramp up trade enforcement, according to Gibson Dunn counsel Samantha Sewall.

The False Claims Act "has also been applied in the context where companies underpay the government, and in that case, the U.S. can investigate a company, and there is the potential for travel damages," Sewall said. "So, even if maybe a traditional criminal case is not made out, you still have essentially a criminal-level fine that could potentially be levied."

As the U.S. seeks to open other countries' markets for U.S. exports, one challenge may be having enough federal resources to facilitate those efforts, Kirk said.

"There's a component of this Trump administration strategy asking other countries to open their market to more of our exports. But what we're also hearing is, because of the DOGE cuts, for example, at BIS [the Bureau of Industry and Security], the ability to get export licenses has almost become stagnant. They are understaffed. They are undermanned," Kirk said. "So while the administration may have this laudable goal of creating more markets ... some of their own internal actions are frustrating the goals that they have stated that they're trying to achieve."