Decoupling by Discrimination? Strategic Competition and the Limits of Trade Law

What are the impacts for the future of trade regulation - particularly for the WTO reform agenda - when governments in major economies such as the US, the EU and China seek to reshape supply chains for strategic and security reasons? The US and the EU are increasingly embracing policies of a geoeconomic nature to respond to strategic competition from China. In a number of sectors, they are adopting industrial policies that seek to bring production home or to "friendly" economies, while export controls try to avoid leakage of capabilities deemed of strategic or security importance. As they roll out an expanding portfolio of geoeconomic measures, the US, the EU and other developed economies gradually lay the contours of an informal trade governance regime marked by state intervention in economic sectors and negotiated settlement of trade frictions. This range of actions is consistent with a geoeconomic rationale, yet difficult to reconcile with the existing WTO rules as well as with its dispute settlement mechanism. The embrace of geoeconomic policies by the world's major economies changes the terms of the WTO reform agenda: substantive rules, such as those on subsidies, are likely to be put under pressure, not only to curb what are China's perceived state activism but now also to accommodate the geoeconomic policies by the US, the EU and others. Debate on the WTO dispute settlement is also cast under a new light as Washington and Brussels are unlikely to see their geoeconomic policies scrutinized in Geneva.