Yesterday, the White House posted the text of trade agreements it signed with Cambodia and Malaysia. Both agreements have a number of provisions that target or have an impact on China in some way.

The Cambodia agreement is here and the Malaysia agreement is here. With regard to provisions that have a connection to China, the agreements address the following issues: Labor rights, rules of origin, transshipment, and economic/national security.

Labor

Of particular interest related to labor are provisions that call for actions against imports made with forced labor.

Article 2.8 of the Cambodia agreement states:

1.         Cambodia shall adopt and effectively implement a prohibition on the importation of goods mined, produced, or manufactured wholly or in part by forced or compulsory labor, as defined by the relevant International Labor Organization (ILO) instruments to which Cambodia is a party.  Cambodia may acknowledge U.S. government determinations on entities under Section 307 of the Tariff Act of 1930 and shall take appropriate action to prohibit importation of goods from those entities.

Article 2.9 of the Malaysia agreement offers a slight variation on this language:

1.         Malaysia shall adopt and implement a prohibition on the importation of goods mined, produced, or manufactured wholly or in part by forced or compulsory labor. Malaysia may acknowledge U.S. government determinations on entities under Section 307 of the Tariff Act of 1930 and shall take appropriate action to prohibit importation of goods from those companies. The Parties shall cooperate by sharing best practices on the development and enforcement of forced labor import prohibitions, as appropriate. Malaysia shall implement the obligations in this paragraph within two years of the date of entry into force of this Agreement.

(underlining in original)

In recent years, the U.S. has ratcheted up its enforcement of the Section 307 prohibition of imports made with forced labor (it also enacted a statute specifically targeting products made with Uyghur forced labor), targeting China and a range of other countries. The trade agreement provisions quoted above suggest that Cambodia and Malaysia will be applying similar prohibitions of their own.

How these provisions will be implemented is unclear. The effort and resources that would be required for such an undertaking would be significant, and it is an open question whether these countries have sufficient infrastructure for enforcement. And if the U.S. is hoping that any such laws and regulations would target Chinese products, Cambodia and Malaysia would get significant pushback from China. As a result, it may be difficult to achieve an implementation that matches what is written in the text.

Rules of Origin

A big concern of the U.S. in recent years has been that Chinese producers have been able to take advantage of weak rules of origin in U.S. trade agreements in a way that allows imports of Chinese products at reduced tariff rates offered to other countries. The Cambodia and Malaysia agreements both have a provision in Article 4.1 that notes the issue and indicates that if it becomes a problem, the parties will address it:

1. The Parties intend for the benefits of this Agreement to accrue substantially to them and their nationals. If benefits of this Agreement are accruing substantially to third countries or third-country nationals, a Party may establish rules of origin necessary to achieve the Parties’ intention for this Agreement.

Transshipment

Both agreements have a provision in Article 5.3.2 that identifies the issue of "transshipment." Many people in the U.S. consider it to be a serious problem that Chinese producers ship their products to other countries first in order to avoid tariffs that target Chinese products.

The Malaysia agreement states:

2.         Malaysia shall, in accordance with its domestic laws and regulations, adopt and effectively enforce measures to combat transshipment and other practices to evade or circumvent duties applied by the United States. Malaysia shall enter into a duty evasion cooperation agreement with the United States.

The Cambodia agreement provision is similar.

To some extent, the Cambodian and Malaysian efforts here are likely to be limited due to the resources necessary to undertake such an effort.

Economic and national security

The agreements include several items related to economic and national security.

First, Article 5.3 of both agreements places restrictions on negotiating new economic agreements with certain countries, similar to the USMCA provision on negotiating agreements with non-market countries. The Malaysia agreement refers to countries that "jeopardize[] essential U.S. interests":

3. If Malaysia enters into a new bilateral free trade agreement or preferential economic agreement with a country that jeopardizes essential U.S. interests, the United States may, if consultations with Malaysia fail to resolve its concerns, terminate this Agreement and reimpose the applicable reciprocal tariff rate set forth in Executive Order 14257 of April 2, 2025.

The Cambodia agreement has similar language, but refers to "a material threat to economic or national security":

3.         If Cambodia enters into a new bilateral free trade agreement or preferential economic agreement that the United States considers undermines this Agreement or otherwise poses a material threat to economic or national security, the United States may terminate this Agreement pursuant to Article 7.4.

With regard to existing and potential agreements of this type, China and Cambodia have an FTA that went into effect in 2022. In addition, China, Cambodia and Malaysia are all parties to the Regional Comprehensive Economic Partnership (RCEP) and the ASEAN-China Free Trade Area. The ASEAN-China FTA 3.0 is set to be signed this week.

In addition, the agreements require Cambodia and Malaysia to address "unfair practices" of companies from "third countries." Article 5.1 of the Cambodia agreement states:

2.         At the request of the United States, Cambodia shall, consistent with its sovereign interests, adopt and implement measures to address unfair practices of companies owned or controlled by third countries operating in Cambodia’s jurisdiction, including those that result in:  (1) the export of below-market price goods to the United States; (2) increased exports of such goods to the United States; (3) a reduction in U.S. exports to Cambodia; or (4) a reduction in U.S. exports to third-country markets.

Along the same lines, the Malaysia agreement says:

2.         Malaysia shall adopt and implement measures, in accordance with its domestic laws and regulations, to address unfair practices of companies owned or controlled by third countries operating in Malaysia’s jurisdiction that result in─

(a)        the export of below-market price goods to the United States;

(b)       increased exports of such goods to the United States;

(c)        a reduction in U.S. exports to Malaysia; or

(d)       a reduction in U.S. exports to third-country markets.

These provisions seem to envision the two countries taking some sort of action against Chinese companies operating in their territory. It is not clear what specifically the U.S. has in mind here, or whether Cambodia and Malaysia are actually willing to go along in the face of probable pushback from China, and the details will need to be worked out.

There are also provisions related to shipping and shipbuilding, which is the subject of an ongoing U.S. Section 301 investigation and response. The Malaysia agreement says:

3.         Malaysia shall adopt, through its domestic regulatory process, similar measures of equivalent restrictive effect as those adopted by the United States to encourage shipbuilding and shipping by market economy countries. The Parties shall discuss the structure and effect of such measures, recognizing the Parties’ commitment to address shared economic or national security concerns in the shipbuilding and shipping sector.

The Cambodia agreement uses similar language.

It is not clear how implementation will go here, but any port fees targeting Chinese ships, similar to the U.S. measures, will likely provoke a strong reaction from China.

In addition, there are provisions that call for the coordination of export controls, sanctions, and investment screening. The Malaysia agreement includes the following provision:

Article 5.2: Export Controls, Sanctions, Investment Security, and Related Matters

1.         Malaysia shall, through its domestic regulatory process, cooperate with the United States to regulate the trade in national security-sensitive technologies and goods through existing multilateral export control regimes, align with all unilateral export controls in force by the United States, and ensure that its companies do not backfill or undermine these controls.

2.         Malaysia shall cooperate with the United States, in a manner consistent with applicable requirements of domestic laws and regulations, with a view to restricting transactions of its nationals with individuals and entities included in the U.S. Department of Commerce Bureau of Industry and Security Entity List (Supplement 4 of Part 744 of the Export Administration Regulations), as well as the U.S. Department of the Treasury Office of Foreign Assets Control Lists of Specially Designated Nationals and Blocked Persons List (SDN List) and the Non-SDN Consolidated Sanctions List.

3.         Malaysia shall explore the establishment of a mechanism to review inbound investment for national security risks, including in connection with critical minerals and critical infrastructure, consistent with widely accepted international best practices, and shall cooperate with the United States on matters related to investment security.

4.         If the United States determines that Malaysia is cooperating to address shared national and economic security issues, the United States may take such cooperation into account in administering its domestic laws and regulations pertaining to export controls, investment reviews, and other measures.

The Cambodia provisions are similar, but have a few differences:

1.         Cambodia shall cooperate with the United States to regulate the trade in national security-sensitive technologies and goods through existing multilateral export control regimes; align with relevant U.S. export controls on a case-by-case basis, based on requests from the United States; and ensure that its companies do not backfill or undermine these controls.

2.         Cambodia shall cooperate with the United States with a view to restricting transactions of its nationals with third-country individuals and entities included on the U.S. Department of Commerce Bureau of Industry and Security Entity List (Supplement 4 of Part 744 of the Export Administration Regulations), as well as the U.S. Department of the Treasury Office of Foreign Assets Control Lists of Specially Designated Nationals and Blocked Persons List (SDN List) and the Non-SDN Consolidated Sanctions List.

3.         At the request of the United States, Cambodia shall cooperate in providing information available to Cambodia, subject to a mutually agreed protocol for confidential information, about investment activity in its territory by third countries with a view toward increasing transparency and cooperation with the United States, including through technical exchanges, on economic and national security matters.

4.         If the United States determines that Cambodia is cooperating to address shared national and economic security issues, the United States may take such cooperation into account in administering its laws and regulations pertaining to export controls and other measures.

Coordination on these matters will likely be difficult in practice even without China raising concerns directly with these countries, especially since both nations are part of China's Belt and Road Initiative and have industrial cooperation projects that involve Chinese investment. It will be even harder with the probable Chinese pushback.

Finally, an annex to the Malaysia agreement has additional provisions that could impact Chinese telecoms and port equipment:

Article 5.2: Equipment and Platform Security

1. Malaysia commits to only using communication technology suppliers that do not compromise the security, safeguards, and intellectual property of ICT infrastructure, including 5G, 6G, communication satellites, and undersea cables. The United States and Malaysia will consult on whether suppliers are unable to meet these standards.

2. Malaysia shall ensure that its ports, port terminals, and logistics tracking networks, and its commercial fleet, use digital logistics platforms that provide appropriate cybersecurity protection, protection against the unauthorized disclosure of data, protection against national security risks, and protection against data-access by other foreign governments.

A Cambodia agreement annex has a similar provision on ports.