China, United States Work to Overcome Challenges in Investment Treaty Talks

Obstacles remain, but the two countries said to be making progress in negotiations for Bilateral Investment Treaty

English Caixin

With Beijing's commitment to push forward bilateral trade cooperation with global partners, progress is expected on the Bilateral Investment Treaty (BIT), the negotiations around which had advanced into a substantive phase for the first time in the beginning of this year after the official launch in 2008.

In the third plenary session of the Communist Party's 18th Central Committee, leaders agreed to expedite the signing of investment agreements with relevant countries and regions; reform the examination and approval mechanism for overseas investment; improve the consular protection system; provide more services such as rights protection, investment promotion and early warning of risks; and broaden the space for investment cooperation.

Many U.S. financial institutions are making efforts to push for the BIT. Mark Schwartz, vice chairman of Goldman Sachs Group and chairman of Goldman Sachs Asia Pacific, said that this summer presents a "unique opportunity" for the U.S. and China to push on with the BIT. Of course, there are many challenges for any breakthrough in the near term. Both parties will engage in a very tough seesaw battle on a "negative list," while the BIT negotiation process may also be influenced by outside factors.

However, Schwartz said that "in the interest of stability and predictability, the BIT should be a strategic imperative for both countries."

'Rejoining the WTO'

The BIT negotiations between the U.S. and China are regarded as "discussions for rejoining the WTO" by a number of observers. According to an optimistic estimate by a U.S. source, it probably takes at least two years to conclude a BIT.

But to Schwartz, this summer represents one of the best opportunities to push on with negotiations. It may even be a "historic opportunity" for the two countries to come much closer to an agreement on the bilateral investment treaty.

He said in a interview with Caixin that besides the sixth Sino-U.S. Strategic and Economic Dialogue (S&ED) which will be held in early July in Beijing, the 13th and 14th rounds of BIT negotiations were also scheduled for this summer. The 13th round was held between June 9 and June 13 in Beijing. That is the third round of substantive negotiation on the text of the treaty after the previous two in January and March. The website of the Ministry of Commerce said that "in-depth discussions around core issues of the text were held between the two parties."

China's urgency in its reform is another driver behind the BIT talks. "China has made this a very important priority to reform – it wishes to promote as much reform as possible right now," said John Frisbie, president of the U.S.-China Business Council.

Frisbie said in an article that in his meeting with several senior Chinese officials last fall and this March, they expressed hope the BIT talks with the U.S. would drive domestic changes.

After last year's S&ED, the U.S. government listed BIT as the No. 1 item in its official statement and called it the United States' "top priority." But in Swartz's opinion, the U.S. has probably been working harder on the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP) for some time.

"I really hope in the S&ED in July, it is a unique opportunity to be seized by both countries," he said.

There is another tailwind for negotiations this summer: the arrival of a new U.S. ambassador to China, Max Baucus, in late March. Since his appointment as chairman of the Senate Finance Committee in 2007, Baucus has been seen as an advocate of trade and investment treaties in the Senate. He also provided support for the admission of China into the WTO and granting China most-favored-nation treatment.

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[link to english.caixin.com]

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