Can a U.S.-China Investment Treaty Become Reality?

The latest round of the U.S.-China Strategic and Economic Dialogue Talks concluded last week with China agreeing to negotiate a bilateral investment treaty with the United States, which U.S. Treasury Secretary Jacob Lew hailed as a “significant breakthrough” in his closing remarks at the summit. The Diplomat’s Eve Cary writes that the news is a step in the right direction, though “immense challenges remain”:

The Wall Street Journal commented that an investment treaty would have innumerable benefits for the Chinese: “an investment treaty would give China a lot more clarity about the rules of the road, give it a way to appeal for compensation if a deal is blocked, and provide China something of an overall seal of approval.”  This is important since Chinese investment has hit a number of roadblocks over the years.  (In fact, an earlier post from The Diplomat elaborated on the difficulties the Chinese have had with investing in the U.S. market.) Meanwhile for the US, the treaty would further open market access to China, pleasing U.S. business interests.

However, this agreement is only the first step in what will most likely be a very long journey. The Heritage Foundation’s Derek Scissors doesn’t see a BIT implemented until 2017, noting a number of roadblocks, including Congressional opposition.  He believes that “American business and government may be seeing their hopes and dreams for the Chinese market rather than what is actually on the table.”

Skepticism is not just coming from more conservative commentators either. Nicholas Lardy of the nonpartisan Peterson Institute for International Economics comments, “It’s a noble goal but one which will be very difficult to conclude in any reasonable time period and it might well fail.”

On the U.S. side, a bilateral investment treaty would need two-thirds approval in the Senate, and Chinese investment has sparked (and will continue to spark) concerns about national security interests and the wisdom of foreign ownership in certain sectors. For example, China’s Shuanghui International’s recent proposal to buy Smithfield Foods has ignited debate about Chinese involvement in U.S. food supplies, particularly in light of China’s own food safety challenges.  Indeed, an investment treaty would not put an end to American fears about Chinese investment in the United States. [Source]

See also a 91-point summary of the outcomes of the forum, published by China’s Ministry of Foreign Affairs via the China Daily.

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