Despite the joint announcement of the United States and China that both countries would “expedite negotiation on a bilateral investment treaty” (abbreviated in English as a “BIT”), the notion of a BIT between the United States and China, two of the world’s five largest economies, remains inconceivable for some. On the U.S. side, there are significant political obstacles: free trade and foreign investment typically are not successful campaign platforms for U.S. politicians during an economic recession, especially in an election year. U.S. politicians would not likely accept a BIT while strong disagreement remains over China’s currency policies. China’s pegging of the yuan to the dollar remains an irritant (indeed, the only trade issue on President Obama’s agenda in Beijing in November), notwithstanding that it may have enabled critical flows of debt-financing while the United States endured the depths of a recession while still needing billions for military actions in Iraq and Afghanistan. There are obstacles on Chinese protection and enforcement of U.S. intellectual property, controlled Chinese capital markets, and laws raising national treatment concerns for American investors trying to establish investments in China, according to Amy Tsui’s BNA Int’l Trade Daily article. Political support for a BIT with China does not look promising, particularly with a Congress whose Democratic leadership is often openly suspicious of Chinese trade and investment intentions.
China has its own policy disagreements with the United States, including on trade issues such as the United States’ safeguard duties on Chinese tires. China also has been reluctant to embrace international arbitration of investor-state investment disputes to the degree that the United States would demand using the 2004 U.S. Model BIT as the basis for negotiations.
Notwithstanding these obstacles, there are reasons to believe that a U.S.-China BIT is not a question of “whether” but “when.” When the Bush Administration announced in June 2008 that the United States and China had been discussing a BIT as part of the Strategic Economic Dialogue, at least one observer wondered whether the announcement meant a deal had been completed. According to a U.S. official, talks of a U.S.-China BIT already had been going on for seventeen months. Under the Obama Administration, it appears that discussions are continuing “in technical stages [but] have not yet reached political decisions.” (“ACIEP Report on Model BIT Lacks Consensus on Critical Issues,” Inside U.S. Trade, Oct. 2, 2009.)
BITs are smaller in scope than free trade agreements (“FTAs”). The negotiations, therefore, are much more attainable, in terms of both the substance and the political capital expended to reach an agreement. BITs tend to favor the country in the agreement that is the larger exporter of capital, which usually has meant that the United States stood to benefit far more than its treaty partner. Of the approximately 60 countries with whom the United States previously has agreed on BITs or FTA investment chapters, Canada and South Korea are the only significant exporters of capital.
U.S. businesses see BITs as a way to open up access to foreign markets, and China would be no exception. For many years, U.S. industries have been looking for ways to improve access to China’s one billion consumers and to eliminate restrictions on or disincentives to foreign investment, particularly as, during recent years of high economic growth, the Chinese have accumulated unprecedented wealth for a developing country.
China, unlike most of the United States’ treaty partners in prior BITs, has become a significant exporter of capital, but this fact probably makes a BIT even more likely. Since 1998, China has been renegotiating BITs it had with many European countries in order to provide greater protection for its own investors doing business in Europe. Recently, China also has been in BIT negotiations with Canada. As China increases its investments in the United States, it becomes increasingly likely that China will want the same protections for its investors doing business there.
There have been critics in the United States fearing that BIT provisions for international investor-state arbitration circumvent U.S. judicial, legislative and regulatory processes, and many certainly would oppose a BIT with China given the implications for U.S. environmental and labor standards. And yet, there is little reason for anyone to believe that the United States would be overrun with foreign claims under a U.S.-China BIT. Notwithstanding Canada’s significant investments in the United States market, in the sixteen-year period since the adoption of NAFTA’s investment chapter no arbitration tribunal has required the United States to pay on a single claim.
Political concerns over U.S. national security restrictions on investment have subsided since 2005 when CNOOC’s bid to purchase UNOCAL was blocked, as discussed in our previous post in December. Specific transactions still may be blocked, but those decisions appear to be driven more by the national security analysis of a particular case than by reactionary measures to calm an agitated Congress, as discussed in our earlier post in January.
U.S. industry representatives have recommended that the United States should consider softening the “essential security” exception in its Model BIT language to allow foreign investors greater assurances that their investments will not be disrupted by disguised protectionist motivations. (“ACIEP Report on Model BIT Lacks Consensus on Critical Issues,” Inside U.S. Trade, Oct. 2, 2009.) While they plainly intend for the exception to be softened as to foreign countries’ restrictions on foreign U.S. investment, the reciprocal nature of such a provision would be appealing to the Chinese as well. There may not be enough sympathy in Congress, however, for such a departure.
Negotiation of a China-U.S. BIT will not be quick and easy, but it remains likely. China is an expanding market attracting foreign investment from around the globe. American enterprises want to invest there and would like more security for their investments. Such incentives historically have driven the United States to negotiate BITs.
This time, however, there is an added and critical dimension. China has amassed capital and is beginning to invest abroad. The United States not only is an attractive market; the United States also needs a substantial share of that investment for the growth of its own economy. Chinese businessmen, like Americans, want investment security. This time, therefore, the BIT partners share a common vision of an agreement that will attract investment to their own countries while protecting their citizens investing abroad. Such unusual balance may make the negotiations more difficult, but they also make a positive result more likely.
尽管存在这些障碍，但有理由相信美中签订双边投资条约不是“是否”，而是“何时”的问题。当布什政府于2008年6月宣布美国和中国把讨论双边投资条约作为战略经济对话的一部分，至少有一名观察员猜想这一宣布是否意味着已经基本达成协议。据美国官员，美中会谈已经进行了17个月。在奥巴马政府任内，“谈判仍在技术层面，还没有达到政治决定层面”。(“ACIEP Report on Model BIT Lacks Consensus on Critical Issues,” Inside U.S. Trade, 2009年10月2日.)
美国产业界代表建议美国应考虑软化双边投资条约范本中的“重要安全”例外条款，给予外国投资者更大的投资不被伪装的保护主义中断的保证。(“ACIEP Report on Model BIT Lacks Consensus on Critical Issues,” Inside U.S. Trade, 2009年10月2日.) 这明显是为了减弱外国对美国对外投资的限制，这一互惠规定也一定对中国很有吸引力。但在国会，这种偏离可能不能赢得足够同情。