Economy Watch | 24 March 2016
U.S. and China close in on a Bilateral Investment Treaty
It may have taken 24 rounds of negotiations, but Chinese officials announced on Wednesday that a US-China bilateral investment treaty (BIT) is close to being signed. According to the Chinese Minister of Commerce, Chen Deming, many of the key stumbling blocks that have held up the deal may have been resolved. Chen’s statements came in an interview with China’s state-run Xinhua News Agency.
Dispute resolution has been one of the most difficult issues to resolve. After the last round of talks, both sides were finally able to agree – at least in principle – to using third party arbitration at the World Bank to resolve disputes between countries and investors.
The treaty has been anticipated by investors in both nations. If it meets the goals of the two nations negotiating its terms, the treaty will allow for free and easy investment and improved economic vitality for both nations, according to Chen. The BIT will allow companies from the signatory nations to invest overseas with fewer restrictions and in a more natural manner that better fits within the global value chain.
Talks regarding the BIT began in 2008. Since that time, 24 rounds of talks have occurred. Until this most recent round, a few major disagreements had held up finalizing the deal. Both sides saw the value in the BIT, at least in principle, and remained committed to seeing it through to completion. Once finalized, it should serve as an enormous boost to China-US economic and political ties. China became the largest trading partner to the United States once again in 2015, with a trade volume of almost $560 billion.
“Sino-US trade has grown large in volume, but bilateral investment is still trudging a muddy path,” said the President of Shanghai Zhenhua Heavy Industry Company, Song Hailing. Merit Janow, Dean of Columbia University’s School of International and Public Affairs agrees, adding that China is very open to foreign investment as compared to other developing countries. He believes China has shown substantial progress in inviting foreign investment to most of its economic sectors, though some remain largely closed.
Janow believes the treaty will not only benefit the economies and corporate interests of both nations, but also help rebuild confidence in the world economy in general.
Chinese Premier, Li Keqiang, has noted that China will give American investors greater access to the Chinese marketplace. In exchange, he hopes that America will return the favor, allowing investment opportunities to flow to the benefit of both public and private interests in both nations.
