China-USA: Investment Negotiations have a Long Way to Go

Depending on the point of view, the economic crisis either provokes depression or inspires brilliance.  In the first case, the perception of decline prevails, a horizon with new players on the international scene.  In the second, an opportunity is presented to study the possible methods of managing and not succumbing to the redistribution of power.  Some equations can be solved while others remain inextricable.  The commercial and political accords that subtend the issue are visible on the front pages of newspapers.  The US and Asia’s attempts to contain China are evident in their work to form a Trans-Pacific Partnership (TPP).  More direct economic motivations underlie burgeoning negotiations for a Transatlantic Trade and Investment Partnership (TTIP) between the two shorelines.  The US and Europe lack strong political contentions and can dedicate themselves to facilitating trade to alleviate incongruences, promoting and stimulating competition.  Less well known was the launch of mutual talks between the US and China to create a Bilateral Investment Treaty (BIT).  The decision to reprise negotiations—inaugurated by Bush in 2008 and subsequently blocked by Obama—was made during the Strategic and Economic Dialogue (SED).  The top political leaders were absent from the annual SED conference, but their inspiration was evident.  The recent meeting in Washington justified the existing tensions between the two countries concerning the security of information technology and industrial espionage, themes that have imbued the media.  In reality, both countries would benefit from a treaty that facilitates and protects reciprocal investments.  The terrain is ripe for improvements; until now suspicion, prohibitions, and fairly camouflaged restrictions have prevailed.  The decisive obstacles posed for Cnooc and Huawei in the US have aroused clamor, while the differential treatment of international companies in public procurement on behalf of the Chinese government are also notable.  Albeit gradual, the elimination of barriers would have undeniable benefits: access to technology for Beijing, modernization of services in China for American companies, and access to the largest consumer market, and the one with the greatest margins for growth.  If Hong Kong is included in the calculation, China has already surpassed the US as a destination of international investments.  At the same time, it became the second largest source of outbound foreign investment.  Flow toward the US remains limited, however: in 2012, only 2% of Chinese capital was directed toward the US, contrary to the amount aimed at countries rich in natural resources in Africa and Latin America.  Nonetheless, a realistic evaluation recommends caution.  An eventual BIT would harm vested interests, and, above all, would induce the US to negotiate an asset that it holds almost exclusively: technological superiority.  Washington is prepared to suffer China’s overtaking it in terms of GDP.  Obviously, it cannot resign its position at the forefront of productivity, the irreplaceable foundation of its superiority.  For this reason the BIT, aside from a diplomatic skirmish, needs strong political backing.  But this is contested by looming electoral affairs in the US, where anti-Chinese sentiments are taking root and strengthening.  An array of opinions and interests are marshaling against China, from labor unions to small businesses, human rights activists and the Taiwanese lobby.  Everyone ascribes unfair competition, human rights violations, and lack of transparency to China.  China is an easy target in electoral campaigns.  On the other hand, Obama cannot neglect the economic power that extends itself from the other side of the pacific.  An autarkic solution is not feasible, and a negotiable one is fraught with difficulty, right at a time when the economic crisis dictates urgent resolutions.