US-China Bilateral Investment Treaty (BIT) Negotiations: Still Nothing to Sink One’s Teeth Into

Prior to the opening of the just concluded 7th U.S.-China Strategic and Economic Dialogue (S&ED) there was some hope the two countries might make progress on a BIT. China fed the optimism somewhat, with a Chinese official lauding the fact the two sides had exchanged negative lists and were working to improve and shorten their lists. External observers concurred with one commentator asserting the mere fact there was an exchange of negative lists represented “huge progress” and that a BIT deal, the two countries’ “top economic priority,” might be struck before U.S. President Barack Obama’s term in office ends, despite numerous political tensions. The American business community indisputably covets a deal, viewing it as a way to gain greater market access in China, to reduce operating and ownership restrictions, and expand dispute resolution options. It is not so clear, though, what national interests and/or special interest group pressures would drive China to make significant compromises. As well, while China and the US have separated politics and economics in the past, the two sectors are not so obviously divisible now as frictions over cybersecurity and industrial espionage make clear. Indeed, many foreign businesses believe political considerations are pushing China towards creating an increasingly unfriendly environment for foreign firms. For its part, China is displeased with the U.S.’s negative list, which contains vague restrictions on key infrastructure, technology, and national security investment. Given the above, it is no wonder the 7^th S&ED yielded little progress on a BIT with both sides merely committing to exchange updated offers later. At this point, it is hard to envision dramatic negotiating progress unless Beijing decides greater American FDI would offer significant economic benefits at a reasonable cost, a BIT would dramatically benefit Chinese companies pursuing investment in the US, or political imperatives necessitate a deal.