Print PDF

Practice Areas

U.S., China Pledge to Speed Talks on Investment Treaty, Discuss Other Issues

Tuesday, September 29, 2015
Sandler, Travis & Rosenberg Trade Report

Following a meeting between President Obama and Chinese President Xi Jinping last week, the U.S. and China said they will speed up talks on a bilateral investment treaty and pledged to continue working to resolve issues on technology trade.

BIT. The two sides said it remains a “top economic priority” to negotiate a high-standard bilateral investment treaty “that reflects a shared commitment to the objectives of non-discrimination, fairness, and transparency, that effectively facilitates and enables market access and market operation, and that represents on each side an open and liberalized investment regime.” In light of the progress made during the 21 rounds of talks to date, and both sides’ improved negative list proposals in September, the U.S. and China said they will intensify the negotiations and work expeditiously to conclude a mutually beneficial treaty.

However, hope that a BIT could be finalized by the time President Obama leaves office in January 2017 appear to be dwindling. U.S. Trade Representative Mike Froman cautioned that “we are a substantial distance from the kind of high standard agreement necessary to achieve our mutual objectives,” which will require China to maintain “a domestic legal and policy regime that provides for an attractive investment environment so that what is given with one hand is not simply taken back with the other.”

Technology. The U.S. and China emphasized the importance of developing and protecting intellectual property, including trade secrets, and not advancing generally applicable policies or practices that require the transfer of intellectual property rights or technology as a condition of doing business in their respective markets. Prior to the meeting, Froman said the U.S. is concerned that China is pursuing these types of policies.

The two sides also asserted that generally applicable measures to enhance information and communication technology cybersecurity in commercial sectors should be consistent with World Trade Organization agreements, be narrowly tailored, take into account international norms, be nondiscriminatory, and not unnecessarily impose nationality-based conditions or restrictions on the purchase, sale or use of ICT products by commercial enterprises. U.S. congressional leaders have expressed criticism of Chinese “policies that would compromise the integrity of U.S. technology companies’ products and services by forcing them to localize data or production or disclose source code.” The lawmakers said that while there has been some recent progress in this area, “China has not fully abandoned these policies and the recently-adopted national security law and draft cybersecurity and counterterrorism laws under consideration create grave concerns that China remains headed in the wrong direction when it comes to the global digital economy and innovation.”

Investment. The U.S. and China both pledged to:

- limit the scope of their respective national security reviews of foreign investments solely to issues that constitute national security concerns, an issue on which both sides have been openly critical of the other;

- apply the same rules and standards to each investment reviewed regardless of country of origin;

- seek to address any national security risk posed by a potential investment as expeditiously as possible, including through targeted mitigation rather than prohibition whenever reasonably possible; and

- not use information provided by entities not party to an investment to promote the commercial interests of a competitor of a party to that investment.

In addition, the U.S. Department of Commerce and the Chinese Ministry of Commerce will seek to complete at this year’s U.S.-China Joint Commission on Commerce and Trade a memorandum of understanding highlighting the priority that each agency places on facilitating sub-national economic, trade and investment cooperation.

High-Tech Exports. The U.S. made no additional commitments in response to continued Chinese requests to liberalize exports of commercial high technology items to China for civilian end users and end uses. Instead, the U.S. reiterated its commitment to “encourage and facilitate” such exports and both sides said they would continue discussing the matter within the U.S.-China High Technology and Strategic Trade Working Group.

Wildlife Trafficking. The two countries vowed to enact nearly complete bans on ivory imports and exports, including significant and timely restrictions on the import of ivory as hunting trophies, and to take significant and timely steps to halt the domestic commercial trade of ivory. They also decided to cooperate with other nations in a comprehensive effort to combat wildlife trafficking.

To get news like this in your inbox daily, subscribe to the Sandler, Travis & Rosenberg Trade Report.

Customs & International Headlines