U.S., China to start talks on bilateral investment treaty

By Don Lee

July 11, 2013 12 AM PT

WASHINGTON -- The U.S. and China will begin substantive talks on a comprehensive bilateral investment treaty, a development that American officials described as a major shift by the Chinese that could give U.S. firms greater market access to many more products and services.

U.S. and other foreign businesses in China have long complained about restrictions in investment and trade. Chinese rules prevent foreign companies from taking majority ownership in dozens of manufacturing and farm goods and services, including cars, oil seed processing, insurance and banking.

The agreement to launch the negotiations was announced Thursday afternoon near the end of the U.S.-China annual security and economic dialogue, taking place this year in Washington.

“The commitment made today stands to be a significant breakthrough and marks the first time China has agreed to negotiate a bilateral investment treaty, to include all sectors and stages of investment, with another country,” U.S. Treasury Secretary Jacob J. Lew said in a statement.

Neither side specified when the talks would start, but Chinese Commerce Minister Gao Hucheng, speaking on the sidelines of the two-day dialogue, said it would begin “as soon as possible.”

John Frisbie, president of the U.S.-China Business Council, which represents major American companies operating in China, said it remains to be seen whether the Chinese are serious in negotiating a treaty that would in principal include everything, though there could be exceptions for certain strategic goods and services.

But if they are serious, he said, “this could be a significant move forward.”

Frisbie said one reason the Chinese may be open to a broad investment treaty is that it would help them gain greater access to American goods and markets.

A senior Treasury official offered another reason for the seeming change of attitude on the part of the Chinese: China is now in an economic transition in which the new leaders, after years of focusing on manufacturing and infrastructure investments, want to broaden the economy by boosting services and innovation. And an investment treaty, the Treasury official suggested, would help Beijing in its goal as foreign competition could also drive faster development in services and related businesses.

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