China-U.S. Trade Law : International Trade Lawyer & Attorney : Baker Hostetler Law Firm : Trade Remedies, Customs & Export Controls

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The European Union has moved ahead of the United States in negotiating a bilateral investment treaty with China, as predicted previously here on Baker Hostetler’s China U.S. Trade Law blog. Chinese Commerce Minister Chen Deming and EU Trade Commissioner Karel De Gucht made the announcement on Thursday, July 14, 2011 in Beijing following the 25th meeting of the joint economic and trade commission between China and the European Union.

Both China and the European Union expressed concerns that likely will be key topics of the negotiations. As reported by Xinhua, Europe’s primary concerns are compulsory certification regulations, export credits, and exports of raw materials. For China, primary concerns are high tech trade, registration of herbal medicine, and Europe’s policies applying anti-subsidy, or countervailing duties, to China. These issues are unlikely to stand in the way of a treaty agreement, however, because China has demonstrated a significantly increased commitment to its economic relationship with Europe and is eager to continue attracting foreign investment.

Even before this month’s news about raising the United States’ debt ceiling, China appears to have been shifting its trade and investment focus away from the United States and toward Europe. Economists tracking China’s purchases of U.S. Treasury debt have observed an unexplained gap between the decrease of those purchases and an increase in China’s foreign exchange reserves. The Chinese government remains guarded about its foreign exchange holdings, but some economists believe the gap can be explained by a redirection of foreign investment to Europe.

The announcement of bilateral investment treaty negotiations also comes on the heels of Premier Wen Jiabao’s five-day tour of Hungary, Germany and England, which began on June 24. Trade between the EU and China has risen rapidly this year—twenty-one percent higher than last year, when bilateral trade totaled $480 billion (by comparison U.S.-China trade in 2010 totaled $457 billion). And China is reported to be the fastest rising destination for European exports.

Twelve agreements were signed between China and Hungary during the visit, and China has shown interest in purchasing Hungarian state bonds, as well as investing in the government-owned airline and rail companies. The China Development Bank reportedly has made a one billion euro credit available for joint business ventures with Hungary.

China and Britain reached trade agreements worth $2.2 billion and set goals for doubling trade between the two countries to $100 billion by 2015. British natural gas company, the BG Group, signed a $1.5 billion financing deal with Bank of China.

China and Germany signed agreements worth more than $15 billion, including purchases of aircraft and collaborative automobile investments. China already has a trade deficit with Germany, and German exports of high-technology goods continue to increase.

China also has given Europe repeated assurances that it would invest in European sovereign debt, including purchases of Greek government bonds, in order to continue to support Europe and the euro. EU Trade Commissioner De Gucht has maintained that China cannot be the solution for Europe’s debt crisis, but admits that the Chinese investment “certainly helps.”

Meanwhile, China is urging the United States to act responsibly and protect the interests of debtholders in deciding whether to raise the U.S. debt ceiling. Chinese ratings agencies have downgraded U.S. sovereign debt, which might be dismissed were it not for the fact that the three largest U.S. credit rating agencies lean ever more in that direction with the August 2 deadline fast approaching with no agreement in the U.S. Congress to raise the debt ceiling.

Europe has the attention of the Chinese for the moment. The United States will have to get its economic house in order, before it can start courting China again for an investment treaty. It also would not hurt for the United States to approve Free Trade Agreements with Colombia, Panama and South Korea, which have been in limbo since they first appeared to be concluded during the George W. Bush administration in 2006 and 2007, to show that a politically sensitive agreement like a U.S.-China investment treaty ultimately can get done. Perhaps the EU-China negotiations will lead to additional Chinese reforms that will help pave the way for a future U.S.-China treaty, but for now it would seem the United States has a lot of catching up to do.
 

        中美贸易法博客先前撰文指出，欧盟对华双边投资协定谈判已经领先美国一步。2011年7月14日，中国商务部部长陈德明和欧盟贸易代表德•古赫特在结束第25届中欧经贸混委会会谈后宣布宣布这一结果。

        中国和欧盟都分别对一些经贸议题深感忧虑，这些议题将成为会谈重点。据新华社报道，欧盟最关注的议题是：许可证规定、出口信贷及原材料出口。中国主要关注：高科技贸易、中药产品注册以及欧盟是否对中国采取反补贴调查。但是这些议题不太可能阻碍双边协定谈判，因为中国已经表现出她对中欧经贸关系的重视、并希望继续吸引外资。

        本月种种有关提高美国负债限额的新闻发布之前，中国已经表现出将贸易和投资重点从美国转移至欧洲的政策倾斜。追踪研究中国购买美国国债的经济学家发现，中国的购买增速正在减弱，而中国的外汇储备却不断增加，这一差距颇令人费解。中国对外汇储备仍异常重视，但是一些经济学家认为导致这一差距的原因是中国将对外投资逐步转移至欧洲。

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Chinese leaders have participated in high-level strategic talks with both the United States and Europe in recent months, during which China reiterated its interest in a bilateral investment treaty (BIT) with each of them. EU officials went to Beijing in December 2010 for the Third China-EU High-Level Economic and Trade Dialogue, and President Hu Jintao met with President Obama in Washington D.C. in January 2011.

There are similarities in China’s economic relationships with these two trading partners—the United States and Europe both seem to be increasingly dependent on China for the health of their financial markets and economic growth. However, differences in the relationships suggest that China may be closer to reaching a BIT with the EU than with the United States.

The United States may appear, on the surface, to be more dependent on China for financial support than Europe. China holds over $900 billion of U.S. sovereign debt. Notwithstanding the United States’ financial troubles, China continues to hold vast sums of U.S. treasuries, which has played a critical role in financing the U.S. wars in Iraq and Afghanistan, as well as the expanding costs of U.S. “homeland security” and domestic social programs. The United States has told China that it will focus “on reducing its medium-term federal deficit and ensuring long-term fiscal sustainability,” and has asked China to stimulate a domestic demand that would absorb more U.S. exports, but even if the two countries did as suggested, China still would remain the largest financial backer of U.S. debt.

Recently, as Portugal, Italy, Ireland, Greece and Spain all have threatened the stability of the euro, China has taken on a larger role as a banker for Europe. China reportedly bought €6 billion of Spanish bonds, committed to buy another €5-6 billion of Portuguese bonds, and pledged to back Europe in its efforts to bail out Greece. China’s euro commitments are still far from the level of its holdings in dollars, but the precarious state of the euro, and therefore the European Union, means that E.U. leaders may have a more compelling need for cooperation with China than the United States.

President Obama has been promoting China as a market for U.S. exports and as a solution (rather than the problem) for reducing the trade deficit, stimulating economic growth, and promoting job expansion. In his 2011 State of the Union address, he said, “To help businesses sell more products abroad, we set a goal of doubling our exports by 2014 — because the more we export, the more jobs we create here at home. Already, our exports are up. Recently, we signed agreements with India and China that will support more than 250,000 jobs here in the United States.” 

E.U. leaders similarly have been looking at China to stimulate exports, economic growth and jobs. China has been the second-largest foreign market for European goods, and exports grew last year by more than thirty percent. The promise of new jobs is especially important for Europe. There have been strikes and threats of strikes in Greece, Portugal, Italy and the U.K., and fears that public sector jobs will be cut substantially as the European governments try to reign in public spending and get their financial houses in order. 

Europe and the United States both have significant trade imbalances with China but, according to the European Commission’s Vice President, Joaquin Almunia, the E.U. is focused less on revaluation of the yuan and more on increasing E.U. companies’ investments in China. In addition, Europe appears to be increasingly more willing to relax export controls on high-tech goods, which might help reverse some of the trade balance and, perhaps more importantly, would gain the appreciation of Chinese officials who have complained about such restrictions among their Western trading partners.

As Europe’s interdependence with China is accelerated by the debt crisis, so also, it would seem, Europe will leap ahead of the United States in signing a BIT with China. When the two delegations discussed trade and investment issues in Beijing last December, China emerged with a commitment from the European delegation that the Europeans would “speed up a feasibility study for a bilateral investment treaty.” During President Hu’s visit to Washington, negotiations for a U.S.-China BIT were mentioned, but members of the U.S. Congress subsequently have complained about the Obama administration’s inaction on a BIT, and even FTAs with Colombia and Panama, pending for years, have remained tied up by labor rights interest groups. Negotiations and ratification of a U.S.-China BIT, although an eventual likelihood, certainly will not be easier than finalization of the agreements in Central and South America.

As the United States seems slowed by trade politics in pursuing the investment treaty that might help open the Chinese market for American companies and attract more Chinese investment into the United States, China should have an easier time accepting the terms of a BIT with Europe than with the United States. E.U. BITs typically have not provided guarantees for market access during the pre-investment phase, but rather only after the investment has been established. By contrast, U.S. BITs require that the host government provide foreign investors national treatment, for example—meaning the same rights as domestic investors—at the pre-investment stage, which remains one of the hurdles to agreement on a U.S.-China BIT.

It is not unusual for European negotiators to wait for the results of American negotiations and then seek comparable terms. The course of Chinese accession to the WTO was marked by such a strategy. However, in those negotiations, China was primarily obliged to accept tough terms. The BIT negotiations define more equal ground for the negotiating parties. Europe may not wait for the United States to extract better terms because it may not want to wait, and it may not think the United States is in a position to fare better in negotiations. Moreover, because the Europeans typically are not as demanding as the United States in BIT negotiations, China likely will find completion of a deal with Europe more attractive, and will be able to get it done more quickly.

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Despite the joint announcement of the United States and China that both countries would “expedite negotiation on a bilateral investment treaty” (abbreviated in English as a “BIT”), the notion of a BIT between the United States and China, two of the world’s five largest economies, remains inconceivable for some. On the U.S. side, there are significant political obstacles: free trade and foreign investment typically are not successful campaign platforms for U.S. politicians during an economic recession, especially in an election year. U.S. politicians would not likely accept a BIT while strong disagreement remains over China’s currency policies. China’s pegging of the yuan to the dollar remains an irritant (indeed, the only trade issue on President Obama’s agenda in Beijing in November), notwithstanding that it may have enabled critical flows of debt-financing while the United States endured the depths of a recession while still needing billions for military actions in Iraq and Afghanistan. There are obstacles on Chinese protection and enforcement of U.S. intellectual property, controlled Chinese capital markets, and laws raising national treatment concerns for American investors trying to establish investments in China, according to Amy Tsui’s BNA Int’l Trade Daily article.  Political support for a BIT with China does not look promising, particularly with a Congress whose Democratic leadership is often openly suspicious of Chinese trade and investment intentions.

China has its own policy disagreements with the United States, including on trade issues such as the United States’ safeguard duties on Chinese tires. China also has been reluctant to embrace international arbitration of investor-state investment disputes to the degree that the United States would demand using the 2004 U.S. Model BIT as the basis for negotiations.

Notwithstanding these obstacles, there are reasons to believe that a U.S.-China BIT is not a question of “whether” but “when.” When the Bush Administration announced in June 2008 that the United States and China had been discussing a BIT as part of the Strategic Economic Dialogue, at least one observer wondered whether the announcement meant a deal had been completed. According to a U.S. official, talks of a U.S.-China BIT already had been going on for seventeen months. Under the Obama Administration, it appears that discussions are continuing “in technical stages [but] have not yet reached political decisions.” (“ACIEP Report on Model BIT Lacks Consensus on Critical Issues,” Inside U.S. Trade, Oct. 2, 2009.)

BITs are smaller in scope than free trade agreements (“FTAs”). The negotiations, therefore, are much more attainable, in terms of both the substance and the political capital expended to reach an agreement. BITs tend to favor the country in the agreement that is the larger exporter of capital, which usually has meant that the United States stood to benefit far more than its treaty partner. Of the approximately 60 countries with whom the United States previously has agreed on BITs or FTA investment chapters, Canada and South Korea are the only significant exporters of capital.

U.S. businesses see BITs as a way to open up access to foreign markets, and China would be no exception. For many years, U.S. industries have been looking for ways to improve access to China’s one billion consumers and to eliminate restrictions on or disincentives to foreign investment, particularly as, during recent years of high economic growth, the Chinese have accumulated unprecedented wealth for a developing country.

China, unlike most of the United States’ treaty partners in prior BITs, has become a significant exporter of capital, but this fact probably makes a BIT even more likely. Since 1998, China has been renegotiating BITs it had with many European countries in order to provide greater protection for its own investors doing business in Europe. Recently, China also has been in BIT negotiations with Canada. As China increases its investments in the United States, it becomes increasingly likely that China will want the same protections for its investors doing business there.

There have been critics in the United States fearing that BIT provisions for international investor-state arbitration circumvent U.S. judicial, legislative and regulatory processes, and many certainly would oppose a BIT with China given the implications for U.S. environmental and labor standards. And yet, there is little reason for anyone to believe that the United States would be overrun with foreign claims under a U.S.-China BIT. Notwithstanding Canada’s significant investments in the United States market, in the sixteen-year period since the adoption of NAFTA’s investment chapter no arbitration tribunal has required the United States to pay on a single claim.

Political concerns over U.S. national security restrictions on investment have subsided since 2005 when CNOOC’s bid to purchase UNOCAL was blocked, as discussed in our previous post in December. Specific transactions still may be blocked, but those decisions appear to be driven more by the national security analysis of a particular case than by reactionary measures to calm an agitated Congress, as discussed in our earlier post in January.

U.S. industry representatives have recommended that the United States should consider softening the “essential security” exception in its Model BIT language to allow foreign investors greater assurances that their investments will not be disrupted by disguised protectionist motivations.  (“ACIEP Report on Model BIT Lacks Consensus on Critical Issues,” Inside U.S. Trade, Oct. 2, 2009.)  While they plainly intend for the exception to be softened as to foreign countries’ restrictions on foreign U.S. investment, the reciprocal nature of such a provision would be appealing to the Chinese as well. There may not be enough sympathy in Congress, however, for such a departure.

Negotiation of a China-U.S. BIT will not be quick and easy, but it remains likely. China is an expanding market attracting foreign investment from around the globe. American enterprises want to invest there and would like more security for their investments. Such incentives historically have driven the United States to negotiate BITs.

This time, however, there is an added and critical dimension. China has amassed capital and is beginning to invest abroad. The United States not only is an attractive market; the United States also needs a substantial share of that investment for the growth of its own economy. Chinese businessmen, like Americans, want investment security. This time, therefore, the BIT partners share a common vision of an agreement that will attract investment to their own countries while protecting their citizens investing abroad. Such unusual balance may make the negotiations more difficult, but they also make a positive result more likely.
 

        尽管美国和中国共同宣布，两国将“加快双边投资条约”谈判（英文缩写为“BIT”），美国和中国——世界五大经济体中的两大国签订双边投资条约这一概念对一些人士而言仍然有些不可思议。在美国这一条约面临重大政治障碍：在经济衰退时期，尤其是选举年，自由贸易和外国投资通常不会成为美国政治家成功的竞选纲领。当美中在中国的货币政策问题上仍存在重大分歧时，美国政治家不可能接受双边投资条约。中国把人民币汇率与美元挂钩仍然让美国不满，（事实上，这是奥巴马总统11月北京之行议程上唯一的贸易问题），尽管它为经历经济衰退、同时为在伊拉克和阿富汗的军事行动支付数十亿美元的美国的债务融资、资金流动起到关键作用。中国在保护美国知识产权方面仍面临重重困难、严格控制本国资本市场、是否给予试图在华投资的美国投资者国民待遇这一法律问题等等。因此赢得支持双边投资条约的政治资本不容乐观，特别是美国国会的民主党领导经常公开对中国贸易和投资意向提出质疑。

        中国也存在对美政策分歧，包括就中国轮胎征收特保税等贸易问题。美国要求以2004年双边投资条约范文作为国际投资者与国家间投资争端仲裁谈判的基础，中国一直不愿妥协至这一程度。

        尽管存在这些障碍，但有理由相信美中签订双边投资条约不是“是否”，而是“何时”的问题。当布什政府于2008年6月宣布美国和中国把讨论双边投资条约作为战略经济对话的一部分，至少有一名观察员猜想这一宣布是否意味着已经基本达成协议。据美国官员，美中会谈已经进行了17个月。在奥巴马政府任内，“谈判仍在技术层面，还没有达到政治决定层面”。(“ACIEP Report on Model BIT Lacks Consensus on Critical Issues,” Inside U.S. Trade, 2009年10月2日.)

        双边投资条约比自由贸易协定范围较小。因此，就实质内容和政治资本支出而言，双边投资条约谈判更容易达成协议。双边投资条约倾向于在该协议中较大的资本输出国，这通常意味着美国得到的好处远远超过它的条约伙伴。已与美国达成双边投资条约或是自由贸易条约投资章节的60多个国家中，加拿大和韩国是仅有的重要资本输出国。

        美国企业认为双边投资条约是开放外国市场的方式，中国也不例外。多年来，美国企业一直在寻找途径，更好地接触中国10亿消费者，并消除或抑制限制外国投资的措施。特别是近几年来中国经历了高速经济增长，已经积累了对一个发展中国家来说前所未有的财富。

        不像大多数已经与美国达成双边投资条约的条约伙伴，中国已成为重要的资本出口国，但这一事实很可能使双边投资条约更有可能实现。从1998年以来，中国已与许多欧洲国家重新谈判双边投资条约，以便为她在欧洲经商的投资者提供更好的保障。最近，中国也与加拿大展开双边投资条约谈判。随着中国增加在美投资，中国可能也越来越希望保护在美经商的投资者的利益。

        目前在美国已有批评者担心双边投资条约中的国际投资者与国家间投资争端仲裁条规将规避美国司法、立法和行政监管程序；由于牵涉美国环境和劳工标准，还有许多人肯定会反对与中国签订双边投资条约。然而没有人有理由相信美国将被美中双边投资条约下的对外索赔淹没。尽管加拿大在美国市场投资数额巨大，自《北美自由贸易协定》投资章采纳16年以来，仲裁庭没有一次要求美国支付索赔。

        正如我们在先前的帖子中讨论的，自2005年中海油收购UNOCAL受阻以来，美国对外资进行国家安全审查带来的限制的政治担忧已经消退。本博客一月的文章指出：具体交易仍可能会被封锁，但这些决定似乎更是建立在国家安全分析基础之上，而不是对激动不已的国会的回应。

        美国产业界代表建议美国应考虑软化双边投资条约范本中的“重要安全”例外条款，给予外国投资者更大的投资不被伪装的保护主义中断的保证。(“ACIEP Report on Model BIT Lacks Consensus on Critical Issues,” Inside U.S. Trade, 2009年10月2日.) 这明显是为了减弱外国对美国对外投资的限制，这一互惠规定也一定对中国很有吸引力。但在国会，这种偏离可能不能赢得足够同情。

        谈判中美双边投资协定将不会简单快捷，但它仍然有可能实现。中国不断扩大的市场吸引了来自世界各地的外国投资。美国企业想要在华投资，并希望他们的投资更加安全。历史上，这种奖励驱使美国参与双边投资条约谈判。

        然而，这次谈判有一重要附加方面。中国积累了资本，并开始在国外投资。美国不仅是一个具有吸引力的市场，美国也需要这些投资大幅增长、促进自己的经济发展。和美国商人一样，华商想要确保投资安全。因此，谈判双方共享的一个目标：吸引投资流向本国，同时保护本国公民对外投资。这种不寻常的平衡可能使谈判更加困难，但同时更有可能促进实现积极结果。

（翻译：朱晶）

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