Updated 12:50 pm, 7/12/2013

The United States and China agreed Thursday to begin negotiating a bilateral-investment treaty (BIT), which could open up more business opportunities for American firms in the Chinese market. US Treasury Secretary Jacob Lew said in a statement that the agreement was a “significant breakthrough.”

“A high-standard US-China bilateral investment treaty is a priority for the United States and would work to level the playing field for American workers and businesses by opening markets for fair competition,” he said. The announcement was made at the end of the fifth annual Strategic and Economic Dialogue (S&ED), a yearly forum to address broad issues between the United States and China, including the global economy, trade, international affairs, energy, and security.

A BIT could take years to finalize, and would require that China open up its investment system, which currently restricts or prohibits investment by foreign firms in nearly 100 industries, to American firms. BIT negotiations with China started in 2008, but were stalled after the US government decided to review its model for the bilateral treaties.

John Frisbie, president of the US-China Business Council, has said that “a bilateral investment treaty, if it addressed ownership barriers in China, could also provide a boost to the relationship and provide needed additional protections to US and Chinese investors in both markets.” (The China Business Review is published by the US-China Business Council.)

China also agreed to further open its services sector to foreign investment, including ecommerce, and committed to expanding opportunities for US financial services firms. The United States is the largest services economy and currently has a $15 billion trade surplus in services exports with China.

China said it would commit to opening up its government procurement market by submitting a revised offer to the World Trade Organization’s Government Procurement Agreement by the end of the year, which would level the playing field for foreign firms bidding on government contracts in China. According to the Treasury Department, China also agreed to eliminate preferential pricing of energy, land, and water for China’s state-owned enterprises. Foreign businesses have complained that Chinese companies, both state-owned and private, pay below market rate for such inputs and sometimes receive preference in government licensing and other areas.

S&ED Day 1

US and Chinese government officials kicked off the fifth annual S&ED Wednesday in Washington, DC by emphasizing the interdependence of both economies and the need to work together on pressing international issues.

“The stakes are very high because it’s fair to say that the dynamic that emerges between our nations will affect not just our peoples, but quite frankly, have a significant impact on the entire world,” US Vice President Joe Biden said during the opening session on Wednesday.

In his remarks at the opening session of the economic track,  Lew emphasized that as the world’s two largest economies, the United States and China “share the responsibility to work together constructively, even sometimes in the face of our differences.” He said participants would have “frank discussions” about investment and creating a level playing field for companies from both countries, as well as theft of intellectual property through state-affiliated cyber attacks.

Cybersecurity

Cybersecurity has been one of the major issues at this year’s talks. A senior Obama administration official said during a press briefing Thursday that the US government “had candid conversations about our concerns, cyber-enabled theft of – economic theft of intellectual property, trade secrets, and business proprietary information.”

While officials said the first meeting of the US-China Cybersecurity Working Group was productive and focused on ways to build trust between the two countries, revelations by former intelligence contractor Edward Snowden of widespread intelligence gathering by the US government were expected to affect the talks.

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Energy and the environment

The US-China Working Group on Climate Change agreed Wednesday to five new initiatives to reduce greenhouse gas emissions in both countries. The group agreed to reduce emissions from heavy duty and other vehicles, implement carbon capture, utilization and storage projects, improve energy efficiency, improve greenhouse gas data collection, and promote smart-grid systems to promote use of renewable energy.

The two countries also designated six new “eco partnerships” to encourage cooperation between the United States and China on clean energy and sustainable development.

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Christina Nelson

Posted by Christina Nelson