July 12, 2013 / 12:46 AM / 5 years ago

U.S., China to relaunch talks on investment treaty

WASHINGTON (Reuters) - The United States and China agreed on Thursday to restart stalled negotiations on an investment treaty, with Beijing dropping previous efforts to protect certain sectors of its economy from the start.

U.S. Treasury Secretary Jack Lew (R) shakes hands with Chinese Vice Premier Wang Yang after the U.S.-China Strategic and Economic Dialogue (S&ED) Joint Opening Session at the State Department in Washington July 10, 2013. REUTERS/Yuri Gripas

“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 Jack Lew said in a statement.

China and the United States began negotiations on a pact to govern bilateral investment in 2008 under then-U.S. President George W. Bush, but discussions were put on hold after President Barack Obama took office the following year.

Previously, Beijing had only agreed to talks if certain Chinese industries, especially in its service sector, were exempt. But it agreed to drop blanket restrictions for the current talks, a U.S. Treasury official said.

The official, briefing reporters on the sidelines of U.S.-China economic talks, said the move was an encouraging sign the world’s second-largest economy was willing to open up more sectors to foreign competition.

Chinese Commerce Minister Gao Hucheng told reporters China hopes to move from technical discussions to “a substantive stage of negotiations as soon as possible.”

“All these technical discussions have paved the way for the substantial negotiation,” he said. “There is a common purpose, which is to try to find ways to reduce and mitigate differences and barriers that both sides place in our trade and investment relations.”

U.S. business groups welcomed the move, but warned that both sides still face many other tough issues and that negotiations on a treaty could be lengthy. Any pact would need to be ratified by the U.S. Senate.

“The U.S. Chamber called for this last year as a pre-condition, and we are very pleased that both governments rose to the challenge,” said Myron Brilliant, head of international affairs at the U.S. Chamber of Commerce.

U.S. investors face barriers or ownership limits in about 90 Chinese sectors, while Chinese companies seeking to invest in the United States often fear a political backlash in Congress or rejection on national security grounds.

“If China negotiates a treaty that not only protects investments after they are made but also improves U.S. investors’ access to the Chinese market, this would be a real breakthrough,” said Michael Smart of consultants Rock Creek Global Advisors who worked on investment issues in the Bush White House.

“It would mean greater transparency for investors and an opportunity to address real market access concerns.”

The U.S. official, speaking on condition of anonymity, said China also plans to establish a Shanghai Free Trade Zone pilot program and permit foreign firms to compete in certain service sectors, including e-commerce.

The United States also expects to see more progress on China’s move toward a freely floating exchange rate in coming weeks, the official said.

Additional reporting by Paul Eckert and Doug Palmer; Wrwiting by Anna Yukhananov and Tim Ahmann; Editing by Dan Grebler and Cynthia Osterman

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