The new American ambassador to China, Max Baucus, will be looking to leave his mark with a China-U.S. investment treaty. While China and the United States are major trade partners, the legal framework governing investments between the two countries is rather complex and cumbersome. A new investment treaty could potentially open up investments flow between the two economic powerhouses.
Ambassador Baucus, a former senator from Montana, outlined his ambitions at his first public speaking engagement. The engagement was a luncheon with American business leaders in China. While Ambassador Baucus has been on the ground since March, it appears that he has been focusing on getting his own house in order before reaching out to the community at large.
Trade negotiations will be complicated by national interests
The United States and China are currently engaged in talks to establish a new trade treaty that would open up trade between both nations. Talks have been on-going since last July, but given the national rivalry between the United States and China, and the implications of any such deal for both countries, progress has been rather slow so far.
Regardless, the deal itself could be quite substantial. According to the U.S. Treasury department, the Chinese government has committed to negotiating a bilaterial investment treaty (BIT) that would include all stages of the investment process and all sectors. Apparently, this is the first time that the Chinese government has demonstrated a willingness to engage in such open-ended and wide-sweeping talks.
The U.S. Treasury department believes that any BIT between China and the United States will increase transparency and will level the playing field between American and Chinese companies. Currently, Chinese companies face numerous obstacles when investing in the United States, and American companies face many obstacles when investing in China. A bilateral trade agreement could ease these obstacles by reducing regulations and investment requirements.
Ambassador Baucus downplays Committee of Foreign Investment
The Committee on Foreign Investment has garnered a lot of buzz in recent years for blocking several large Chinese investments due to national security concerns. Ambassador Baucus, however, has downplayed the committee, arguing that in the grand scheme of things, its restrictions are rather minor.
Whether or not the Chinese will see it that way, however, remains a different matter. The Chinese media, much of it state-owned, has repeatedly used the issue to lambaste the United States and to stoke anti-American sentiments. Meanwhile, with concerns over China's growing power increasing tensions in the United States, it's unlikely that American politicians will agree to any reduction in their power to vet Chinese investments that could present a threat to national security.