Lawmakers Anxious for U.S.-China Discussions to Yield Trade Results

Lawmakers Anxious for U.S.-China Discussions to Yield Trade Results

Now that the United States and China have agreed this month to resume talks toward an investment treaty, pro-trade lawmakers are urging the Obama administration to complete an agreement while also wrapping up a separate, sweeping Trans-Pacific Partnership deal.

An investment treaty with China has long been on the agenda but the negotiations were stalled after the Obama administration said it was taking another look at the talks. Treasury Secretary Jacob J. Lew this month announced the restart during a recent Strategic and Economic Dialogue with China in Washington.

“As a government in the first term, the president took a look at the bilateral investment treaties,” said Rep. Kevin Brady, R-Texas, at a Ways and Means hearing last week on trade policy. “We sort of pulled the truck to the side of the road, took a look at the engine, made some adjustments. But now it’s really time to get back on down the road, and it’s an important tool.”

At the same hearing, Ways and Means Chairman Dave Camp, R-Mich., urged the new U.S. trade representative Michael Froman to use bilateral investment treaties, or BITs, to help break down trade barriers that U.S. companies encounter abroad.

“We should use our bilateral investment treaty agenda as one tool to address these concerns,” Camp said.

Froman told the lawmakers the investment treaty with China already holds promise because the country has agreed to make it easier for U.S. companies to invest in more sectors.

“Now obviously, the devil will be in the details, and we have not yet even begun to negotiate,” Froman said. But, he said, that word from China is a “potentially very positive development.”

House lawmakers may be working to build pressure in support of the U.S.-China treaty, but once finalized it will be only the Senate that will need to ratify it — unlike trade agreements, which require the approval of the entire Congress.

Brady also quizzed Froman on whether negotiators could finalize the TPP deal, a pact with more than a dozen nations including potentially Japan, by year’s end. Froman said that timeline was “ambitious” but remained the objective.

Many trade policy observers view the TPP as a counterbalance to China, but some have questioned whether the concessions that China has agreed to as part of the BIT might signal its interest in signing on to the TPP deal.

“There seems to be a growing recognition in China that it needs to reform its economy and that one way of doing that is by improving the investment climate,” said David Thomas, vice president for trade policy at the Business Roundtable. “China’s stepped-up interest and commitments in the BIT may reflect that China seems to be paying closer attention to other trade negotiations in the Asian-Pacific region, such as the TPP.”

The business community for now is focused largely now on the administration rather than Congress in looking at trade support. Treasury, State and USTR all have a function in the investment treaty negotiations.

“Right now our primary role is to arm U.S. negotiators with as much information as possible about the differences between the investment regimes in China and the United States and how China treats foreign companies differently,” said Erin Ennis, vice president of the US-China Business Council, which supports the treaty.

She said China’s agreement to treat American companies under a BIT on a mostly equal basis is a major change. “It’s the first time China has ever agreed to this,” she said.

Despite the pledges of Chinese officials, critics of the country’s economic and currency policies say a U.S.-China investment treaty may not do enough to level the field for U.S. manufacturers and other domestic interests.

“There’s not much sign that the obstacles to real progress have either been removed or are looking significantly smaller,” said Alan Tonelson, a fellow with the U.S. Business and Industry Council.

Tonelson said sectors such as high-tech manufacturing, finance and energy may remain at least partially off limits for U.S. investors. “The Chinese have always made it clear, they are going to keep big portions of their economy out of any future investment deal,” he said.

Tonelson doesn’t think the Chinese view the TPP as a threat. But, he said, “I have no doubt that it irks them.”