Promising advances have been during the past year in negotiation of a bilateral investment treaty (BIT) between the US and China. Key objectives of the BIT are to accord certain protections to investors and also to ensure that each party will accord to investors and investments of the other party the same treatment it accords to its own investors and investments.
These negotiations have been ongoing since 2008. A breakthrough was achieved last year when China agreed that the benefit of national treatment should apply not only to existing investments but also to those seeking to invest, thus allowing US companies and individuals to invest in previously closed sectors on the same conditions available to Chinese investors. They also agreed that any exceptions to a party’s national treatment obligation must be specifically listed in a schedule of non-conforming measures—the so-called “negative list.”
This does not mean it will be smooth sailing to reach an agreement. The Chinese are developing their draft negative list which they will present to the US by late 2014 or early 2015. The US side is concerned that the “negative list” proposed by China listing those sectors to be carved out of the treaty will be far greater in scope than the US can accept.
What is clear however is that now is the time for American businesses to provide input to the US trade negotiators. Companies have a unique opportunity to influence the course of negotiations and hence improve their operating climate in China if an agreement is finalized. They can do so, for example, by identifying and ranking in order of importance the current laws, regulations and administrative practices that restrict or otherwise hamper their operations in China. Now is the time to make their concerns known and attempt to have them covered by the US-China BIT.