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WHY THE US AND CHINA NEED A BILATERAL INVESTMENT TREATY
I. INTRODUCTION
The election of Donald Trump as President of the United States (“US”) marks a new era
of American leadership globally and has created uncertainty about how issues, such as
international trade, will be handled. President-elect Trump will be expected to appease his “Rust-
Belt” electorate, who have been hurt by trade when jobs were lost to more competitive markets.
Throughout his campaign and in the month since being elected, President-elect Trump has
promised to step away from trade agreements, enforce tough trade enforcement actions, curtail
Chinese steel capacity and name China a currency manipulator1. Trump’s proposed actions
against China could ignite possible retaliation, jeopardizing the potential completion of the US-
China Bilateral Investment Treaty (“BIT”), further hurting the US economy.
The process of opening world markets and the expansion of trade has greatly contributed
to prosperity in the US over the last fifty years2. Through emphasis on production of the US’s
most competitive industries and the import of high quality inputs, trade increases US worker
incomes and helps American companies and their workers remain competitive at home and
abroad3. As more than ninety-five percent of the global population is outside the US, the growth
of the US economy is dependent on continued expansion of trade and investment4. Free trade
1 See Phil Levy, Trade Under Trump, Foreign Policy, November 10, 2016,
http://foreignpolicy.com/2016/11/10/trade-under-trump/. 2 Increased trade has increased incomes in America nine percent higher than they might have been without trade
liberalization that has occurred since World War II. See Trade and Economy, U.S. Trade Representative,
https://ustr.gov/issue-areas/economy-trade 3 Trade encourages more competitiveness in the economy, imports increase consumer choice and lower prices of
goods, and helps US businesses grow. See id. 4 See About the Issues, Trade Benefits America, https://www.tradebenefitsamerica.org/about (discussing the
importance of trade agreements to U.S. businesses, farmers, and workers).
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agreements (“FTA”) and bilateral investment treaties (“BIT”) help achieve that goal through
principles of open market access and increased transparency.
Bilateral investment treaties are government to government agreements which create
binding rules which govern how foreign investors and investments are treated between the
agreeing governments5. BITs are designed to further open markets to foreign direct investment
(“FDI”) through the protection of investments abroad in countries where investor rights are not
already protected through existing agreements. Protection occurs through guarantees of fair and
equitable treatment6, fair compensation in case of expropriation7, full protection and security8,
national treatment (“NT”)9, and sometimes most favored nation clause (“MFN”)10. Most BITs
also contain a dispute resolution mechanism which allows an investor to bring a case against the
5 See Rudolph Dozer and Christoph Schreuer, Principles of International Law 20 (Oxford University Press, 2d ed.
2012). 6 Most bilateral investment treaties and other types of agreements contain provisions for fair and equitable treatment.
It is also the basis for which the most international arbitration claims are won. Per Dozer, fair and equitable
treatment provisions are meant to fill in the gaps for not covered by other provisions to fully guarantee investor
protection. There has been significant debate about the vagueness of this provision, and courts have determined that
its meaning will primarily be determined by the facts of the case. See Dozer, supra note 4, at 130, 132. 7 International trade agreements must balance the interest of investors with the interest and sovereignty of the
contracting nation. As such, international law has accepted that a host state has the right to expropriate an alien
investor’s property. However, certain requirements must be met for expropriation to be valid: 1) expropriation must
serve a public purpose; 2) it must not be discriminatory or arbitrary; 3) in some treaties, expropriation procedures
must follow due process; 4) and it must follow with prompt and effective compensation. See id. at 98-99. 8 As with other provisions in an international treaty, the meaning of full protection and security has been interpreted
by the courts in different manner depending on the facts of the case. However, the most frequent settings in which it
has been applied are: 1) the acts of insurgents or riots that harmed the investor; 2) government or military of the host
state were involved with the act that harmed the investor; 3) or government regulatory acts which disrupted business
stability harmed the investor. See id. at 160. 9 National treatment is arguably one of the most important provisions in an international treaty. It is meant to “level
the playing field” between a foreign investor and its local competition. The purpose of national treatment is to
encourage the host state to make no negative differentiation between the foreign investor and local companies when
creating regulations or applying its rules. See id. at 198. 10 Like national treatment, most favored nation treatment is meant to the level the playing field in the host nation.
MFN clauses encourage the host state to treat relevant parties as favorably as they do third parties. See id. at 206; see
also Bilateral Investment Treaties, U.S. Trade Representative, https://ustr.gov/trade-agreements/bilateral-
investment-treaties.
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host state for violations of the treaty and are often brought before the International Centre for
International Settlement of Investment Disputes (“ICSID”), an arm of the World Bank11.
Like many countries worldwide, the US negotiates BITS using a model text which
represents the US’s policy position that it must use when it starts negotiations on investment
treaties with other countries12. Currently, the US has forty-nine BITs, forty-one which are in
force13. The 2012 US Model BIT has served as the starting point for all recent negotiations,
including the US-China BIT, which has gone through twenty-four rounds of negotiations since
its start in 200814. As two of the world’s largest and most dynamic global economies, a BIT
between the US and China could potentially be a way to expand bilateral investment and
increase FDI flows into both China and the US. US FDI in China in 2012, valued around $54
billion, represented only about 1.2 percent of the $2.2 trillion of total FDI in China, and China
FDI in the US is even lower15.
A high standard BIT could generate new investment opportunities for US companies in
China by allowing US companies to invest in sectors that are currently restricted, as well as
address and ban Chinese practices that violate international trade standards16. China also stands
to gain from a US-China BIT through the advancement of national policy goals, potential
11 Dispute resolution mechanisms in treaties offer investors a preferred alternative to host state local courts, as
investors fear local courts for their impartiality and inability to submit successful claims. International arbitration
through mechanisms, such as ICSID, are preferred because they are impartial, delocalized, cost effective, and can
provide international facilities, arbitrators, and other administrative needs. See id. at 232-239. 12The U.S. uses a model BIT as the basis for their negotiations. The Obama Administration initiated the review and
revision of the US Model BIT, releasing the completed version in 2012. See 2012 Model Bilateral Investment
Treaty, U.S. Trade Rep., https://ustr.gov/sites/default/files/BIT%20text%20for%20ACIEP%20Meeting.pdf (last
visited December 11, 2016). 13 See Lauren Gloudeman and Nargiza Salidjanova, Policy Considerations for Negotiating a U.S.- China Bilateral
Investment Treaty, US-China Economic and Security Review: Staff Research Report, August 1, 2016, at 3. 14 See id. at 3. 15 See Henry M. Paulson, Demystifying Chinese Investment in the United States, Paulson Institute Blog, September
12, 2016, http://www.paulsoninstitute.org/think-tank/2016/09/12/demystifying-chinese-investment-in-the-united-
states/. 16 See Daniel C.K. Chow, Why China Wants a Bilateral Investment Treaty with the United States, 33 B.U. Int’l L.J.
101, 102 (2015).
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expansion of benefits of Chinese state-owned enterprises (“SOE”), and acquisition of US
technologies through mergers and acquisitions of US industries17. While the US-China BIT had
made significant progress throughout the past few years leading up to the 2016 elections,
significant challenges remain, and the future of the agreement is now uncertain under the
incoming Trump Administration.
This Article proceeds in two parts. Part I examines the historical background of the US-
China BIT negotiations and the current geopolitical landscape. Part II analyzes the benefits and
remaining challenges of the BIT, as well as why the US needs a US-China BIT. If the remaining
challenges of the BIT can be addressed, the agreement would provide much needed legal
certainty for foreign investors from both the US and China at a very uncertain time18.
II. BACKGROUND
Since the end of World War II, US-China relations have continued to grow and evolve
from a strained, tense relationship to a combination of intense competition and economic
interdependence19. The US and China began normalized trade relations in 2000 when President
Clinton signed the US-China Relations Act of 2000, which help China gain access to the World
Trade Organization in 200120. By 2008, which marked the beginning of the US-China BIT
negotiations, China had surpassed Japan as the largest holder of US debt, further entangling both
economies21. As the world’s second largest economy with the world’s largest growing middle
17 See id. at 106. 18 See Doug Tsuruoka, Bilateral Deal Could Defuse Sino-US Tension Over Chinese M&A, Asia Times, November
26, 2016, http://www.atimes.com/article/bilateral-deal-defuse-sino-us-tension-chinese-ma/ (discussing the US-China
BIT and its uncertainty in light of the new Trump Administration). 19 U.S. Relations with China, Council on Foreign Relations, http://www.cfr.org/china/us-relations-china-1949---
present/p17698 (last accessed December 12, 2016) 20 See id. 21 See id.
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class, China is predicted to overtake the US as the world’s number one economy, further
increasing the need for improved US-China relations22.
China is only second to Germany in having the world’s most signed BITs, and while
China’s BITs contain most standard provisions found in other international BITs, they have not
always included liberal provisions, such as investment- state dispute settlement (“ISDS”),
national treatment, or pre-establishment protections23. More recently as China has become
focused on foreign investment outside of its borders, China has negotiated stronger, more robust
BITs in interest of protecting its own foreign investment, which is evident in the 2012 Canada-
China Foreign Investment Protection Agreement (“FIPA”).
Canada has a Model FIPA24, which is like the US Model BIT in many ways. However, in
the Canada- China FIPA, Canada did not achieve the high-standard investment treaty it normally
strives toward and negotiated limited protections for Canadian investors25. Most notably, the
Canada-China FIPA does not include pre-establishment national treatment26. Under the FIPA,
Canadian investors cannot file a MFN claim through ISDS provisions, and allows broad
flexibility for SOEs and Chinese FDI screening27. Further, Canada’s agreement with China has
been criticized for benefiting China much more than Canada, as there is a clause which allows
existing restrictions to stay in place. Canadian companies will still face arbitrary practices, while
Chinese companies will receive more protections in Canada28. However, China did agree to
incorporate direct and indirect expropriation clauses, a stronger commitment than China has
22 See id. 23 See supra note 13, at 9; see also Ko-Yung Tung and Rafael Cox-Alomar, The New Generation of China BITs in
Light of Tza Tap Shum v. Republic of Peru, 17 Am. Rev. Int’l Arb. 461 (2006). 24 Canada’s Model FIPA most closely resembles the 2004 US Model BIT. See supra note 13, at 11. 25 See id. at 10-12. 26 Under pre-establishment national treatment provisions, an investor receives equal market access throughout all
phases on investment. See id. at 12. 27 See id. at 10-12. 28 See id. at 10-12.
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previously made in its BITs29. Canada-China FIPA provides good example of China’s most
recent agreements and an indicator of future areas of tension between the US and China30.
The US does not have as many BITs as China, as it is difficult for partners to meet the
high standards set out in the US Model BIT and for the BIT to then passed in Congress31. “The
US ratification process—requiring a two-thirds vote of the Senate—is prolonged and uncertain.
Indeed, many US trading partners prefer to negotiate comprehensive investment chapters in their
free trade agreements (FTAs) with the United States, which are similar in content to BITs but
differ in the process in which the United States ratifies and implements the pact32.” According to
the Office of the US Trade Representative (USTR)33, the US Model BIT is designed to provide
US investors with six benefits: national treatment and most-favored nation treatment for
investors and pre-establishment protection, including establishment or acquisition, management,
operation, expansion, and disposition; limits on direct and indirect expropriation and procedures
for the payment of “prompt, adequate, and effective compensation” when expropriation occurs;
ability to transfer investment-related funds across borders “without delay and using a market rate
of exchange”; restriction of the use of performance requirements; right to employ senior
managerial personnel, regardless of nationality; and international arbitration provisions34.
29 See supra note 13, at 11, 30 See id. at 9 (discussing China’s method of drawing from other countries’ Model BIT for the basis of negotiations,
as it does not have its own model BIT). 31 See supra note 15. 32 See id. 33 USTR is part of the Executive Office of the President. USTR is responsible for developing and coordinating U.S.
international trade, commodity, and direct investment policy, and overseeing negotiations with other countries. The
head of USTR is the U.S. Trade Representative, a Cabinet member who serves as the president’s principal trade
advisor, negotiator, and spokesperson on trade issues. See Mission of the USTR, U.S. Trade Rep.,
https://ustr.gov/about-us/about-ustr (last accessed December 13, 2016). 34 See Bilateral Investment Treaties, U.S. Trade Representative, https://ustr.gov/trade-agreements/bilateral-
investment-treaties.
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The beginning of BIT negotiations between the US and China was hindered by basic
philosophical differences on how to approach provisions of the agreement35. Historically, the US
has negotiated for the protection of investors during the market access phase of investment so
that they are protected before being fully established in a foreign country36. US model BIT calls
for national and MFN treatment for the entire investment process (subject to a few exceptions)37.
China, however, has only protected investors in its BITs once an investor is fully established its
investment in the country38.
After a few years after slow negotiations, China indicated a willingness to negotiate
commitments to open all sectors of its economy to US investment, except for sectors set out in
their negative list39. The adoption of a negative list approach as opposed to China’s current
regime of a positive list would provide significant protection to US investors40. Additionally,
during the 2014 Strategic and Economic Dialogue (“S&ED”), China indicated a willingness to
expand its provision of national treatment to pre-establishment phase of investment. However,
there remain significant challenges remaining in narrowing down the negative list, as well as
addressing China’s less robust provisions for labor, the environments, and state-owned
enterprises (“SOE”)41. While significant challenges exist before negotiations can come to a close,
35 See Jonathan S. Kallmer, What a US-China Investment Treaty Would Mean for US Cos., Crowell & Moring LLP,
July 25, 2013, https://www.crowell.com/files/What-a-US-China-Investment-Treaty-Would-Mean-for-US-Co.pdf. 36 See id. 37 See id. 38 See supra note 23. 39 In most BITs with other countries, the US has taken a negative list approach to market access. The negative list
approach allows all sectors except those set out in the list as exclusions are open to investment by foreign investors.
The US has very few sectors closed to foreign investment (like nuclear energy, domestic air services, credit unions,
etc.) but has restrictions or criteria an investor might meet. An example of the US negative list can be seen in the
Annex of the US-Uruguay BIT and the BIT with Rwanda. See Summary of US Negative Lists in Bilateral Investment
Treaties, US-China Business Council,
file:///C:/Users/bmoun/AppData/Local/Evernote/Evernote/Databases/Attachments/Negative%20list%20summary.pd
f; see also BIT Documents, U.S. Trade Rep., https://ustr.gov/trade-agreements/bilateral-investment-treaties/bit-
documents (last accessed December 15, 2016). 40 See supra note 15, at 13. 41 See id. at 15.
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a US-China BIT provide many opportunities that would help build the relationship between the
two countries and grow the global economy.
III. WHY TWO WORLD POWERS NEED A BIT
As two of the largest exporting and importing world powers, a US-China BIT would set
the precedent for future BITs with other major developing nations and have the potential to
expand trade relations in the Asia-Pacific region. For both nations, a high standard BIT could
highly benefit each. However, both countries have concerns that could determine the direction
and future of the negotiations.
The US stands to significantly from a BIT. A BIT could increase bilateral investment and
open successful sectors in China that have been closed off to US investment or are highly
restricted42. Addressing Chinese investment barriers would help US companies compete with
domestic Chinese enterprises and allow them to gain the same benefits enjoyed by Chinese
companies43. Additionally, the ISDS provisions would ensure that the agreement is enforceable,
guaranteeing US companies protection against discriminatory policies or regulations, such as
licensing requirements that Chinese companies are not required to meet and preferential
treatment of domestic companies44.
If a high standard, far-reaching US-China BIT can be achieved, it is possible that it could
address US concerns about the Chinese government’s role in the economy and lack of
transparency45. Beyond expanding market access, a BIT could protect US companies from
having to give China proprietary information, such as trade secrets and intellectual property,
42 See id. at 13-14; see also supra note 16, at 103. 43 See supra note 13, at 13. 44 See id. at 18. 45 See id. at 22.
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which China currently requires as part of doing business there46. Increased regulatory
transparency in China would significantly improve US companies’ ability to invest and succeed
in China.
Increased bilateral investment could also encourage more Chinese investment in the US,
which could help grow the US economy and create more US jobs. A 2015 Report on the
“Sustainable Development of Chinese Enterprises Overseas” by the United Nations
Development Program China and Chinese Government Think Tanks stated that Chinese foreign
investment is good for local growth as Chinese firms pay local taxes, employ host country
workers, engage in local procurement, aid local innovation, provide technology transfers and
follow local environmental laws.47 President-elect Trump promised during his campaign trail and
after being elected to bring manufacturing back to the US48. FDI through the US-China BIT
would accomplish this and build better foreign relations.
China also stands to gain from a US-China BIT. A BIT would achieve several national
policy goals set out in its thirteenth Five- Year Plan49. “Innovation, coordination, the
environment, opening up, and sharing” will create China’s “new normal50.” A US-China BIT
would help China realize that goal.
46 See supra note 29. 47 See supra note 16. 48 See Chris Arnold, In Economy as in Business, Trumponomics May Mean Building Big Things, NPR, November 9,
2016, http://www.npr.org/2016/11/09/501476997/trump-provides-clues-into-economic-plan-during-acceptance-
speech. 49 China’s Five-Year Plan are a series of social and economic development initiatives set forth by the Communist
Party of China The early plans supported its centrally planned economy. As China began to open up its economy,
the plans have become more general and have set targets for both society and the economy. The Thirteenth Five-
Year Plan has included a series of strategic objectives, such as addressing environmental issues and investing
abroad. See Highlights of Proposals for China’s 13th Five-Year Plan, Xinhuanet, April 11, 2015,
http://news.xinhuanet.com/english/photo/2015-11/04/c_134783513.htm; see also Scott Kennedy and Christopher K.
Johnson, China’s 13th Five-Year Plan, Wall Street Journal, May 23, 2016,
http://blogs.wsj.com/chinarealtime/2016/05/23/chinas-13th-five-year-plan-qa-with-scott-kennedy-and-christopher-k-
johnson/. 50 China’s “New Normal” reflects the lowered growth in the Chinese economy. China is entering a new stage of
development and is looking to become less export driven and more diversified, building more sustainable growth.
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As part of China’s attempt to “open up” its economy, China is working to reform state-
owned enterprises to become a mixed economy of both state and private ownership51. In early
2016, Chinese Premier Li Keqiang, Chair of the State Council, announced the reform and
China’s intention to further liberalize its economy52. China desires to expand the reach and
power of SOEs, as well as institute changes that reflect the need for greater efficiency. A US-
China BIT could potentially help China SOEs further invest in the US through mergers or
acquisitions (“M&A”) and be acknowledged as important commercial players53.
Innovation remains a critical part of China’s national policy goals. Through a BIT with
the US, China hopes to acquire innovative technology. Through M&A, China will have access to
US companies’ technology and intellectual property (in addition to all physical property)54.
While a negative list will outline the sectors in which China will or will not have access to, it is
likely there will be key sectors that China needs access to, such as food and agricultural
companies and their seed technologies. In the past few years, Chinese firms have acquired
companies, like Smithfield Foods, with limited difficulty55. However, more recently, Chinese
acquisitions of US technology have received more scrutiny56. A US-China BIT would make it
more difficult for the US to block Chinese firms from acquiring companies in sectors not on the
negative list.
As part of China’s economic direction, it is expected that China will become more integrated into the global
economy. See Martin Wolf, China’s Struggle for a New Normal, Financial Times, March 22, 2016,
https://www.ft.com/content/28ea640e-ef62-11e5-aff5-19b4e253664a (discussing China’s challenges facing a
decline in economic growth and how to interface in the global economy). 51 See Chinese Government Sets Timetable for Reform of Centrally-Administered SOEs, China Daily USA, May 16,
2016, http://usa.chinadaily.com.cn/business/2016-05/20/content_25385992.htm. 52 See supra note 43. 53 See supra note 16. 54 See id. 55 See Reginald Cuyler, Leaving Home the Bacon: Judicially Reviewing CFIUS’ Approval of Shuanghui Acquiring
Smithfield Foods, 6 No.2 U. Puerto Rico Bus. L.J. 206 (2015). 56 See Chad Bray, U.S. Regulator Signs Off on ChemChina-Syngenta Deal, NY Times, August 22, 2016,
http://www.nytimes.com/2016/08/23/business/dealbook/us-china-chemchina-syngenta-merger.html?_r=0.
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The US and China will both economically gain from a BIT. However, business
opportunities are not the only incentive for both nations to enter an agreement; as seen above,
both countries have national policy reasons for negotiating a BIT. Despite the apparent benefits,
policymakers on both sides have concerns about a bilateral treaty, which could affect the timing
and possibly the conclusion of an agreement.
IV. OBSTACLES THAT REMAIN
The US has a significant annual and historical trade deficit with China57. When China
became a member of the WTO in 2001, the US hoped that China would become a more reliable
trading partner, and while China started to make significant improvement in becoming a more
liberalized market economy, progress has recently slowed58. The trade deficit with China has
only further focused the US’s attention on China’s failure to fully become a market economy59.
Per USTR in its “2015 Report to Congress on China’s WTO Compliance60,” difficulties in the
U.S.-China trade and investment relationship stem from China’s interventionist policies and
practices and the role of state-owned enterprises in China’s economy61. China’s compliance with
WTO rules has become a major topic in US domestic politics and has affected the rhetoric
around the US-China relationship62. It will be important to address some of the concerns and
57 See David Schinn, China’s WTO Compliance: The US Reaction, China Policy Institute, November 14, 2016,
https://cpianalysis.org/2016/11/14/chinas-wto-compliance-the-reaction-from-the-u-s/. 58 See id. 59 See id. 60 See 2015 Report to Congress on China’s WTO Compliance, U.S. Trade Rep., December 2015,
https://ustr.gov/sites/default/files/2015-Report-to-Congress-China-WTO-Compliance.pdf. 61 See supra note 51. 62 December 11, 2016 marked China’s fifteenth anniversary of its WTO accession agreement. Per the agreement,
China would gain market economy status within the WTO if it met certain conditions. Market economy status would
constrain anti-dumping measures used against China by the US and EU if prices of exports are not shown to meet
market economy conditions. China is currently demanding recognition of being a market economy, but the US and
the EU are resisting. See Douglas Bullock, China Doesn’t Deserve Its “Market Economy’ Status By WTO, Forbes,
December 12, 2016, http://www.forbes.com/sites/douglasbulloch/2016/12/12/china-doesnt-deserve-its-market-
economy-status-by-wto/#117d4ce02d70.
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rhetoric surrounding the BIT to achieve and conclude a high standard BIT that benefits both
nations.
The role of the Chinese government in the Chinese economy continues to raise concerns
in the US63. The Chinese government continues to have significant authority and influence over
Chinese companies, and there is concern that the company might be making the investment to
further the Chinese government’s goals64. The US’s concern about China’s non-economic
motives for investing in the US has led to strict review of Chinese investments65.
US federal law requires that FDI by Chinese SOEs are scrutinized and allows the US to
block investments if there are concerns about national security66. Through a BIT, China hopes
that it would be more difficult to stop Chinese investments in the US through protection under
NT and MFN clauses67. The Committee on Foreign Investment in the United States (“CFIUS”) is
the mechanism through which the US reviews foreign investment68. CFIUS conducts its
investigations in private, and the uncertainty around the process has created tension between the
US and foreign investors69. China has voiced on several occasions complaints about the process
and that it has unfairly blocked Chinses investment in the United States70. While the US has
confirmed that it is open to Chinese investment, CFIUS will still play an important role even
after a BIT is signed and reserves the right to reject foreign investment for national security
63 See supra note 13, at 23. 64 See id. 65 See id. 66 See supra note 16, at 106. 67 See id. 68 CFIUS is an inter-agency committee authorized to review transactions that could result in control of US business
by foreign companies. The Secretary of the Treasury is the Chairperson of CFIUS, but eight other departments sit on
the committee. CFIUS primarily makes recommendations to the President about national security concerns posed by
investments of foreign parties. See Composition of CFIUS, Dept. of Treas., https://www.treasury.gov/resource-
center/international/foreign-investment/Pages/cfius-members.aspx (last accessed December 14, 2016); see also
supra note 55, at 207. 69 See supra note 55, at 207. 70 See supra note 13, at 13-14.
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purposes. However, it is possible that the US can improve transparency in the process and better
aid Chinese companies throughout the process71.
China, similarly, as strict review procedures for foreign investment. In 2016, China
released its foreign investment law, stating that foreign investment in sensitive areas will receive
additional national security review72. The US has expressed its concerns about the review and
China’s definition of national security and its inconsistencies of principles of a bilateral
investment treaty73. The US has also criticized the Chinese government for the continued
preferential treatment of domestic SOEs and raised apprehension that China would continue to
preferentially treat domestic companies over US companies even with a BIT74.
Both the US and China must continue to work on these areas of conflict before BIT
negotiations conclude. The US-China BIT must have robust, high standards to include for
transparency, strong ISDS provisions, and address SOE treatment. It is unlikely that a BIT would
be passed in the US without strong guarantees of a level playing field.
CONCLUSION
The current geopolitical landscape between China and the US is currently strained at best.
The past few Administrations have worked diligently to further the relationship, as well as
establish America’s role in the Asia Pacific region through the Trans-Pacific Partnership
(“TPP”). However, President-elect Donald Trump has announced, through his “America First”
policy, that he intends to reject the TPP and label China as a currency manipulator75. The Trump
71 See supra note 13, at 14. 72 See id. 73 See id. 74 See id. 75 See Howard Stoffer, What Trump’s “America First” Policy Could Mean for the World, Time Magazine,
November 14, 2016, http://time.com/4569845/donald-trump-america-first/.
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Administration has further indicated that trade enforcement will be a priority and plans to
increase tariffs significantly on imported Chinese goods, potentially violating WTO rules76.
So, while the US and the EU77 become more protectionist, China has committed to a
decade long strategy of opening markets and investing abroad. China intends to revive the Silk
Road trading routes through its “One Belt, One Road Strategy78,” has established the Asian
Infrastructure Investment Bank79, and is pushing forward on the Regional Comprehensive
Economic Partnership (“RCEP”) 80. While there are serious challenges remaining and legitimate
concerns about a US-China BIT, the US cannot afford to not move forward on this treaty nor can
it afford to make decisions that could initiate a trade war.
A high standard BIT between the US and China would be good for the global economy.
As two of the largest economies, the US and China need to work together to encourage foreign
investment in the US and in China. The Trump Administration has promised to bring companies
76 See id. 77 Since 2015, there has been a wave of nationalism in the United States and Europe, resulting in Donald Trump’s
election and “Brexit,” the UK’s exit from the European Union. Disappointing economic growth worldwide has
spurred nationalism, anger about immigration, and concerns about the future. Europe is continuing to see a
resurgence in nationalism even aside from Brexit. Germany and France both face elections in the upcoming year and
nationalist parties are rising to the front. Nationalism worldwide could hurt international cooperation and the global
economy. See Gideon Rachman, Nationalism is Back: Bad News for International Cooperation, The Economist,
November 20, 2014. http://www.economist.com/news/21631966-bad-news-international-co-operation-nationalism-
back. 78 China is rebuilding the historic Silk Road trade route that runs from China’s borders to Europe. As part of China’s
economic reform, it is looking to expand to allow for growth and help with its slowing economy. This strategic
position will allow China to reposition itself as a global economic and cultural leader. See Anna Bruce-Lockhard,
Why is China Building a New Silk Road?, World Economic Forum, June 26, 2016,
https://www.weforum.org/agenda/2016/06/why-china-is-building-a-new-silk-road. 79 In 2016, China’s Asian Infrastructure and Investment bank opened. The multibillion dollar, multilateral bank was
created to help finance infrastructure across Asian. While US partners, like Canada and the UK signed up, the US
has remained skeptical and worried that China is using the bank to further its global economic agenda. See Jane
Perlez, China Creates a World Bank of Its Own, and the US Balks, NY Times, December 4, 2015,
http://www.nytimes.com/2015/12/05/business/international/china-creates-an-asian-bank-as-the-us-stands-aloof.html. 80 The Regional Comprehensive Economic Partnership (“RCEP”) is a regional trade deal between China, Australia,
India, Japan, Republic of Korea, New Zealand, and ASEAN countries. The RCEP is a ASEAN centered agreement
which aims to lower trade barriers and improve market access. The agreement has been often positioned as in
conflict with the US-ASEAN trade agreement, the Trans-Pacific Partnership, which concluded negotiations in 2015.
See About the RCEP Negotiations, Australian Dept. of Foreign Affairs and Trade,
http://dfat.gov.au/trade/agreements/rcep/pages/regional-comprehensive-economic-partnership.aspx.
Brittany Mountjoy
15
back to the US and create new jobs for American workers, and China is facing a slowing
economy. A BIT could both create jobs in the US, as well as expand markets for China. It will be
up to the Trump Administration to continue to forge strong relationships with China and not take
protectionist measures that create a disastrous trade war that could hurt the entire global
economy.
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