US-China Talks Yield Renewed Push for Investment Deal, Climate Action

18 July 2013

The US and China have renewed their plans to negotiate a sweeping bilateral investment treaty, while agreeing also to implement a series of climate-focused initiatives. Meeting in Washington last week, the two trading partners - and often rivals - also pledged to work together in helping Beijing submit a new offer later this year for joining the WTO's plurilateral deal on government procurement, and discussed other topics such as currency and the pace of Chinese economic reforms.

Last week's meetings were held in the context of the US-China Strategic and Economic Dialogue - an annual forum that has been held since 2008 - and come less than a month after US President Barack Obama and Chinese President Xi Jinping met in California and outlined their intent to improve their countries' sometimes-troubled relationship.

Beijing and Washington have long struggled to balance their hopes for a deeper partnership with their competitive interests. Their economic disagreements in recent years have ranged from issues such as currency valuation to the use of trade defence instruments to renewable energy support policies, to name a few.

"For two nations as large and influential as ours, it's only natural that there be competition," US Vice President Joe Biden said at the launch of the two-day meetings. "And if the game is fair and healthy, political and economic competition can then marshal the best energies of both our societies. But this mix places an added burden on both of us."

He added, however, that should the two sides manage to be "straightforward, clear, and predictable with one another," they may be able to find mutually agreeable solutions to some of their differences.

Investment talks forthcoming

During last week's talks, officials agreed to re-launch negotiations for a bilateral investment treaty, a process that had begun under previous US President George W. Bush and which many say could create major openings in both investment and trade. The two sides have already held nine rounds of technical discussions on the subject.

The proposed agreement, according to the joint statement released last week, would provide national treatment at all phases of investment - the first time China has signed on to do so with another country. The deal will adopt a "negative list" approach, covering all areas except those explicitly excluded.

"China has for the first time agreed to negotiate a bilateral investment treaty on the basis of principles that will be critical to achieving access to China's market and leveling the playing field for American firms," US Trade Representative Michael Froman said in a statement.

"As the Office of the US Trade Representative prepares to lead these negotiations along with the State Department, we look forward to building on the important commitments China made today to bring home the economic benefits of more exports and more American jobs," he added.

China: New GPA offer by year's end

China has also pledged to submit a new offer for joining the WTO's Government Procurement Agreement (GPA) by the end of this year. The Asian country has been working to join the plurilateral pact for years, and has already submitted four offers for current GPA members to review.

China's most recent offer was submitted last year. While current GPA parties had welcomed some of the modifications in the offer, they also asked that China make additional concessions in some areas. (See Bridges Weekly, 12 December 2012) Though parties had asked Beijing to submit its next offer by this summer, China had said in March that it could not commit to such a timeline, given the reorganisation of its domestic government prompted by the recent leadership change. (See Bridges Weekly, 6 March 2013)

The upcoming offer would, according to Beijing and Washington, respond to the request of GPA parties in areas involving the lowering of thresholds and expanding the coverage of sub-central entities, among other subjects. China and the US are set to hold "intensive technical discussions" on the offer in the coming months.

The GPA is a 42-country agreement that commits its members to certain core disciplines regarding transparency, competition, and good governance, covering the procurement of goods, services, and capital infrastructure by public authorities. While a revised pact was agreed in December 2011, the new version has yet to be implemented, as it requires ratification by two-thirds of its parties. (See Bridges Daily Update #2, 16 December 2011)


China's strict control of its currency, the renminbi, has been a lightning rod for controversy between the two sides. While Beijing has allowed its currency's value to rise in recent years, critics argue that more needs to be done. Washington lawmakers have long pushed for Beijing to allow its currency to appreciate faster, arguing that the renminbi is currently undervalued and thus makes Chinese exports cheaper than their foreign equivalents.

Following last week's meetings, both sides reiterated their G-20 commitment to move more quickly toward market-determined exchange rate systems. Notably, China also pledged to "continue exchange rate reform, increase flexibility of RMB exchange rate, and let market play a more fundamental role in the exchange rate formation."

Other economy-related topics addressed during the two-day meetings included the reform of China's state-owned enterprise, alleged cyber theft, and Beijing's commitment to open further to foreign investment.


Last week's talks also saw Beijing and Washington announce a series of joint initiatives aimed at increasing their cooperation on tackling climate change.

The five-part plan was drafted by a bilateral working group, and would be implemented from October onward, at the earliest. The areas covered include reducing emissions from heavy-duty and other vehicles; improving smart grids' carbon capture, utilisation, and storage; collecting and managing greenhouse gas emissions data; and increasing energy efficiency in buildings and industry.

While analysts note that the commitments made in Washington last week are non-binding, some say that it could show signs of the two sides developing common ground on the climate subject. Just last month, Obama and Xi agreed to work together to phase down the production and consumption of hydrofluorocarbons (HFCs), a "super" greenhouse gas with a warming potential hundreds to thousands of times greater than carbon dioxide. (See Bridges Weekly, 13 June 2013)

The US President also outlined his own national climate plan just weeks later, which would involved a series of executive actions aimed at addressing both the causes and effects of climate change. (See Bridges Weekly, 27 June 2013)

ICTSD reporting; "U.S.-China talks cover cyber issues, currency, Chinese reform," REUTERS, 10 July 2013; "US-China announce sweeping economic commitments," THE HILL, 12 July 2013.

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