Obama, Xi to Discuss Investment Pact in September

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By Len Bracken

Aug. 18 — President Barack Obama will participate in a series of summits during a Sept. 2-9 swing through China and Laos, including meetings with Chinese President Xi Jinping to discuss a bilateral trade pact and other issues, the White House said Aug. 18.

Specifically, Obama and Xi will meet in Hangzhou, China, where progress on the U.S.-China Bilateral Investment Treaty (BIT) talks will be on the agenda, according to John Frisbie, president of the US-China Business Council.

China is preparing a new list of sectors or industries that it would like to exclude from full investment access, and the two sides will exchange these “negative list” offers at the next round of talks prior to the U.S.-China mini summit, he said. The two sides aren't expected to reach an agreement during the president's trip, but the BIT talks have stepped up over the summer and are on pace to conclude by the end of the year, Frisbie told reporters Aug. 17.

Another Pitch for TPP

During the president's latest Asia trip, he also is expected to make the case for the Trans-Pacific Partnership (TPP), the 12-nation trade pact signed in February but which has yet to be ratified. Obama will participate in the Sept. 4-5 Group of 20 Leaders (G-20) Summit in Hangzhou, and four of those countries—Australia, Canada, Mexico and Japan—are TPP member countries.

Other issues that could come up at the G-20 meeting include steel and aluminium overcapacity, currency manipulation, work on the Environmental Goods Agreement and China’s status as a nonmarket economy.

Finally, Obama will travel to Vientiane, Laos, where Sept. 6-8 the Association of East Asian Nations (ASEAN) will hold several summits. Obama will participate in the U.S.-ASEAN Summit and the East Asia Summit, the White House said, adding he will also have bilateral meetings with Laotian President Bounnhang Vorachith.

ASEAN members Brunei, Malaysia, Singapore and Vietnam are members of the TPP, and Indonesia, the Philippines and Thailand are other ASEAN members that have expressed interest in the pact.

BIT Talks Heating Up

Frisbie tied his optimism for concluding the BIT talks with China by the end of the year to the Chinese putting more sectors for open investment on the table and the engagement of the U.S. administration. He wouldn't specify which sectors have been removed from the Chinese negative list.

However, on June 26, an official with the National Development and Reform Commission said the Chinese government is looking into lifting the 50 percent cap on stakes foreign automakers may own in joint ventures with local partners, indicating this is likely an item that has been or will be removed from the list. Currently U.S. automakers, such as Ford Motor Co. and General Motors Co. may only own 50 percent of a production facility in China.

Additionally, the Chinese Securities Regulatory Commission June 30 announced that foreign private equity funds may raise money from domestic investors to invest in Chinese capital markets. Although some restrictions remain, this is a signal that the market opening in that sector is under consideration, which would be beneficial to U.S. banks that are doing business in China, such as Citigroup Inc., Morgan Stanley Inc. and Goldman Sachs Group Inc.

Dueling Lists

The U.S. “negative list” is made up of 30-40 items, according to Erin Ennis, senior vice president at the U.S.-China Business Council, who based this assessment the council's analysis of the negative lists in the 2012 U.S.-Korea Free Trade Agreement and in the TPP.

Ennis said the Chinese are more concerned about the U.S. national security screening being carried out by the interagency Committee on Foreign Investment in the U.S., which is led by the Treasury Department and by restrictions imposed by U.S. states. The U.S. and industry also are concerned about Chinese national security screening of U.S. investments.

The Chinese negative list initially was based on the Catalogue for the Guidance of Foreign Investment Industries and thought to number roughly 100 items, with more items coming off the list with each iteration. The third Chinese negative list offer was assessed by U.S. officials, who indicated in June the negotiations need to continue into the fall (119 ITD, 6/21/16).

The council Aug. 18 released its State Export Report, showing that in 2015 U.S. goods exports to China totaled $113 billion, making it the third-largest U.S. export market after Canada and Mexico and an important market for states across the country.

To contact the reporter on this story: Len Bracken in Washington at lbracken@bna.com

To contact the editor responsible for this story: Jerome Ashton at jashton@bna.com

For More Information

The U.S.-China Business Council study of state exports to China is available at https://www.uschina.org/reports/us-exports/national.

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