BIT for better

By Zhang Lijuan
0 Comment(s)Print E-mail, July 15, 2014
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US Secretary of State John Kerry (L) applauds as China's President Xi Jinping arrives on stage for the opening ceremony of the Sixth Round of US-China Strategic and Economic Dialogue at Diaoyutai State Guesthouse in Beijing July 9, 2014. [China Daily via agencies]

After 35 years of diplomatic relations, China and the United States are making progress on high level trade and investment issues. The ongoing negotiations on the Bilateral Investment Treaty (BIT) are a good example.

In the past twenty years, U.S.-China trade has been marred by issues arising from the "Made in China" label -- antidumping, the undervalued RMB, the use of safeguards, and the U.S. trade deficit with China -- all of which came from the same origin: too many "Made in China" items that are "too cheap" pushed into the U.S. market. Products marked "Made in China" have been, and still are, everywhere in the United States.

However, in recent years, there have been more local American headlines about Chinese investment in the United States. Interestingly enough, local governments are happy to receive FDI from China, while the Federal government, represented by the Committee on Foreign Investment (CFIUS), has increased its "focus" on FDI from China. From the most recent annual report, CFIUS has made China the largest number of undergoing FDI security reviews.

No single factor can explain why the CFIUS is getting tough on China. Part of the problem could be the growing, strategic distrust between the United States and China, as described by Kenneth Lieberthal and Wang Jisi in 2012. The bilateral Strategic and Economic Dialogue has continued to provide great opportunities. High level government officials from both sides have been working on a trade-related investment regime with the hope of simultaneously improving mutual trust.

Today's commercial diplomacy involves close contact between businesses and governments, because business interests serve as a key factor influencing the direction of government negotiations and pending policies. Based upon a survey of global businesses, Ernst & Young's recent global report identified top ten risks and opportunities in 2013 and beyond. The number one risk in 2013 is "Compliance and Regulations," while in 2015 the number one risk will be "political intervention in power and utilities." A research project conducted by Protiviti and North Carolina State University's ERM Initiative also suggests that regulatory change and heightened regulatory scrutiny will continue to be the top overall risk for global businesses.

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