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Administration Considers Bilateral Investment Treaties with China, Vietnam and India

The United States and China agreed to launch negotiations on a bilateral investment treaty (BIT) during their Strategic Economic Dialogue talks that ended on June 18 in Annapolis. The agreement, which almost certainly could not be completed during the limited time remaining in the Bush Administration, would give U.S. investors in China many of the protections Chinese investors already enjoy in the United States.

The basic goals of the BITs negotiated by the United States are to secure the following objectives: non-discriminatory treatment; fair and equitable treatment, including the right to due process; compensation in the event of expropriation or nationalization; free transfers of capital; transparent regulation; and the submission of disputes to independent international arbitration. European and Asian competitors of many U.S. companies already benefit from several of these protections through BITs negotiated by their governments with China.

Concerns have been expressed by several U.S. business groups that an agreement with China might not meet the high standard established in the BITs previously negotiated by the United States with other developing countries (one specific concern relates to China’s refusal to consider further disciplines for the financial services sector). U.S. companies believe it important that a BIT ensure competitive practices and treatment across all sectors of China’s economy, particularly given its still large state-owned sector. Also, U.S. companies fear that any movement away from that the “high standard” BITs that U.S. negotiators have insisted on negotiating with earlier countries would complicate future negotiations with desired BIT candidates such as Russia, Brazil and India.

In fact, the Administration has already begun consulting with U.S. business groups about the possibility of entering into BIT negotiations with India. U.S. officials report that preliminary informal discussions with Indian investment officials have revealed an apparent willingness to consider the investment disciplines that would be required in a high-standard BIT.