U.S.-China Talks Yield Potentially Troubling "Investment Treaty"
White House officials concluded a fifth round of Strategic and Economic Dialogue (S&ED) talks with China this week, and pledged to collaborate on climate policy and a bilateral investment treaty.
Alliance for American Manufacturing (AAM) President Scott Paul had urged the Obama Administration to make concrete progress on Beijing’s longstanding policy of currency manipulation. Unfortunately, little meaningful discussion of currency emerged from the talks.
Currency manipulation, which is prohibited under international trade law, artificially lowers the cost of Chinese exports, while simultaneously taxing U.S. products entering the Chinese market.
Ahead of the talks Paul had cautioned the Administration that the American people are "long past the point of fatigue on this issue":
“The same old promises and handshake photo-ops can’t replace progress on the ‘China problem,’ especially when Washington is asleep at the switch on job creation. In this week’s meetings, Secretaries Kerry and Lew must inform Beijing that continued access to the U.S. market will be conditioned on a steady, meaningful upward trajectory of the Yuan.”
The talks did produce a commitment to restart stalled negotiations on an "investment treaty." Reuters corespondent Paul Eckert reports that U.S. Treasury Secretary Jack Lew hailed the investment treaty commitment as a "sign of positive change in Beijing as China retools its economic growth model away from heavy investment and exports toward growth driven by consumption."
However, the investment treaty could prove troubling because it essentially opens up investment in the U.S. to state-funded capital from China. As Eckert reported, Chinese Vice Finance Minister Zhu Guangyao said China has roughly $20 billion of direct investment in the United States and $1.2 trillion in U.S. treasury bills. It's not hard to foresee more state-owned enterprises in China attempting to purchase potentially sensitive U.S. assets.
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