Dear Madam Secretary, Mr. Secretary and Ambassador Schwab:
We understand that the Administration intends to announce the initiation of negotiations over a bilateral investment treaty (BIT) with China during this week’s meeting of the Strategic Economic Dialogue. We have serious concerns about the Administration’s negotiating objectives, the timing of these negotiations, and how these negotiations fit within an overall strategy for an international economic policy with China.
First, the negotiation of a BIT with China is a major undertaking. China presents a special and particularly challenging case for the negotiation of a BIT, and the stakes for the United States are high. In particular, we are concerned that a BIT with China that does not both meet existing standards and include a number of additional requirements necessary to address problems for U.S. investors arising out of the particular nature of China’s economy and political and juridical systems would not serve the United States well and could weaken the BIT program.
For example, a BIT with China would have to achieve a number of objectives, including addressing fully all key issues such as non-discrimination and transparency; addressing fully and effectively any special issues that investors face with respect to China (including U.S. investors’ fear that the Government of China will retaliate against them if they - or the U.S. Government - exercise their legal rights); and incorporating the provisions from the May 10 Agreement to affirm expressly that Chinese investors in the United States will not be accorded greater substantive rights than U.S. investors in the United States.
Second, we are concerned about the timing of these negotiations, given the limited time remaining in this Administration. Recent experience, for example, with the U.S.-Korea Free Trade Agreement, has demonstrated that a rush to meet an artificial deadline in negotiations is likely to yield disappointing results. The negotiation of a BIT with China needs to be done right, not based on an arbitrary deadline. If the Administration moves forward with these negotiations, it should make clear to China that all major decisions in the negotiations will necessarily be left to the next President.
Finally, any efforts to negotiate a BIT with China must be part of an effective, three-part strategy for U.S. international economic policy: (1) opening foreign markets to U.S. goods and services exports, including by vigorously enforcing international rules relating to competition into and within those markets, such as rules relating to non-tariff barriers, intellectual property, labor rights, and environmental standards; (2) ensuring that U.S. producers in the United States do not have to compete against unfairly traded and injurious imports; and (3) providing protections for U.S. investors overseas.
Unfortunately, the Administration does not appear to have a coherent and effective strategy when it comes to the first two parts of this overall policy, relating to U.S. exports and U.S. imports. These problems are reflected in our massive and growing trade deficit with China (increasing from $82 billion in 2000 to $251 billion in 2007), and in China’s unprecedented trade surplus with the world.
For example, the Administration has failed to stop China from manipulating its currency, despite more than five years of dialogue at the highest levels. There has also been very little progress on the enforcement of intellectual property rights: USTR noted recently that “U.S. copyright industries estimate that 85 percent to 95 percent of all of their members’ copyrighted works sold in China was pirated, indicating no improvement over 2006." And the Administration has refused - repeatedly and without exception - to exercise the rights the Clinton Administration negotiated in the WTO to address surges in imports from China that cause material injury to U.S. producers.
We hope to work with you in the remaining days of this Administration to determine how best to develop a fully reciprocal and sustainable trade and investment relationship with China.
Sincerely,
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The Honorable Charles B. Rangel The Honorable Sander M. Levin Chairman Chairman Committee on Ways and Means Subcommittee on Trade Committee on Ways and Means