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US Urged to Amend Proviso in China Investment Treaty

FILE - A Chinese 100 yuan banknote is placed under a $100 banknote (top) in this photo illustration.

The United States must amend a standard national security provision in investment treaties when negotiating with China, a U.S. business lobby said on Friday, or risk giving Beijing the green light to limit U.S. market access.

China, which has more barriers on foreign investment than the United States, is in talks with Washington to narrow the "negative list" of sectors closed to the other side's investors as part of a bilateral investment treaty (BIT).

'Chinese circumstances'

Keeping a standard exemption in the treaty for sensitive sectors could allow China to apply the proviso to its own national security, which it defines more broadly, to cover anything from the military to ecological, societal and cultural security.

Washington should make adjustments to the model treaty it has used since 2012 in order to tackle "Chinese circumstances," Tim Stratford, the chairman of the BIT task force of the American Chamber of Commerce in China, told reporters.

"While it's a very strong starting point for negotiations, it might be appropriate to make a few adjustments in it that would make it more directly applicable," Stratford told reporters at a briefing on a Chamber report on the talks.

"If you have the same carve-out on the Chinese side but they have a definition that is this broad, then you can see why that could raise some concerns," added Stratford, a former assistant U.S. Trade Representative.

Opening doors

U.S. investors hope that a treaty will widen their access to many industries tightly controlled in China, from financial services to healthcare.

Beijing and Washington have agreed to hasten work on the investment treaty, but business groups fear new national security guidelines in China could stall progress.

Foreign companies say the rules are a rollback of China's vows to usher in market reforms, as they require use of "secure and controllable" technology, with data operations to be based on the mainland.

China says the new policies will bolster networks and better regulate information in the face of growing security threats.

The "protracted rollout of market openings" will not only hurt the Chinese economy, but could have a "cooling effect" on talks, the Chamber said, adding that Chinese officials had told numerous companies that further market opening would be delayed until the investment treaty was complete.

"What is needed is true market access without underhanded and unwritten barriers that could potentially render the BIT meaningless," Chamber Chairman James Zimmerman said in the report.