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U.S.-China Relationship Marked by

Opportunities and Challenges
THOMAS J. DONOHUE
President and CEO, U.S. Chamber of Commerce

U.S. Chamber President and CEO Tom Donohue. Photo credit: Ian Wagreich / U.S. Chamber of Commerce.

The relationship between the United States and China is one of the most complex but important
in the world, marked by both opportunities and challenges. During Chinese President Xis
upcoming state visit to Washington, he and President Obama have the chance to forge a deeper
commercial engagement that benets the workers and businesses of both countries, and this
can and should happen even as we work through our challenges. They should ensure that
cooperation not disagreement is the driving force in this relationship.
Our two countries should also embrace mutually benecial opportunities and one with great
potential is a bilateral investment treaty (BIT).

A BIT would build on the burgeoning ties between the United States and China and is the logical
next step in our relationship. Advances in our commercial relations over the past several years
have been nothing short of astounding supporting strong domestic growth in both economies
and contributing to jobs, innovation and productivity gains. But as Chinas growth slows and
uncertainty seizes the global economy, increasing U.S.-China economic integration is more
important than ever.

A high-standard, comprehensive U.S.-China BIT is an historic opportunity to strengthen our

commercial ties, boost both our economies, and increase global stability. And our leaders
should seize it.

The U.S.-China investment relationship is among the worlds largest. China is a nearly $600
billion market for American companies, and the country has become the United States third-
largest export market. While the United States has long been a signicant investor in China,
Chinese annual FDI in the United States has grown exponentially and now exceeds FDI by U.S.
companies into China. More than 80,000 Americans across the U.S. are employed directly by
Chinese rms, and that number is expected to grow four-fold within ve years.

But expanding and sustaining that investment openness through a BIT will strengthen economic
growth in both countries. A BIT would benet American companies and their workers by
providing better access to the Chinese market, resulting in more sales and job creation. Treaty-
based, enforceable rights with independent dispute settlement would provide American
companies with new opportunities to expand in the worlds second largest market, protect their
intellectual property, and ensure their ability to compete on a level playing eld.

China also has much to gain from a BIT. Increased U.S. investment in China would create
Chinese jobs, lead to higher value products and lower prices for consumers, expand Chinas tax
base, and introduce valuable managerial and technical expertise into the country. In addition, a
BIT would boost the condence of Chinese entities considering the risks and benets of
investing in the worlds largest and most competitive market.

Securing a high-standard, comprehensive BIT will not be easy, however. BITs are ambitious
agreements that result in signicant changes in the way foreign investment is regulated. The BIT
should ensure that governments do not favor their state-owned enterprises that compete
commercially and ensure they operate in accordance with commercial considerations; limit the
discretion of regulators to unfairly discriminate in their enforcement of law; mandate increased
transparency, fairness and due process in administrative and judicial enforcement; and provide a
bulwark against policies that attempt to coerce or induce the transfer of technology.

The good news is that the Chinese government has already created opportunities for
meaningful improvements to a number of these concerns in the short-term, without the mandate
of a BIT. Such improvements are urgently needed to benet the Chinese economy, advance
innovation, and increase consumer welfare.
China needs to adopt key reforms with or without a BIT, a fact Chinese leaders acknowledged in
their plan for accelerating reform presented at the third plenum of the Communist Partys 18th
Central Committee in November 2013. A signicantly improved negative list offer would provide
a measurable signal of President Xis intent to increase the role of the market in the economy
and to pursue inclusive reforms that allow foreign companies to play a greater role in helping
China to achieve its goals as a prosperous and innovative economy. Near-term market opening
in advance of a BIT would also go a long way to creating the momentum and public support
needed in the United States to secure a high standard BIT once negotiations are completed.

Despite these opportunities, a growing number of issues are threatening to drive us apart. Some
recent policies threaten to distort markets and restrict open competition such as embedding
in national security laws, regulations, and policies specic requirements related to economic
security. This approach could drive a wedge between our countries, creating separate islands
of technology, standards, and nance to no ones benet. Our fear is that we could face an
economic relationship in the future characterized increasingly more by separate economic
development, innovation, and nancial ows rather than joint opportunity and collaboration.

We must not allow that to happen. American and Chinese business communities must deepen
our engagement, explore our shared challenges, and ensure that our governments work
together cooperatively to preserve stability and growth in the global economy.

This is the purpose of the U.S. Chambers joint efforts with the China Center for International
Economic Exchanges to strengthen business-to-business engagement through regular dialogue
among CEOs on both sides. When CCIEE chairman and former vice premier Zeng Peiyan and I
convene the 7th meeting of the U.S.-China CEO Dialogue in Beijing days prior to President Xis
departure for the United States, we will call on the two governments to strategically address
broader bilateral relations.

The development of U.S.-China relations is a dening strategic issue for both countries.
Concluding negotiations on a high-standard BIT is the best opportunity facing both presidents to
renew the vision for the partnership and take concrete steps to improve it. Importantly, it would
also ensure that cooperation, rather than differences, dominate in this complex relationship.

Leaders, politicians, and citizens of both countries must demonstrate clarity, common sense, and
maturity in conducting and viewing our bilateral relations. We can forge a deeper commercial
engagement that benets the workers and businesses of both countries, and this must happen
even as we work through our challenges.

About the Author

 Thomas J. Donohue
President and CEO, U.S. Chamber of Commerce

Thomas J. Donohue is president and CEO of the U.S. Chamber of

Commerce.

The U.S. Chamber of Commerce