Sealing investment deal ‘within reach’ at Trump-Xi talks
Analysts say concluding discussions on such an accord would support US leader’s job promises
One accomplishment of a summit between US President Donald Trump and his Chinese counterpart Xi Jinping could be a road map for a bilateral investment treaty, business analysts in the United States say.
They believe there is a favourable environment for both sides to conclude the discussion on such a deal, which started nine years ago and entered substantial negotiations in 2013, because it would support one of the few Trump campaign pledges that has survived into his presidency – more American jobs.
“They both could agree over the next six to 12 months to produce an agreement that would increase American access to China and encourage Chinese investment in the US that would generate jobs,” said Dr David Lampton at the Paul H. Nitze School of Advanced International Studies at Johns Hopkins University in Washington.
Moreover, now that Trump has backed off pledges to brand China a currency manipulator, and with no recent reiteration of threats to erect a 20 per cent tariff wall, the path to a positive meeting of the two presidents is clearer.
Given that Trump had shown a preference for bilateral agreements over multilateral ones, “they could rekindle something like the bilateral investment treaty [initiated under the administration of former US president Barack Obama]”, Lampton said.
“There was substantial work on a bilateral investment treaty, which I think Trump could repackage as his own and get some concessions from the Chinese government on market access.”
US Secretary of State Rex Tillerson’s meeting with Xi in Beijing on Sunday has strengthened expectations that Xi and Trump will meet in the US next month.
Tillerson also met Foreign Minister Wang Yi over the weekend for what he described as “a very extensive exchange” on the escalating tensions on the Korean peninsula.
While an agreement on a new approach to North Korea would likely feature in any summit, Trump will need to address concerns around jobs and market access to please his home audience.
Chinese investment in the US has already proven to align with Trump’s goals.
Chinese companies invested a record US$45.6 billion in the US economy in 2016, according to the Rhodium Group, an authority on investment flows between China and other countries.
That amount is triple the figure recorded for 2015, when US$15 billion worth of Chinese investment in the US led to 13,000 full-time jobs, according to an earlier report by Rhodium and the National Committee on US-China Relations.
Pure extrapolation would put the number of full-time jobs created by Chinese investment in 2016 at 39,000.
That represents about one-sixth of the total new non-farm jobs that were reported in the latest monthly payroll data from the US Bureau of Labour Statistics.
Xi may make other moves that would support US jobs.
Overcapacity among Chinese producers of steel has been blamed for allowing state-owned companies in China to undercut competitors in global markets.
“Chinese overcapacity that affects the US industrial base is a particular focus for President Trump, and President Xi may be willing to take some action on that front given the renewed focus at the recent meeting of the National People’s Congress on addressing overcapacity,” Jeremie Waterman, the senior policy adviser for Asia at the Washington-based US Chamber of Commerce, said.
“I don’t think there are going to be many concrete outcomes at what amounts to a first date, but there’s clearly a desire on the Chinese side to bring more stability to the relationship,” Waterman added.
Still, many of the issues Trump will be under pressure to resolve in the trade and investment relationship between the world’s two largest economies will likely be papered over or ignored.
“There are significant concerns with a range of Chinese policies right now that even a high-standard investment agreement won’t address,” Waterman said.
“For example, large subsidies for domestic companies in targeted advanced and foundational industries to expand around the world as well as acquire foreign technology.
“Also, China is using a broad definition of national security and related information security standards to shield its ICT and data-reliant industries from foreign competition, including areas like cloud and electronic payments.
“At present, there is little indication that China is willing to alter its approach in these areas.”
In the end, the personalities of the two leaders may help them reach some form of agreement on trade and investment, even if it doesn’t directly address subsidies, information security standards or other issues concerning groups like the US Chamber of Commerce.
“Xi has his own sensitive domestic circumstances, and Trump does too,” Lampton said.
“They’re both nationalistic leaders, they’re both prone to be sensitive to criticism.”