Paulson Institute Issues New Policy Memorandum Calling for US-China Bilateral Investment Treaty

Chicago, ILThe Paulson Institute today issued the latest in its series of Paulson Policy Memoranda, concise essays that offer concrete prescriptions on economic and related policy issues. The latest Memorandum, “BIT by BIT – A Path to Strengthen U.S.-China Economic Relations,” is co-authored by leading bipartisan trade experts Daniel M. Price and Michael J. Smart. The Memorandum highlights the economic benefits of a Bilateral Investment Treaty (BIT) for both the United States and China.

The authors argue that reviving and rapidly completing negotiation of a BIT will be an important step in creating a sound foundation for a 21st century economic agenda between the two countries. They strongly suggest that a rules-based treaty between the United States and China will bring tangible benefits to both countries, including creating a more stable environment for attracting Chinese investment into the United States and a level competitive landscape for US investors in China. The two countries have different models and approaches toward such a treaty, but the Memorandum demonstrates that some of these differences can be overcome through creative negotiation.

“A Bilateral Investment Treaty between the United States and China is a realistic and powerful way for both countries to promote cross-border investment and strengthen economic ties in a mutually beneficial manner,” said Henry M. Paulson, Jr., chairman of the Paulson Institute and former U.S. Secretary of the Treasury and chairman and chief executive of Goldman Sachs.  “Completing a BIT would set a positive tone—and send an important signal—about continued progress in this critical bilateral economic relationship.”

A bipartisan effort, BIT by BIT is written by Daniel M. Price, managing director of Rock Creek Global Advisors and former senior trade advisor to President George W. Bush, and Michael J. Smart, vice president at Rock Creek Global Advisors and former trade counsel on the Democratic staff of the U.S. Senate Committee on Finance.

“The rising tide of trade and investment between the United States and China is delivering significant benefits on both sides of the Pacific,” Price and Smart state in their paper. “Successful conclusion of a BIT would re-anchor the bilateral relationship in the 21st century, placing investment relations on an international place, driving economic reforms in China, and helping U.S. companies succeed in one of the world’s most important markets.”

Price and Smart conclude that a BIT would help American firms mitigate the political, legal, and regulatory risks associated with investments in China. Meanwhile, a BIT would help China rebalance its economy and provide greater support for private sector firms.