USCBC Analysis Obama in China: Deals on Visas and Climate Change, Tech Tariff Reductions, and Commitment to BIT as Top Economic Priority US President Barack Obama concluded a constructive three-day visit to China earlier today with announcements of new bilateral deals on a range of issues important to US companies doing business in China, including visas, trade in information technology products, and climate change. Obama’s visit to Beijing included not only his participation in the 2014 Asia-Pacific Economic Cooperation (APEC) organization’s annual summit, hosted this year by China, but also a separate state visit and meetings with Chinese President Xi Jinping. Despite concerns that outcomes would be modest due to challenges in the bilateral relationship, the joint fact sheet released by the two governments indicates that both the United States and China continue to view the relationship as important, and consider economic and commercial ties a key component of that relationship. In addition to the formal deals, the two sides also announced wide-ranging discussions on commercial issues that included intellectual property, fair competition for US companies in China, cybersecurity, and regional institutions such as the Asian Infrastructure Investment Bank. The two sides made a joint commitment that a robust bilateral investment treaty (BIT) would be a “top priority” in the economic relationship. Security issues were also a major component of discussions, as the two sides stressed new mechanisms to improve military-to-military communications. They discussed issues ranging from counterterrorism and regional security in the South and East China Seas to international security hotspots such as Iran, North Korea, Afghanistan, the Middle East, and West Africa. Obama’s trip to China—the second of his presidency—was part of a broader Asia trip that also includes stops in Burma for the November 12-13 East Asia Summit and in Brisbane for the November 15-16 G-20 meetings. Progress on key commercial issues Despite predictions that Obama and Xi would achieve limited progress on priority commercial issues, the two sides drafted a host of agreements on issues including visa reform, the BIT, the Information Technology Agreement (ITA), and climate change. Visas The United States and China jointly announced changes to visa policies for both business travelers and students, extending the validity of business and tourist visas from one year to ten years, and extending the validity of student and exchange visas from one to five years. The United States also announced that it would begin issuing visas under these terms today; the first batch of visas included a Chinese employee of an American multinational. For US companies doing business in China, this issue—a consistent US-China Business Council (USCBC) advocacy point—is a bottleneck for trade and investment flows and an operational irritant for executives in both countries. This reform may also provide an important boost to travel and tourism, making the United States more competitive in attracting China’s rapidly growing outbound tourism industry. Information Technology Agreement On the tail end of the APEC summit, the United States and China announced a breakthrough on the stalled Information Technology Agreement (ITA). ITA, a 1997 World Trade Organization (WTO) agreement, has been under negotiation since May 2012 to update and expand its coverage. Those negotiations were suspended in 2013 due to disagreements between China and other parties over the scope and speed of expansion. According to announcements from the two sides, the United States and China proposed eliminating tariffs on more than 200 different types of products, such as next-generation semiconductors, medical imaging equipment, global positioning system (GPS) devices, printer ink cartridges, loudspeakers, and videogame consoles. While this announcement does not fully resolve negotiations—as the next round of formal negotiations will take place in Geneva in December—it addresses the biggest remaining hurdle to the passage and implementation of the ITA. Bilateral Investment Treaty Although the two sides did not announce any breakthroughs or further progress on the BIT, and Obama did not mention the issue during his closing press conference, a joint fact sheet on US-China economic relations released after the summit stated that the two sides had committed to “continue to pursue BIT negotiations as a top priority in their economic relations.” The fact sheet further said that both sides would devote resources to ensure a “high-standard and comprehensive BIT.” Such a BIT has long been one of USCBC’s key priorities, and prior to Obama’s visit, USCBC sent him a letter signed by 51 American CEOs expressing support for a high-standard BIT. Such bilateral commitments to actively pursue a BIT will be reflected in efforts to pursue active negotiations on BIT text and in China’s proposed negative list in early 2015. Climate change Climate change has been a top issue for the United States in its discussions with China, and the two sides have put in considerable effort through the Climate Change Working Group and other frameworks for discussing energy cooperation. Obama on Tuesday announced new US targets for reducing greenhouse gas emissions by 26 to 28 percent of 2005 levels by 2025, at a rate of 1.2 percent per year through 2020 and 2.3-2.8 percent per year between 2020 and 2025. China, in turn, said that it would seek to increase its energy consumption from zero-emission sources such as wind, solar, and nuclear energy to 20 percent of its total energy mix by 2030. It also made the unprecedented commitment to cap its carbon dioxide emissions by that date. The two sides also announced expansion of existing cooperation under the Climate Change Working Group and the US-China Clean Energy Research Center. In their joint announcement, the two countries said they hope such an announcement could build momentum before the next round of global climate change discussions, set to take place in Paris in late 2015. Questions remain, however, about the viability of such targets in light of domestic opposition in both the US and China. The joint fact sheet on bilateral economic relations also mentions a set of other issues for which the two sides agreed to language, but not necessarily new concrete action. Chief among these is in food and agriculture, where the two sides agreed to boost dialogue to “enable the increased use of innovative technologies in agriculture.” Such language could provide positive signals for foreign agriculture companies, including the producers of genetically modified seeds. Other areas of agreement include exchange-rate reform and export credits. President Obama’s schedule: APEC, state visit Obama also participated in several APEC-related events. On November 10, he—along with Xi and other political and business leaders—addressed the APEC CEO summit, advocating for an ambitious BIT, a level playing field in China for US companies, fair and open competition policy, stronger protection for intellectual property rights, a market-driven exchange rate, greater human rights, and freedom of the press. Xi also made remarks to the group, stressing the importance of openness and reform for development within the APEC region, the strength of the Chinese economy, and the need to tackle difficult challenges to promote reform. Obama and Xi also participated in the leaders’ declaration and discussions on regional trade and investment initiatives, including US-led efforts such as the Trans-Pacific Partnership and China-backed arrangements like the new Asian Infrastructure Investment Bank, and the Free Trade Area of the Asia-Pacific (FTAAP). Following the conclusion of the APEC meetings, Obama remained in Beijing for an official state visit. The format was carefully negotiated by the two sides, and included an informal dinner and discussion with Xi at Zhongnanhai on November 11. The trip also included meetings with Xi and Chinese Premier Li Keqiang on the morning of November 12 and a joint press conference late morning on November 12. The US delegation included Secretary of State John Kerry, National Security Advisor Susan Rice, US Ambassador to China Max Baucus, US Trade Representative Michael Froman, and Deputy National Security Advisor Caroline Atkinson. Xi’s delegation included senior officials such as Chinese Communist Party (CCP) General Office Head Li Zhanshu, Politburo Member and CCP Central Policy Research Office Director Wang Huning, State Councillor Yang Jiechi, Foreign Minister Wang Yi, and PRC Ambassador to the US Cui Tiankai.
Posted on: Wed, 12 Nov 2014 23:08:44 +0000
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