How to Get a Trade Deal That Pleases Everyone

By David Fickling | Bloomberg April 3 at 11:48 PM

The key to crafting international agreements is making sure that all parties are able to declare victory.

That seems to be at the heart of the emerging trade pact between the U.S. and China. Beijing would have until 2025 to meet commitments on commodity purchases and would allow American companies to wholly own Chinese businesses, three people familiar with the talks told Bloomberg News.

China will have target dates 90 days and 180 days into the future to follow through on some of its pledges, and failing to come good on its 100 percent foreign-ownership promises would trigger retaliation, the people said. Other commitments wouldn’t have to be implemented until 2029 and wouldn’t result in punitive measures, while issues around technology transfer remain a sticking point, according to the report.

It’s not hard to see how this would be sold as a victory in the U.S. – but it’s worth remembering that China, too, will be able to present such an agreement as a seal of approval on its existing policies.

For instance, the drive to allow 100 percent foreign investment in local businesses has been a long-standing one. China’s foreign-investment catalog – a document defining the sectors of the economy in which foreign partners are encouraged, or banned, or allowed in with restrictions – has been progressively pruned ever since the first edition was released in 1995.

The restricted category mainly consists of industries where overseas companies can only operate in joint ventures with local partners as controlling or minority shareholders. This seems to be the area being targeted by the proposed foreign-ownership commitments – but with the progressive removal of financial-services businesses and auto manufacturing from that list, just 20 industries remain.(1) 

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