Political Economy of China-U.S. BIT Negotiation: Whose Decisive Pursuit of Leadership in Institutional Transformation?

TDM 1 (2015) - The Pacific Rim and International Economic Law: Opportunities and Risks of the Pacific Century

27 Pages Posted: 30 Jul 2014 Last revised: 24 Jan 2015

See all articles by Peng Wang

Peng Wang

School of Law, Xian Jiaotong University

Date Written: July 29, 2014

Abstract

China-U.S. BIT negotiation signals the consensus and shared understanding over transnational investment regulations and cooperation among U.S. and China. This research proposes a power-oriented necessary condition model of IIAs making to analyze the desirability and feasibility of potential China-U.S. BIT negotiation. In light of opportunity cost and transaction cost of international regulatory cooperation over transnational investment governance, the research argues that states will not enter an IIA unless (1) the IIA would efficiently better states off, and (2) great states come with great distribution of surplus of the IIA. A China-U.S. BIT is mutual beneficial and there is no alternative mechanism with both high desirability and high feasibility for both contracting states. China-U.S. power relation falls in between strong-strong relation and strong-weak relation with a more resemblance to strong-strong relation. The China-U.S. BIT negotiation, therefore, would be largely based on US model BIT with tradeoff between BIT objectives based on bilateral economic position and political relations. Policy preferences of both states concerning investment protection are compatible while policy preferences concerning investment liberalization and socialization will be subject to compromises. Besides, available control mechanisms for contracting states in individual arbitration and accommodative mechanisms for shifts of underlying power in the long term are discussed in detail to evaluate the possible contribution of a China-U.S. BIT to the institutional transformation of IIAs system.

Keywords: China-U.S. BIT, Power Relation, Transaction Cost, Political Economy

Suggested Citation

Wang, Peng, Political Economy of China-U.S. BIT Negotiation: Whose Decisive Pursuit of Leadership in Institutional Transformation? (July 29, 2014). TDM 1 (2015) - The Pacific Rim and International Economic Law: Opportunities and Risks of the Pacific Century . Available at SSRN: https://ssrn.com/abstract=2473537 or http://dx.doi.org/10.2139/ssrn.2473537

Peng Wang (Contact Author)

School of Law, Xian Jiaotong University ( email )

28 Xianning West Road
Xi'an, Shaanxi 710049
China
029-82664484 (Phone)

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