BEIJING – Global economic growth, says the International Monetary Fund, has been “too slow for too long.” A major reason has been sharply decelerating growth in global trade, which the World Trade Organization expects to grow by 1.7% this year – far below the 6.7% average in the decade preceding the 2008 crisis. With trade alone no longer capable of underpinning global cooperation, it is time to add more investment linkages to the mix.
As it stands, there is no real global-level investment framework. But the G20 recently approved the world’s first programmatic document on multilateral investment, entitled the G20 Guiding Principles for Global Investment Policymaking. The general framework it provides could be particularly valuable for China and the European Union, as they attempt to negotiate a bilateral investment treaty (BIT).
So far, there have been several rounds of BIT talks, focusing on increased investment protection and market access. Many more rounds are on the way, as some significant issues – including guarantees of regulatory transparency and the creation of an effective dispute-settlement mechanism – have yet to be fully agreed.
The Sino-European BIT is to be based on 26 existing BITs involving China and 28 individual EU members – treaties that are far from consistent, in terms of requirements for and restrictions on market access. This lack of uniformity is a major motivation for China to negotiate a single treaty: it wants to ensure that its enterprises have equal market access in all EU member countries and avoid the costs and complications associated with adhering to different regimes. Gaining access to the advanced technologies and management expertise of European firms is another major enticement.