Two-level Analysis Of The Obama Administration's Participation In The U.S.-China Bilateral Investment Treaty(BIT) Negotiations

The U.S.-China BIT(Bilateral Investment Treaty)represents the highest level of BIT for China.The negotiations have gone through nine years from 2008 to 201 6.Although the U.S.-China BIT negotiations have gained some progress in the Obama administration.what prevented the U.S.from finishing the BIT negotiations with China during that period?Robert Putnam's "two-level game theory" and Helen Milner's theory of domestic politics provide a clear model for analyzing the challenges in the U.S.-China BIT negotiations.Putnam believes that in any international negotiations the national leader is involved in a two-level game simultaneously.The national leader seeks to reach an agreement with other international actors in the international level(Level I),and he also needs to persuade domestic constituents to approve of the ratification of this agreement(Level ?).He identifies the intersection of the two levels that can lead to an agreement as"win-set".Based on Putnam's two-level game theory,Helen Milner specifically explains how domestic forces shape the international outcomes.Milner identifies three sets of actors in domestic politics:the executive branch,the legislature,and societal interest groups.Focusing on the U.S.perspective,this paper discusses the challenges that prevented the BIT negotiations from being concluded in two levels as well as the interaction between international negotiations and U.S.domestic politics.Textual analysis of the related materials is applied to this research.The first-hand materials include the speeches.transcripts of interviews,books,statements,and remarks from relevant persons,including the President,trade representatives,congressmen,interest group leaders,etc.Official documents such as the Constitution,legislative bills and announcements published by the U.S.government and the Chinese government are also discussed.This paper collects relevant data on trade and investment and spending on lobbying.Testimony on public hearings and reports issued by Congress and firms are also used.Second-hand materials include news reports and reviews published by experts and media.The discussion of the international level analyzes the common interests and conflicting interests between the U.S.and China.At the preliminary stage,common interests bring the U.S.and China into BIT negotiations.The vision of an open investment relationship motivates them to make changes for the advancement of negotiations.China sets up pilot free trade zones and releases a series revised laws and regulations on the management of FDI and the U.S.government releases the new model BIT to fit in the new situation of U.S.-China BIT negotiations.However,the win-sets for the U.S.and China cannot be achieved because of the "uncompromised" sticking point in the later period.For China.a negative list short enough to satisfy U.S.expectations requires a reform of domestic laws and regulations on a large scale,which undermines the Chinese government's autonomy in domestic economic reform.For the U.S.,national security concerns and political distrust prevents the U.S.government from addressing the strict scrutiny of Chinese FDI in the U.S.When the negotiations enter into the later period,no successful compromise was made to solve the cores issues.thus the negotiations got stuck.The discussion on the national level analyzes the distribution of power,coalition,and policy preferences of the three sets of domestic actors,including the executive branch,the legislature,and interest groups.The executive branch holds the most open-minded attitude toward China among domestic actors,but its adherence to global leadership and political distrust in China kind of weakens its willingness to make compromises in the U.S.-China BIT negotiations.Divided coalition in the legislature makes the U.S.-China BIT less likely to be ratified.The Democratic President and his fellow Democrats encountered their biggest losses in the House seats in both 2010 and 2014 midterm election turnouts.President Obama even faces disagreement from his fellow Democrats on trade issues.In terms of the involvement and monetary spending on government lobbying,pro-BIT interest groups are overshadowed by anti-BIT interest groups.At the later stage of negotiations,only Goldman Sachs,a financial group,holds on to lobbying for U.S.-China BIT.Other supporters such as agricultural groups do not express too many aspirations for an agreement since they can make enough incomes from exports on agricultural goods.Protectionist interest groups rank high on the total spending of government lobbying,with energy,manufacturing,and high-tech industries always on the list of top 10.With respect to the distribution of information,they actively participate in public hearings and issue reports to articulate their oppositions and to provide information for Congress with an aim to prevent the achievement of U.S.-China BIT.The research findings show that the largest divergences of the U.S.-China BIT lie in China's long negative list and no response from the U.S.on the scrutiny issue,which are deeply rooted in the power distribution and policy preferences of domestic actors.Besides,China cannot give the U.S.a satisfactory negative list,which means no significant benefits for domestic groups,thus reducing the cost of "no BIT".The U.S.'s silence on the scrutiny issues originates from domestic oppositions based on the unemployment rate and national security concerns.As the chief negotiator,Obama's team cannot make more compromises at the international table because of its political distrust in China,divided coalition in Congress and strong oppositions from protectionist interest groups.Therefore the U.S.-China BIT was not achieved in the Obama administration.Although the U.S.-China BIT negotiations were not finished,it may be resumed in the future.The significance of the U.S.-China BIT is no less than that of China's entry into the WTO.From the perspective of the U.S.,this paper demonstrates the interactions among different parties in the U.S.-China BIT negotiations.