Monday, December 05, 2016

Joel Slawotsky Reports From Chinese University of Hong Kong: Asia FDI Forum II--China's Three-Prong Investment Strategy: Bilateral, Regional, and Global Tracks


(CUHKFacultyofLaw ‏@CUHKLaw Nov 28 #AsiaFDI2016 with a packed house Ready for two days of enlightening discussions on #FDI #ISDS #China @JChaisse @MFeldman97 @fernandodsimoes)


Joel Slawotsky, of the Radzyner School of Law, Interdisciplinary Center, Herzliya, Israel, and the Law and Business Schools of the College of Management, Rishon LeZion, Israel has guest blogged for "Law at the End of the Day"  on issues relating to corporate liability under international law  (e.g., "Rethinking Financial Crimes and Violations of International Law", Jan. 9, 2013; "Corporate Liability Under The Alien Tort Statute: The Latest Twist"April 26, 2014) has recently also served as Guest Editor of the Sovereign Wealth Fund special issue of Qatar University International Review of Law (IRL) (2015). 

He has very kindly reported on the recently concluded conference held at the Chinese University of Hong Kong: Asia FDI Forum II: China's Three-Prong Investment Strategy: Bilateral, Regional, and Global Tracks in which he participated.

(Pix from Joel Slawotsky)


The Background Note to the conference explained:
Launched by the Chinese University of Hong Kong in 2015, the series of Asia FDI Forum provides a multi-stakeholder platform anchored in Hong Kong for participants from academia, government, the private sector and civil society to discuss regional investment trends, highlight specific features of investment treaties and policies, analyze Asia's relationship with other regions of the world, and explore the various legal and policy implications of the emergence of new actors, issues and norms which shape the future of Asia FDI. The Asia FDI Forum 2016 is structured around the emerging three tracks of China's investment policy and strategy.
His Report follows. The Conference Program may be accessed HERE (and portions of which follow the Report);  the Background Note may be accessed HERE; a list of Conference Participants may be accessed HERE.
 

(Pix from Joel Slawotsky)

Report: From the Chinese University of Hong Kong-- 
Bilateral, Regional, and Global Tracks
Joel Slawotsky

On November 29 and 30 I had the privilege of being invited to speak at the ASIA FDI Forum II, themed “China’s Three-Prong Investment Strategy: Bilateral, Regional and Global Tracks” organized and chaired by international trade and economic law scholar Julien Chaisse of the Chinese University of Hong Kong (“CUHK”). Julien is also Director of the Centre for Financial Regulation and Economic Development. His fantastic leadership and stewardship of the conference was greatly appreciated by everyone. The conference was also fortunate to have co-sponsors such as the Columbia University Center of Sustainable Development and the World Economic Forum. Lise Johnson (Columbia Center) and Cristian Rodriguez Chiffelle (World Economic Forum) both provided insightful comments throughout the intensive two day conference.

(#AsiaFDI2016 Amb. Manzoor Ahmad presenting the China-Pakistan Corridor #OBOR); Pix Dini Sejko who also participated in the Conference)


The CUHK, led by Dean Christopher Gane, is the venue for the FDI Forum which was launched in 2015 to analyze regional investment and trade issues in the context of the ever-changing challenging developments affecting Asia. The 2016 conference focused on the changing dynamics within China which is endeavoring to transition from a public-sector manufacturing based economy to a service-driven model. The conference involved discussion of three prongs: 1) the bilateral prong such as China’s bilateral treaties; 2) the regional prong where China is fostering closer internal Asian integration and 3) the global prong such as the OBOR initiative. The overarching question was whether these various prongs conflict or complement each other and in what ways.

An outstanding array of governmental, academic, private practice and corporate perspectives was provided. The diverse speakers, discussants and open questions resulted in an excellent exchange of ideas. Rather than focus purely on academics (and specifically the legal discipline), there was an extensive variety of stakeholders represented and also a multi-disciplinary approach which included economic, geo-strategic and economic global governance narratives. For example, the highly respected political science scholar Ka Zeng of the University of Arkansas had excellent feedback on my contribution which focused on transformative developments in the context of the global governance architecture. Among other great contributors: Manzoor Ahmad (Former Pakistani Ambassador and Senior Fellow, International Centre for Trade and Sustainable Development in Geneva); Heng Wang (The University of New South Wales); Li Ka-Yin (AnJie Law Firm, Beijing; Fellow and Council Member, The Hong Kong Institute of Directors); Xinquan Tu (China Institute for WTO Studies); Jane Y. Willems (Tsinghua University) and Mark Feldman (School of Transnational Law, Peking University).

The limited space and purpose of a blog precludes a full description of all the dozens of topics and discussions. However, I will briefly mention a few, sensitive to the Chatham House Rules under which the conference was organized.

 (Kicking off session 2 of #AsiaFDI2016 on Shaping a New International Investment Order? with Dr. Ka Zeng, Amb.Manzoor Ahmad & @JamesLockett1; Pix Dini Sejko who also participated in the Conference )

One participant delivered a powerful analysis of the OBOR and China in the context of economic and strategic context particularly relating to Central Asia. The speaker’s presentation was compelling and compared the OBOR to the U.S. Marshall Plan but noted the apparent lack of an ideological underpinning to OBOR. The speaker also discussed how China’s initiative is a significantly more ambitious project in terms of development and infrastructure. I think this makes great sense in a geo-political context particularly since nations receiving OBOR infrastructure investment funds will certainly be likely to be within the orbit of Chinese influence much as Western Europe was under U.S. influence for many decades.

Another participant delivered a fascinating analysis of the likelihood of changing investment rules and China as a possible rule modifier noting that ChAFTA contains many innovations on investment than other areas. The participant discussed how China’s entry onto the world stage in terms of treaty making could potentially lead to China becoming either a “rule-shaker” or rule-maker” i.e., modifying rules. Of course this has important implications for the current U.S. led order.


(Pix Julien Chaisse 2016; Leon Trakman revising the practice of standing panels in arbitration )


Yet another speaker presented an economic and political commentary on the recent U.S. presidential campaign and President-elect Trump. The speaker noted that Trump’s campaign derided trade treaties not investment agreements and opined that U.S. policy may “decouple” as opposed to the current “holistic approach”. The speaker also stated that RCEP will likely be the only game in town as TPP is shelved (but the possibility it will resurface in the future remains) giving China a greater role in global trade.

Still another speaker provided an insightful analysis on the topic of “Integration by Stealth: How the EU gained competence over FDI”, in which she eloquently described the historical perspective of investment treaties in the EU as well as the increasing protests against trade agreements.

 (#AsiaFDI2016 Toward a US-China Investment Treaty - @MFeldman97 Prof. Tu Xinquan and Joel Slawotsky @wef @JChaisse); Pix Dini Sejko who also participated in the Conference).


My presentation was focused on transformative developments in the global governance architecture such as China’s establishment of the AIIB as well as other developments including growing Yuan usage, the NDB and OBOR. In the aggregate, these developments portend a potential challenge to the existing international economic and legal architecture of the post WW2 era – the dominance of the IMF and World Bank, and the USD as the premier reserve currency. Will the new institutions serve to complement the present-day mechanics or constitute a rival architecture? At a minimum, the AIIB and NDB will provide another option to the existing mechanics but the possibility that the AIIB and NDB will become important actors seems likely particularly since financing OBOR will require a tremendous amount of funding.
Should this alternative architecture become successful the short-term and long-term ramifications on international law and finance are enormous. With respect to international law norms, as Judge Kaufman noted in the Filartiga case, international law is not immutable and could potentially be modified over time as has been done historically. Indeed, China as well as other nations were once outcasted and considered “uncivilized”, “barbaric” and “savage” yet ironically, it is “uncivilized” China that is assembling the new architecture that could serve to provide a new alternative to the existing order. China could potentially become a creator of international law norms. And of course should the USD lose its hegemony, the flexibility U.S. policy makers currently enjoy would be seriously eroded.
(Pix from Joel Slawotsky)

 While the answers to these questions are impossible to ascertain at this juncture, U.S. preeminence is perceived to be at-risk both domestically and abroad. This perception was likely a contributing factor in Trump’s election. Is this a mere perception? In examining the question, we should note that virtually all U.S. allies (other than Japan) have joined the AIIB over vehement U.S. objection. What does that say about the U.S.-China rivalry?

(#AsiaFDI2016 #EU - #China #BIT: uneven inheritance of 26 BITs between 27 (out of 28 EUMS) with china except Ireland; Pix Julien Chaisse)
 __________




As China is experiencing 'painful and treacherous' (Premier Li Keqiang in a speech at the WEF 2015) economic transition from state-led manufacturing to a service-based economy, new strategies are needed to fuel its stalled economic reforms and development goals as articulated in China's 13th Five-Year-Plan (2016-2020). For China's domestic investors, there is a shrinking pool of good investment opportunities in the country compared to its very high savings rate. According to World Bank`s Doing Business Index, which measures business-friendly regulations, China was ranked 84 in 2015, after Ukraine ranked at 83. It is thus important for China to adjust its investment rules and policies with its major economic partners and within the Asia-Pacific region.
 
 (Pix from Joel Slawotsky)
The Bilateral Prong: In recent years, China, a country which has historically preferred to deal bilaterally with foreign nations, has launched bilateral talks with its top high-income trading partners to advance its interests and gain more influence. China has concluded bilateral deals with certain strategic partners e.g. ASEAN (2009), Canada (2012), and Australia (2015). In addition, there are two notable deals under negotiation: US-China BIT (launched in 2008) to govern a more complex economic relationship between the world`s two largest economies, and EU-China investment treaty (launched in 2013 at the 16th EU-China Summit) to encourage further liberalization of China`s economy.


The Regional Prong: China has also actively participated in shaping the economic architecture of the Asia-Pacific region. Spurred by regional economic integration in the West (EU, NAFTA, MERCOSUR, Pacific Alliance) and frustrated by the deadlock of WTO multilateral negotiations, countries in the Asia-Pacific region are leaning towards harmonization and modernization of their foreign investment rules. To fulfill the "Asia-Pacific dream" touted by President Xi, China has, since 2006, been promoting an Asia-Pacific trade pact, Free Trade Area of Asia Pacific (FTAAP), arguably with Regional Comprehensive Economic Partnership (RCEP) and (Trans Pacific Partnership) TPP as pathways created by China and the U.S. towards harmonization. In 2014, a level of harmonization has been achieved in the East Asia as China-Japan-Korea Trilateral Investment Agreement entered into force. And of course the potential coming into force of the TPP, even without having China, must be part of the analysis, as it could also have complex and significant impacts on the region's investment governance.

The Global Prong: China has garnered increasing attention through its introduction of the One Belt One Road (OBOR) in 2013, aimed at strengthening its "Go global" policy by opening up new markets and increasing the value of cross-border business. Over China`s G20 Presidency in 2016, a multilateral consensus has been reached on Global Investment Policymaking, which specifically reference inclusive growth and sustainable development as objectives of investment policymaking, and implementation of which will be pivotal in reducing the fragmentation of international investment law and policy going forward.


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