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U.S. and China talks move forward

They'll cooperate on investments and climate change but are stuck on cyber-theft.

July 11, 2013|By Don Lee, Los Angeles Times
  • The U.S. and China have agreed to cooperate on such issues as improving investments and on climate change. Above, an automobile factory in Wuhan, China.
The U.S. and China have agreed to cooperate on such issues as improving investments… (SHEPHERD ZHOU, EPA )

WASHINGTON — The U.S. reached agreement with China to cooperate on improving investments and climate change, among other areas, but officials could cite little concrete progress on a White House priority: getting the Chinese to stop cyber-theft of American technologies and trade secrets.

As China and the U.S. concluded their fifth annual Strategic and Economic Dialogue on Thursday, officials on both sides described the overall tenor of the two-day discussions as candid and constructive.

They highlighted new initiatives on cutting greenhouse gas emissions and an agreement to start substantive talks on a comprehensive bilateral investment treaty, a development that could give U.S. firms greater market access to many more products and services.

Though the dialogue covered a range of touchy issues in their relationship — including human rights, maritime security in the Pacific and North Korea — one of the newest and most important for the U.S. is cyber-security.

For months, the U.S. has accused China of engaging in government-sponsored commercial cyber-spying.

Leaders of the Treasury and State departments who co-chaired the dialogue sought to make clear that although all governments engage in cyber-spying to some degree, hacking computers for the purpose of stealing commercial secrets was another matter and was unacceptable.

"We had a healthy discussion among our senior economic officials about growing U.S. concerns with cyber-enabled theft and the need to address this issue head on," said Treasury Secretary Jacob J. Lew in his closing remarks.

A senior Treasury official, speaking on background, said the Chinese acknowledged cyber-theft as a separate category and as a serious issue.

It wasn't clear that Chinese officials conceded that they engaged in such activity or accepted the distinction as far as a matter of negotiations. China has repeatedly denied U.S. allegations of cyber-intrusions.

In his closing remarks Thursday, Councilor Yang Jiechi repeated a familiar Chinese retort: China, too, is a victim of hacking. And he said China believed that the U.N. should play the main role of setting up rules for world cyber-security.

The U.S. agenda on cyber-spying was complicated by American electronic surveillance activities recently revealed by former National Security Agency contractor Edward Snowden.

Deputy Secretary of State William J. Burns, who filled in for Secretary John F. Kerry, who was in Boston to be with his ailing wife, criticized China's handling of the Snowden affair because Beijing had allowed Snowden to fly out of Hong Kong, which is a part of China.

When his turn came up for closing remarks, Yang said that the U.S., like Beijing, should respect Hong Kong's decision in the matter since it was operating according to its laws.

The agreement to start talks on a bilateral investment treaty could address a long-standing complaint by U.S. and other foreign businesses in China. Chinese rules prevent foreign companies from taking majority ownership in dozens of manufacturing and farm goods and services, including cars, oil seed processing, insurance and banking.

“The commitment made today stands to be a significant breakthrough and marks the first time China has agreed to negotiate a bilateral investment treaty, to include all sectors and stages of investment, with another country,” Lew said in a statement.

Neither side specified when the talks would start, but Chinese Commerce Minister Gao Hucheng, speaking on the sidelines of the two-day dialogue, said it would begin "as soon as possible."

John Frisbie, president of the U.S.-China Business Council, which represents major American companies operating in China, said it remains to be seen whether the Chinese are serious in negotiating a treaty that would in principal include everything, though there could be exceptions for certain strategic goods and services.

But if they are serious, he said, "this could be a significant move forward."

Frisbie said one reason the Chinese may be open to a broad investment treaty is that it would help them gain greater access to American goods and markets.

A senior Treasury official offered another reason for the seeming change in position on the part of the Chinese: China is now in an economic transition in which the new leaders, after years of focusing on manufacturing and infrastructure investments, want to broaden the economy by boosting services and innovation.

And an investment treaty, the Treasury official suggested, would help Beijing in its goal as foreign competition could also drive faster development in services and related businesses.

don.lee@latimes.com

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