The US must hone its message on fair play

The relationship between China and the United States is plagued by contradictions, as evidenced by Vice-President Xi Jinping's recent visit to Washington. High on the US agenda, conveyed by US Vice-President Joe Biden, were concerns over China's trade practices, human rights and cybersecurity, yet at the same time US officials were pressing for more Chinese investments in the US to help boost the US economy and generate job growth.

The Obama Administration, led by former commerce secretary and now Ambassador to China, Gary Locke, is hoping to get a bigger slice of the $2 trillion China is expected to commit to foreign investments between now and 2020. Yet that huge bundle of investment capital will likely bypass the US and flow into Europe and other continents where there is a warmer and less complicated reception.

America is an attractive market for China's major companies but it is losing out due to what has become a hostile environment, rooted in lingering "Red China" fears and the heightened political and national security concerns that serve to dismay and discourage China's business leaders.

Almost overnight, Chinese companies have emerged as world-class players that now rival their global corporate counterparts, displaying technologies and products that are cutting edge and competitive while exhibiting the best in management proficiency.

That is why the American business and financial sectors and the regions of the country that benefit heartily welcome such investments. Indeed, Chinese investments and acquisitions have literally saved American plants and jobs in states such as Minnesota and in industries such as renewable energy and automotive parts.

Yet China's major companies, mostly State-owned, are viewed by some US skeptics as being subject to State mandates that go beyond market objectives and otherwise give them an unfair advantage in their global pursuits. This has resulted in several high-profile cases of Chinese companies encountering US government scrutiny and political hostility, often resulting in an acquisition or merger being denied, thus resulting in Chinese companies exiting the US and channeling their investments to other destinations.

While US laws are directed at State-owned or controlled companies, the most notable case of US government harassment of a Chinese company is Huawei Technologies, a private, employee-owned company that is a global leader in the design and manufacturing of communications technologies, providing products and services that span wire-line, wireless and IP platforms.

Huawei is dominant in the world's largest telecommunications markets, but in the US, its presence has been severely limited thanks to government interference, including blocking several large commercial transactions, that was clearly discriminatory if not outright harassment. Interestingly, all of Huawei's competitors are foreign-based and all of the network equipment being provided is made in China. Huawei is prepared to make huge investments in the US and has done its utmost to fully comply with US security concerns and relevant laws governing all transactions, but it is difficult to do so in such a hostile environment.

As China's largest State enterprises pursue investment opportunities globally, the US will likely lose out given today's political climate and the so-called Committee on Foreign Investments in the US law, a review process that singles out State-owned or controlled companies that often ignite a controversy if the transaction in anyway involves America's critical infrastructure such as port facilities, electric grids, cyber-related technology.

Chinese companies, like all foreign investors, must play by the rules, but they should not be subject to discriminatory and unfair treatment by government officials and opponents on Capitol Hill. If the Obama administration and Congress are serious about seeking Chinese investments that could prove vital to boosting the US economy, the following is recommended:

The US should avoid sending mixed messages to Chinese enterprises. If the government officials extend a welcome handshake, they should not follow with the other hand that clobbers a transaction.

The committee review dates back to the 1970s and applies to all foreign investments in the US, but it should be a fair and balanced process and one that resists being dominated by security-minded members who often influence decisions based more on fear than the economic well-being of the country.

Congress acted responsibly in updating the committee after the controversy which arose after the management of US ports was sold to the government of Dubai, but senators and House members should respect the process they established and not interfere or attempt to influence the outcome for political reasons or simply to protect domestic companies who are competitors.

When a foreign transaction is rejected for security, economic or political reasons, the government's decision should be transparent, implementing a process that adheres to the rule of law and otherwise avoid having US officials taking discrete actions to interfere in commercial transactions.

During Xi's visit to Los Angeles, Huawei signed an agreement to procure $6 billion in goods and services from US suppliers, bringing the total to $30 billion to date, which is a mere fraction of what it would have been had government officials not intervened to block billions in investments.

If this is the kind of investment the Obama Administration is seeking, it must avoid sending mixed messages and find a way to more fairly balance the nation's legitimate security concerns with the country's other concern that may prove just as threatening its long-term economic well-being.

The author is a former US congressman and an expert on international trade and investment. He is an executive vice-president at APCO Worldwide.