Obama in race against time to end talks with China and save legacy

Beijing and Washington face a challenging task of concluding investment talks before President Barrack Obama steps down in January 2017, according to observers in Brussels.

The experts made their observation as the two countries began their economic and strategic dialogues in Washington with media quoting the White House as saying that Obama intends to make the conclusion of such talks his legacy.

"It will be very difficult to conclude the talks before the end of 2016 given the complexity of issues involved," said Fraser Cameron, director at EU-Asia Centre, a think tank based in Brussels.

Cameron said the EU-China bilateral investment talks will take at least another 12-18 months as there are substantial differences over questions such as market access.

He said the current political atmosphere between Beijing and Washington will not affect the progress of talks. "The economic relationship is not affected by any political problems," he said.

"Obama has understood the importance of China's dramatic economic rise and the implication for Asia and the US."

Cameron said Obama has sought successfully to engage with China across the board but he should have done more to educate Congress on the importance of giving China more say in international financial systems, hence the debacle over the AIIB".

Shada Islam, director of policy at the Brussels-based think tank Friends of Europe said Obama would definitely like to see the US-China Bilateral Investment Treaty (BIT) talks concluded by the end of his term – but the devil is in the detail of such discussions and much will depend on negotiations on the two sides' "negative lists".

She said EU negotiators are keeping a close watch on China's parallel talks with the United States – and while the European Union won't want BIT to be concluded long after the US one, EU negotiators will not rush discussions.

"EU negotiators have their own pace and this won't be impacted too much by the US-China talks," said Islam. "President Xi and Obama could give the BIT talks a big political boost in September – this will encourage negotiators not to waste too much time and to speed up discussions."

Islam said Obama has not radically changed US policy towards China – no president can do that since policy shifts require all parts of the administration to fall into line and there are wide divergences on policy towards China in the Congress between Democrats and Republicans.

"The US continues to see China as a strategic competitor but also knows that tackling 21st Century global challenges requires cooperation with China," said Islam.

"This was the case on climate change when Xi and Obama unveiled joint commitments on emission reductions. The US also intends to raise the issue of the South China Sea where Washington has taken a tough line on China's land reclamation and construction projects as well as cyber security."

Duncan Freeman, senior research fellow at Brussels' Institute of Contemporary China Studies said it may be possible to conclude a deal before the end of Obama's presidency, but it depends on a number of factors falling into place, not just in the negotiation, but also in the political process, especially in the US.

"Some tough issues still remain to be resolved, for instance on negative investment lists, which are at the heart of negotiations," said Freeman.

Freeman said a key element in the negotiation being able to move ahead quickly will be the policy adopted by the Chinese government, especially on the key issue of the negative list. "This relates not just to the US-China BIT, but more fundamentally to wider reform of Chinese FDI policy," said Freeman. "The position adopted on this issue will reflect how far China is willing to go on reform, and also will have an impact on the EU-China BIT negotiation, where it is also central. ".

Freeman said Obama's legacy on China is a rather confused one of positives and negatives. "This reflects a fundamental difficulty the US has in responding to the emergence of China. It is unlikely this will be resolved during the rest of Obama's term, and will remain for his successors," he said.

Freeman said a degree of political tension between China and the US will influence the wider context of negotiations, especially in the US, but the impact will depend on how far both sides are able to separate the BIT from other issues in the relationship.

"No doubt President Xi will push for the negotiation on the BIT to move ahead during his visit, but the key will be progress on the substantive issues," said Freeman. "Progress may depend on top leaders in both China and the US committing themselves to resolve differences in the negotiations.".

Gao Shuang contributed to the story in Brussels.