U.S. and China to negotiate investment treaty

By Doug Palmer and Jason Subler

WASHINGTON (Reuters) - The United States and China agreed on Wednesday to initiate negotiations on a bilateral investment treaty that would make it easier to invest in one another's corporations and to cooperate more on energy issues.

The initiatives were announced by U.S. Treasury Secretary Henry Paulson after two days of talks with a Chinese delegation led by Vice Premier Wang Qishan, who said China was committed to free trade but was studying the causes of global financial turmoil that stemmed from a U.S. subprime mortgage meltdown.

A treaty would take at least a year to negotiate -- well past the Bush administration's tenure that ends in January -- and Democrats made clear that they had reservations about it.

"If the administration moves forward with these negotiations, it should make clear to China that all major decisions in the negotiations will necessarily be left to the next president," the chairman of the U.S. House of Representatives Ways and Means Committee, Charles Rangel, and Trade Subcommittee Chairman Sander Levin wrote in a letter to Paulson.

A treaty would also require a two-thirds majority vote of approval by the U.S. Senate, a potential hurdle if Democrats remain in a majority.

U.S. COMPANIES HAPPY

U.S. business interests were more supportive. The president of the Financial Services Forum, Rob Nichols, said a treaty would "improve U.S. access to China's market and provide greater security for U.S. investments" in its growing economy.

China also has a strong interest in a treaty, in part because of difficulties its companies have had in securing licenses to do business in the United States.