FOR IMMEDIATE RELEASE: July 27, 2012
SCHUMER TO GEITHNER: BLOCK CNOOC DEAL UNTIL CHINA OPENS UP ITS MARKETS
China-Owned Oil Company Seeking To Buy Canada’s Nexen in $15B Mega-Deal, Largest-Ever Foreign Acquisition by Chinese Company
Sale Needs Approval From CFIUS Since Nexen Has Major Operations in Gulf of Mexico
Schumer: Regulatory Approval Should Be Conditioned on Market Reforms By Chinese Gov’t
WASHINGTON, DC—U.S. Senator Charles E. Schumer (D-NY) urged Treasury Secretary Timothy Geithner, in his capacity as Chairman of the Committee on Foreign Investment in the United States (CFIUS), to block China’s state-owned oil company, China National Offshore Oil Corporation, from buying Canada’s Nexen Inc. until the Chinese government takes concrete, enforceable steps to open that country’s markets to foreign investment and level the playing field in international trade.
In a letter to Geithner, Schumer said he does not object to the deal on its merits, but said it presented an important opportunity to pressure China to consent to economic reforms it has resisted for years.
“It is rare that we have so much leverage to exert upon China. We should not let this window of opportunity pass us by. At some point, we have to put our foot down over China’s refusal to play by the rules of free trade,” Schumer said.
As Treasury Secretary, Geithner is also the Chairman of CFIUS, which reviews deals involving the sale of U.S. interests to foreign firms for national security purposes. Even though Nexen Inc. is a Canadian oil company, the companies are expected to seek CFIUS approval because Nexen has significant U.S. drilling operations in the Gulf of Mexico.
The sale of Nexen Inc. to CNOOC, valued at over $15 billion, would be the largest-ever foreign acquisition by a Chinese company.
In his letter to Geithner, Schumer said the transaction’s approval should be conditioned upon China making “tangible, enforceable commitments to ensure U.S. companies reciprocal treatment.” Schumer suggested a number of concrete steps China could take to show good faith. For instance, Schumer said:
· China could finally join the Government Procurement Agreement.
· China could follow through on its promise—made at last May’s Strategic & Economic Dialogue (S&ED)—to simplify its review system for foreign investments to focus only on national security concerns;
· Since 2007, the Office of the United States Trade Representative has had China on its “priority watch list” for habitual intellectual property violations. China could step up its enforcement of intellectual property infringements, and;
· China could require provincial and municipal governments to adopt reforms that the national government made last year to the 2006 indigenous innovation policy.
A copy of Schumer’s letter to Geithner appears below.
July 27, 2012
Hon. Timothy Geithner
U.S. Department of the Treasury
1500 Pennsylvania Ave. NW
Washington, D.C. 20220
Dear Secretary Geithner,
I write today regarding the proposed transaction between China National Offshore Oil Corporation (CNOOC) and Canadian oil firm Nexen Inc. While I support foreign investment in North America and the United States, and believe the proposed transaction will benefit the United States and help ensure the continued resurgence of our domestic energy sector, I believe we must take a long-term perspective. For far too long, the road toward a normalized trade and investment relationship between the U.S. and China has been a one way street – it’s time that we demand equal treatment from China.
It is expected that the transaction will be reviewed by the Committee on Foreign Investment in the United States (CFIUS). Accordingly, I respectfully urge you, in your capacity as chairman of CFIUS, to withhold approval of this transaction until China’s government has made tangible, enforceable commitments to ensure U.S. companies reciprocal treatment. There is a long list of issues where, despite positive steps, progress has been all too slow. China has too often committed to further negotiations, which too often have not resulted in concrete action.
One of the primary areas relevant to this proposed transaction is the degree of market access for U.S. companies seeking to invest in China. In the 2012 Strategic & Economic Dialogue, we committed to a fair, non-discriminatory review process by CFIUS, regardless of whether the foreign investor is private or state-owned. But at the same time, China committed to “provide fair treatment to foreign investors in China”. Any review of U.S. investments in China would be based solely on national security concerns, and “expand the areas open to foreign investment and the degree of openness”. I believe approval of the CNOOC-Nexen transaction should be a test of these reciprocal commitments, and that concrete progress must be made by both sides simultaneously.
I sincerely hope the CNOOC-Nexen deal can be approved, and that Chinese companies will continue to increase their investment in the United States. But I urge you not to miss this opportunity – the largest foreign acquisition ever by a Chinese company – to hold China to the commitments it has made to provide a level playing field for US companies seeking to access Chinese markets. As Undersecretary Lael Brainard said last week, “China’s economy is now too large for it to pick and choose which rules it will follow”.
Thank you for your attention to this matter, and I look forward to working with you further to ensure a level playing field for cross-border investments.
Charles E. Schumer