Following about seven years of negotiations, the EU and China reached an agreement in principle on investment shortly before the end of 2020. However, it will take a while until the agreement, which is supposed to facilitate EU investors’ access to the Chinese Market and to ensure sustainable development, will come into force.
It had to be Christmas of all times when everything went quickly: on 24 December 2020, the EU Commission announced – to the surprise of many observers – the conclusion of a post-Brexit Deal with Great Britain. Only a few days later, on 30 December 2020, the Commission announced an “agreement in principle” on the Comprehensive Agreement on Investment (CAI) between the EU and China.
Improved market access for European businesses
According to the Commission, the Agreement, which had been negotiated since 2013, shall make it easier and more predicable for European businesses to access the Chinese market. By reducing market access barriers, the Agreement shall increase bilateral investment flows, improve the level of protection for investments and promote sustainable development. The latter would also include the protection of fundamental labour rights. Clear rules shall also be laid down with regard to state-owned Chinese enterprises, the transparency of subsidies, the forced transfer of technologies and other distortive practices. By doing so, the Commission hopes to be able to guarantee a level playing field. A “sustainable” State-to-State dispute resolution mechanism shall ensure that China will indeed meet its obligations within the framework of the Agreement.
Commission President Ursula von der Leyen called the Agreement a “landmark” for the EU’s “values-based trade agenda“. Vice President and Trade Commissioner Valdis Dombrovskis hopes the Agreement will be a “major boost” for European businesses in “one of the world’s biggest and fastest markets”. For the EU, China, a country with ca. 1.4 billion consumers, is the second most important business partner worldwide.
German Presidency accelerated reaching an agreement
The fact that the Agreement had been enforced just before the end of the year – thereby at the end of the German Presidency – is probably thanks to the effort made by German Chancellor Angela Merkel. Merkel had already emphasized during the summer that the EU had a strategic interest in an active cooperation with China. Criticism about Germany’s approach was voiced, among others, by such Member States as Italy, Spain and Belgium. They were, above all, concerned about forced labour in China. Another fear is that the Agreement might strain relations with US President-elect Joe Biden, making a fresh start regarding the transatlantic Partnership more difficult. Biden has recently voiced his intention to build an alliance against China with Europe.
Criticism from the European Parliament
Criticism was also voiced by the EU Parliament. The deputy Chair of the European Parliament Delegation for Relations with China, Reinhard Bütikofer (Greens), criticised the lack of sanctions with regard to sustainability and worker protection.
Bütikofer calls China’s promise to work towards a ratification of the ILO Core Labour Standards “nonsense”. He regards the fact that the EU had not demanded binding promises a mistake. Even though Bütikofer believes that an improved market access for European businesses looks positive on paper, he has his doubts concerning its actual implementation.
On 17 December 2020, about two weeks prior to the agreement, the EU Parliament adopted a resolution, in which it criticised massive human rights violations, the persecution of Muslim ethnic minorities as well as forced labour and internment. 604 MEPs voted in favour of the resolution, thereby passing it with a clear majority.
However, there is still a long way to go until the Agreement can come into force. First, it has to be legally examined, translated into the official languages of the EU and approved by the EU Parliament.