The agreement is intended to make it easier for European companies to access the Chinese market.
China and the EU have basically agreed on a future-oriented investment agreement. After seven years, Commission President Ursula von der Leyen and the Chinese state media announced the conclusion of the negotiations on Wednesday.
The EU leadership with von der Leyen and Council President Charles Michel as well as Chancellor Angela Merkel for the German EU Council Presidency and French President Emmanuel Macron spoke via video with China's President Xi Jinping.
The agreement is intended to improve market access for European companies in China, ensure fair competition and open up new business opportunities. It is the most comprehensive attempt by the EU to date to put the economic relationship with the emerging, second-largest economy on a new footing. But critics don't go far enough. The future US administration also showed certain reservations about Europeans going it alone.
“The world after the pandemic needs a strong relationship between the EU and China,” wrote Commission President von der Leyen on Twitter. “But that requires cooperation and trust – also in trade and investment.” The EU has the largest open market in the world. “But we value reciprocity and fair competition.” China's president said the deal demonstrates “China's determination to open up further.”
The issue of labor rights
The breakthrough came after China made new promises on the labor rights issue. The communist leadership has promised to undertake “permanent and sustainable efforts” to ratify two conventions of the international labor organization ILO against forced labor, according to an internal briefing to the EU member states that the dpa has received. Critics, however, saw only “superficial lip service”.
As the world's most populous country with 1.4 billion people, China is an important trade and economic partner for the EU. Last year, goods worth an average of 1.5 billion euros were traded between the two sides every day. After the USA, China is the Europeans' second most important trading partner. For the EU, the conclusion of the agreement is also a prerequisite for starting talks on a free trade agreement.
Graduation in 2022
The agreement in principle is a “first step”, which will be followed by further negotiations on the exact legal text of the agreement and “significant technical work”, as the paper to the EU members indicates. The EU Commission therefore does not expect a conclusion until “early 2022”. The agreement is only a single instrument, but “not a silver bullet to solve all problems and challenges related to China”.
The German government viewed the agreement as a great success for the Chancellor at the end of the German EU Council Presidency. European values have been anchored in the investment agreement – “as far as it is possible at all,” said the government. “It doesn't solve all of the critical issues, but it's a big step forward.”
Role of the USA
For China's head of state and party, it is an important symbolic victory against the background of the ongoing trade war with the United States – during the handover in Washington of all places. The elected US President Joe Biden wants to stick to the tough course against China and forge alliances with allies such as the Europeans. There are concerns that Brussels is acting too hastily and without further consultation with the new US administration.
“These concerns are understandable, but unjustified,” says the internal EU paper. The EU welcomes cooperation with the USA towards China, which should be “on different pillars”. Europe's trading partners also benefited from more market access, transparency and better competitive conditions in China. Greater openness to state subsidies or obligations for state companies should also help the work of the World Trade Organization (WTO).
obstacles
The agreement had been fought for until the very end. There were new concessions from China in the transport services by sea or in the air, in the areas of finance, computers, research and development, vehicles with alternative drives, telecommunications, cloud services and the operation of private hospitals, according to EU circles.
At the beginning of the agreement, both sides reaffirmed their intention to “create a better climate for the promotion and development of trade and investment”. The agreement would set out “the necessary arrangements for progressive and significant investment liberalization”.
In the case of government subsidies, a greater degree of “transparency” and a mechanism was agreed to point out negative effects. The controversial issue of the discrimination against European companies in public procurement in China was completely excluded. Investment protection is also not included, but is being negotiated separately. Both sides want to conclude negotiations on this within two years of the signing of the investment agreement.
Arbitration bodies
In order to settle differences between companies, the draft text provides for a mechanism for consultation or, finally, a panel of three experts who should try to mediate. The settlement of disputes between states via an arbitration committee chaired by an expert who does not have the nationality of the parties involved is also regulated in detail. Lists of experts should be drawn up for this purpose.
The European Chamber of Commerce in China welcomed the deal. “We eagerly await the publication of the details of this political agreement and hope for a robust and courageous conclusion,” said Chamber President Jörg Wuttke in Beijing. Before the final text could be agreed and ratified, “additional hurdles” would probably have to be overcome.
