China/EU Investment Agreement

by Stephen Lendman (stephenlendman.org - Home - Stephen Lendman)

At yearend, China and EU countries agreed in principle on a Comprehensive Agreement on Investment (CAI) — after years of negotiations.

European Commission President Ursula von der Leyen said the following: 

"Today's agreement is an important landmark in our relationship with China and for our values-based trade agenda." 

"It will provide unprecedented access to the Chinese market for European investors, enabling our businesses to grow and create jobs."

The new agreement will replace 26 existing bilateral investment treaties between China and EU bloc countries.

According to Eurostat, the EU exported around $242 billion worth of goods to China in 2019.

Bloc imports from China were valued at about $442 billion.

The CAI reduces bilateral barriers to investment. It covers the following:

It provides greater market access for Chinese and EU investors.

It addresses issues related to transparency, predictability, and legal protections for investors.

It establishes protection against unfair, inequitable, unlawful treatment. 

It permits unhindered transfer of capital and payments related to investments.

Negotiations began in January 2014, multiple rounds continuing for seven years to reach an agreement in principle.

More talks are likely to finalize details for publication.

Chinese President Xi Jinping earlier said the following:

Both "sides should adopt a positive and pragmatic attitude, speed up negotiations on the China-EU investment agreement to achieve the goal of completing the negotiations by the end of this year, working to upgrade cooperation, facilitate the post-epidemic world economic recovery and jointly safeguard an open trade and investment environment."

On Wednesday by video link with Germany's Merkel, France's Macron, European Council president Michel, and von der Leyen, Xi said the agreement will contribute to creating an open global economy and will enhance mutual trust.

According to China's Ministry of Commerce (MOCOM), the CAI establishes benchmarks for bilateral trade and investment.

It covers bilateral commitments for market access, fair competition, sustainable development, and a mechanism for settling disputes,  MOCOM said.

Beginning straightaway in the new year, work will begin to produce the CAI's final text for formal signing when completed.

A total of 35 rounds of talks were held through December 2020, more to follow after completing a final text draft.

According to Chinese Academy of Social Sciences expert Gao Lingyun:

"Companies in Europe and China still have concerns about investing in the other's market, with European firms worrying about Chinese policies not being transparent enough, and Chinese companies worrying about legal pathways should they face problems in their investment in Europe."

Both sides hope the CAI will ease these concerns over time.

Institute of European Studies of the Chinese Academy of Social Sciences' Zhou Junjie called the agreement "a brand new cooperative model" between China and world's largest bloc of developed countries.

Bilateral Sino/EU trade increased significantly in recent years but investments didn't keep up, said Zhou.

They account for only a small portion of the bilateral economic relationship both sides hope the CAI will change ahead.

When signed and implemented, it aims to increase bilateral investments as smoothly as possible.

According to the South China Morning Post (SCMP), some analysts question whether the European Commission "oversold a deal that will not significantly move the needle in economic terms," adding:

It "retains multiple deep carve-outs to protect Chinese interests in key sectors, including automotive, aviation, health care and telecoms, according to" what's known.

It lets Beijing reject EU investments it believes are contrary to national interests. It affords EU bloc countries the same right.

The devil will be in the details and implementation. 

Whether the CAI a "landmark" agreement as claimed remains to be seen.

According to economist Alicia Garcia Herrera:

"The European economy is…in much worse shape than the Chinese one," adding:  

"There is a sense in Europe that China is only going to get so much bigger, so that's the idea behind this – 'Let's get whatever we can get' – and that's ultimately the reason they signed this."

EU Chamber of Commerce in China president Joerg Wuttke welcomed the agreement, saying:

"(A) strong agreement would be a powerful statement to show that constructive engagement can produce results."

Renmin University's Center for European Studies director Wang Yiwei expressed optimism, saying:

"If winter comes, can spring be far behind? The conclusion of the China-EU investment agreement, the UK-EU free-trade agreement, and (Regional Comprehensive Economic Partnership) have brought three warm winds to the global economy…and also swept away the hostility of the Trump era."

The fullness of time will explain who accurately and inaccurately assessed the CAI.

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