The European Union welcomed the signing of the Comprehensive Agreement on Investments (CAI) with China on 30 December as the German Presidency of the EU Council ended the following day. After 7 years of negotiations and an acceleration in recent weeks, the two sides have managed to agree on a text. For the EU, this result is the most ambitious commitment China has ever shown.
Market access. Indeed, China has agreed to remove barriers to foreign investment in several sectors. It has, for example, undertaken to remove restrictions on joint ventures in the automotive sector, in financial services, for private hospitals in several major Chinese cities, in the transport repair and maintenance sector and in advertising.
Beijing will also lower its requirements on the maximum percentage of shares held in a company by foreign investors, while limiting this loosening for certain sectors. Companies operating in the data storage services (‘cloud’) may not be more than 50% owned by foreigners.
Transparency. The agreement includes several sets of rules to improve transparency and ensure fair competition. Public enterprises should be able to provide all the information necessary to judge their compliance with international trade rules. State Aid in the services sector will also have to be subject to transparency rules.
Sustainable development. As a real thorn in the side of the EU, issues surrounding sustainable development have been among the most difficult to resolve between the two sides. The EU can finally boast that it has brought China to the table on several aspects. This country is committed to implementing the Paris Climate Agreement and not to lowering environmental protection standards for economic purposes.
With regard to workers’ rights, China undertakes to apply the fundamental conventions of the International Labour Organization (ILO) that it has already signed and to “continue efforts to ratify” the fundamental conventions that it has not yet signed.
The ILO has eight fundamental conventions and China has ratified only four (on discrimination, equal pay and two on child labour). The timetable for these future ratifications has not yet been given. This situation is reminiscent of the case of South Korea, which has been engaged in the same way since a free trade agreement with the EU ratified in 2015 and which has still not signed the four outstanding ILO conventions.
Dispute resolution. In order to ensure that these commitments can be tracked and that disputes can be settled, the agreement provides for a bilateral dispute settlement body composed of a panel of experts.
According to one European diplomat, “we are at the beginning of a long process. We have everything we expect from an agreement”.
The EU has also provided for a monitoring mechanism that can raise problems in a preventive manner, before the dispute settlement stage. According to the same source, the EU also relies on its autonomous instruments such as the sanctions regime or the legislative tools on duty of care to ensure compliance.
Some aspects have not yet been decided between the two parties. Over the next 2 years, negotiations are planned to find common standards on investment protection and a corresponding dispute settlement system. China is not in favour of the Investment Court System (ICS) supported by the EU, which allows for the settlement of disputes between investors and states.
A mixed reception
EU Trade Commissioner Valdis Dombrovskis has been proactive: “We have secured binding commitments on the environment, climate change and combatting forced labour. We will engage closely with China to ensure that all commitments are honoured fully.”
The text agreed by the leaders of both sides now needs to be legally examined before it can be submitted to the Member States and the European Parliament.
No sooner had the agreement been signed than several MEPs expressed their disagreement, due to the human rights situation and allegations of forced labour by minorities in the country. The Chair of the European Parliament Delegation for relations with China, Reinhard Bütikofer (Greens/EFA, Germany), argued that Beijing should ratify the ILO conventions before Parliament is asked to ratify the agreement. For her part, Parliament Sub-Committee on Human Rights Chair Maria Arena (S&D, Belgium), speaking before RTBF’s microphones, called on the EU to adopt a regulation on corporate responsibility when acting outside Europe, before signing the agreement with China.
Blocking this agreement or submitting it to other nations for approval would be “a terrible sign”, said Portuguese Prime Minister António Costa, whose country has held the rotating Presidency of the EU Council since the beginning of the year, reported Portuguese agency Lusa on Monday 4 January, referring to the request by future US President Joe Biden that the EU consult the US administration before concluding an agreement with China.
On Monday, the French Trade Minister, Franck Riester, retorted on French television that Europe was sovereign. “We make sovereign decisions without asking the United States or China or any other power, who are partners, who should stay in their place as partners, not guardians”, he said.
For more information see: http://bit.ly/2Mzph6b (Original version in French by Léa Marchal and Camille-Cerise Gessant)