Thursday, March 30, 2023

EU, China agree on new investment treaty

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The EU and China have announced a long-awaited deal on an investment treaty, to an extent that aims to open up lucrative new business opportunities but risks upsetting the new US administration of President-elect Joe Biden.

The deal was confirmed on Wednesday by Chinese President Xi Jinping and EU leaders, including European Commission President Ursula von der Leyen, successfully closing seven years of often difficult negotiations.

Valdis Dombrovskis, the EU’s trade commissioner, told the Financial Times that the agreement contained “the most ambitious results China has ever achieved with a third country” in terms of market access, fair competition and sustainable development.

“We expect European businesses to have more certainty and predictability in their operations,” he said. “We have some very welcome changes in the rules of the game, because for a long time trade and investment relations with China have been imbalanced.”

But the deal could create friction with the new Biden administration in the United States, which has stressed the need for transatlantic cooperation to put pressure on Beijing. Human rights activists will also take a close look at the deal over claims that China uses uyghur muslims detained in large numbers in Xinjiang Province as forced labor. Beijing denies these claims.

A backlash began even before the deal was released. Reinhard Bütikofer, chairman of the European Parliament’s delegation for relations with China, marked it on Tuesday evening a “strategic error”. He tweeted that it was “ridiculous” of the EU for trying to sell Beijing’s labor rights commitments in the deal as “a success.”

The deal will remove some barriers to European companies’ investment opportunities in China, such as specific requirements for joint ventures and caps on foreign equity.

Sectors in which the EU has obtained improved access conditions include automotive, private health, cloud computing and ancillary services for air transport, said Dombrovskis. Improved market access agreements for car manufacturing cover electric vehicles and hybrids, he noted.

On financial services, the deal will provide the same benefits to the EU that the US obtained in its “phase 1” trade deal with the country, including openings on insurance and management. of assets.

Other parts of the agreement aim to ensure transparency of subsidies and to establish clear rules against forced technology transfer. EU officials said Brussels had also secured guarantees of non-discrimination against state-owned companies. All these points have been at the heart of the EU’s grievances in its trade relations with China.

For Beijing, the deal will block existing market access rights while securing some openings in manufacturing and renewable energy.

Brussels continued the deal despite the incoming Biden administration making it clear that it wanted a multilateral alliance with the EU and other partners to put pressure on Beijing over human rights and human rights issues. trade.

The new US administration “would welcome early consultations with our European partners on our common concerns about China’s economic practices,” Jake Sullivan, who will serve as Biden’s national security adviser, wrote on Twitter last week. .

Dombrovskis told the FT on Wednesday that the deal represented a “leveling off” with the United States, which has already secured commitments from China on market access and a level playing field as part of the agreement. ‘phase 1’ deal negotiated by the Trump administration.

“We had some catching up to do here,” he said, adding that the EU wanted “to engage very closely with the United States” on trade issues.

“I don’t see the phase 1 agreement or our comprehensive investment agreement as an obstacle to this cooperation in any way,” he said.

But Thomas Wright, a senior researcher at the Brookings Institution, said on Tuesday that the EU’s choice to go ahead with the investment deal was “unquestionably damaging and that many will rightly wonder if it was worth it. Biden’s time to place a big bet on Europe ”.

EU officials said the issue of labor rights was the last sticking point in the talks, with the EU ensuring that China will strive to ratify and implement the conventions of the ‘International Labor Organization.

The commitments include that Beijing will make “continuous and sustained efforts” to ratify the ILO Conventions against the use of forced labor.

China has made significant last-minute concessions, European officials said, in what many observers see as an effort by Beijing to secure the deal before Mr Biden takes office on Jan.20.

While Bütikofer and others criticized China’s sustainable development commitments as insufficient, Dombrovskis said they went further than those made by Beijing in trade deals with other partners. He also said they would be subject to a strong “enforcement mechanism”.

The announcement of the deal comes just two days ahead of the end-2020 target date agreed by Brussels and Beijing last year. The agreement will need to be ratified by both parties to enter into force. Brussels aims for the deal to enter into force in early 2022, according to EU officials.

Additional reporting by Aime Williams in Washington and Sam Fleming in Brussels


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