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EU-China investment treaty one of 'major economic significance'

Saleha Riaz
·3-min read
The agreement includes important commitments on environment and climate, including to effectively implement the Paris Agreement. Photo: Getty Images
The agreement includes important commitments on environment and climate, including to effectively implement the Paris Agreement. Photo: Getty

The EU said on Wednesday it signed a trade and investment agreement with China, talks for which had started back in 2014, which will give EU companies better access to the Chinese market.

“China has committed to an unprecedented level of market access for EU investors, giving European businesses certainty and predictability for their operations,” the EU said in a statement, adding that “EU companies will henceforth benefit from fairer treatment when competing in the Chinese market.”

It also said the Comprehensive Agreement on Investment (CAI) came after “intensive negotiations,” is of “major economic significance,” and “will help rebalance the trade and investment relationship between the EU and China.”

It is hoped the deal will improve the level playing field for EU investors by laying down clear obligations on Chinese state-owned enterprises, prohibiting forced technology transfers and other distortive practices, and enhancing transparency of subsidies.

The deal also includes important commitments on environment and climate, including to effectively implement the Paris Agreement.

China has said it is committed to implement the International Labour Organisation’s (ILO) Conventions it has ratified, and “to work towards the ratification of the ILO fundamental Conventions, including on forced labour.”

READ MORE: EU chiefs sign post-Brexit UK trade deal

This was a contentious issue due to reports that China uses Uighur Muslims detained in large numbers as forced labour. China has denied these claims.

The two sides are aiming to conclude negotiations on investment protection within two years of the signing the CAI.

The deal has to be transposed into legal texts and go through a ratification process by the European parliament.

Negotiations were completed via video conference between Chinese president Xi Jinping and EU officials.

In comments reported by Chinese state media publication Xinhua, Xi said the new deal will “strongly stimulate” the world's post-pandemic economy recovery, while promoting global trade.

Looking beyond the CAI negotiations, the EU said it hopes China will engage in negotiations on industrial subsidies in the World Trade Organization and said it had emphasised the need to improve market access for EU traders in sectors such as agri-food and digital.

Discussions for the EU-China Comprehensive Agreement on Investment started in 2014 but made little progress because the EU said the world’s second largest economy was not keeping its promise of lifting restrictions on EU investment.

The US and China’s deteriorating trade relations may have been a catalyst for a deal with the EU finally being agreed, officials have said, although an EU-China agreement could cause frictions with the incoming administration of Joe Biden.

Jake Sullivan, who will be Biden's national security adviser, said last week on Twitter the administration “would welcome early consultations with our European partners on our common concerns about China's economic practices.”

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