The European Union and China are edging closer to a long-sought investment deal which would give European firms better access and protection in the Chinese market, but is likely to be seen as a snub by the new US administration. Just some three weeks before taking office, the incoming US administration of President-elect Joe Biden has been irked by the EU, which has agreed in principle to conclude this wide-ranging investment treaty after seven years of talks. The agreement is a significant coup for Germany, which saw its six-month term as EU president expire on Thursday and which sees China as a major market for its auto and other industries. And it may be an even bigger win for Beijing, which has been faced with harsh global criticism over its human rights record and is seeking new foreign investment as many companies move operations out of the country in response to the US-China trade war and other concerns.
EU officials say the agreement, known as the EU-China Comprehensive Agreement on Investment (CAI), will allow European companies to compete more equally with state-owned companies in China, which is now the bloc’s second-largest trading partner after the US. It includes provisions for settling disputes, requires greater disclosure of Chinese state subsidies and restricts China’s practice of demanding that foreign investors share their technology in exchange for market access. But on the other side of the Atlantic, the EU-China deal was met with dismay by President Trump’s administration, which has engaged in a long-running trade war with Beijing, as well as by Biden advisers who had signaled reservations about the pact and a desire for more input before it was concluded. Matt Pottinger, Trump’s deputy national security adviser, hit back at Brussels, stressing that US leaders “are perplexed and stunned that the EU is moving towards a new investment treaty right on the eve of a new US administration.”
“The agreement has shown the European Union, ravaged by the pandemic, to be the weaker economic and geopolitical actor,” argues Phar Kim Beng, founder and CEO of Strategic Pan Indo-Pacific Arena, in his recent opinion piece. He also says that although the European Commission has in the past referred to China as a “systemic rival”, now with Poland, Austria, Hungary and potentially Italy slowly swinging to the far right of the political spectrum, and Germany and France also hoping to have a good relationship with China, it does seem that China has key EU members on its side. According to Beng, had the EU waited for US President-elect Joe Biden to consolidate his administration first, the strength of transatlantic relations would have served as a counterweight to the emergence of transpacific ties, which China seems to want to dominate and control. However, having signed the agreement, China is obliged to ratify four International Labor Organization (ILO) conventions and the EU must now pressure Beijing to comply with ILO provisions, including abolishing forced labor. This might lead to an EU-China confrontation or dialogue over the treatment of Tibetans, Uygurs and other Muslim minorities.
