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Foreign Policy

A Stride Forward

Jan 22, 2021
  • Feng Zhongping

    Vice president, China Institutes for Contemporary Int'l Relations

As 2020 drew to an end, a breakthrough was finally made in the long-anticipated China-EU Comprehensive Agreement on Investment (CAI), which is a welcome step forward for relations against the background of heightened tensions between China and the United States.     

On Dec. 30, both sides jointly announced the conclusion of Bilateral Investment Treaty negotiations in a virtual meeting between Chinese President Xi Jinping, European Commissioner Michel Barnier and European Commission President Ursula von der Leyen. It is worth mentioning that German Chancellor Angela Merkel and French President Emmanuel Macron also attended the meeting, in a show of faith and resolve to advance China-EU relations. 

The conclusion of the CAI is by no means a small feat. Is is the culmination of 35 rounds of talks spanning seven years starting in 2014. Pressure built up intensely as the target date approached, compounded by the onslaught of the pandemic and blatant interference of the U.S. It was a roller-coaster ride, but the strenuous efforts eventually paid off. Openness now prevails over protectionism, cooperation over confrontation. 

The CAI features breakthroughs that set it apart from traditional bilateral investment treaties —   notably clauses on market access, fair competition, sustainable development and dispute resolution. An official involved in CAI negotiations from the law and treaty department of China’s Ministry of Commerce hailed the treaty as a balanced, high level and mutually beneficial treaty that is aligned with high-standard international rules and one that promotes China’s opening-up through the reform of institutions.

The EU’s official website outlines a long list of market access commitments made by China, ranging from manufacturing, automobiles, financial services, private health care clinics, R&D, telecommunication, cloud services, maritime transportation, air transportation services, business services, environmental services, construction services and employee mobility.

The EU also stressed that the CAI puts a premium on environmental and labor rights protection, with the aim of shoring up sustainable development. The CAI needs to be signed and subjected to internal ratification procedures, but on the whole both sides have the political will to bring it into effect soon, which is good for China and the EU, the world economy and global governance.   

Over the past 15 years, the EU has been China’s biggest trading partner, while China is the EU’s second-largest, underscoring the deepening economic ties between the two major economies. In the first 10 months of 2020, China overtook the U.S. as the EU’s top trading partner.

As trade ties expand, frictions are bound to increase as well; and, indeed, recent years have witnessed increased conflicts over trade. The EU has two prime concerns. First is market access: It demands that China provide access to its service sector for European companies on reciprocal terms. Second is fair competition, which involves revolving such issues as state-owned enterprises, government subsidies and technology transfers, which have hobbled cooperation and disrupted the progress of bilateral ties.

China hawks within the EU are gaining momentum, creating an echo chamber across the Atlantic with China hawks in the U.S. The trajectory of China-EU relations has attracted much attention in the midst of intensified China-U.S. competition. At this critical juncture, China and the EU have risen above their differences despite some jarring notes, in their quest for positive solutions to pending issues between them.

The outcome of the negotiations shows that in the package agreement, key concerns of both sides have been addressed and both short- and long-term considerations are balanced. Regarding market access, China has embraced a negative list commitment that applies to all sectors — service and non-service sectors alike — that is fully in line with the negative list under its Foreign Investment Law. The EU has committed to further open up market access for Chinese businesses.

Consensus has also been reached on addressing concerns on both sides regarding fair competition. In a nutshell, the agreement will facilitate the unwinding of flashpoints in bilateral relations, further unleash opportunities for cooperation and add more certainty to the future development of China-EU relations.    

The onslaught of the pandemic accelerated the once-in-a-century transformation, with global challenges such as human health and climate change becoming more prominent. The international community has yet to reach any consensus on how to tackle them. Populism, isolationism and protectionism still attract large followings.

China and the EU are staunch supporters of multilateralism, and a BIT agreement underpinned by institutionalized rules for win-win cooperation will significantly shore up confidence in cooperation in global governance.    

Last, the EU remains firm and levelheaded over issues of strategic importance. Strategic autonomy is easier said than done, of course, but the slogan will by no means ring hollow or be dismissed as a whim. With a strange bedfellow, strategic autonomy proves the most pragmatic choice for the EU.  

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