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China and the EU agree on investment agreements

Hardly anything happened for years, now it happened very quickly: The EU and China agreed on the deal on investment protection. The sudden rush was no accident.

China and the EU have basically agreed on a future-oriented investment agreement. After seven years, Commission President Ursula von der Leyen and the Chinese state media announced the conclusion of the negotiations on Wednesday.

Before that, the EU leaders had spoken to von der Leyen and Council President Charles Michel as well as Chancellor Angela Merkel for the German EU Council Presidency and French President Emmanuel Macron via video with China’s head of state and party Xi Jinping.

China had made surprising concessions

The agreement aims to improve market access for European companies in China, ensure fair competition and open up new business opportunities. It is the most comprehensive attempt by the EU to date to put the economic relationship with the emerging, second-largest economy on a new footing. But critics don’t go far enough. The future US administration also showed certain reservations about Europeans going it alone.

“The world after the pandemic needs a strong relationship between the EU and China,” wrote Commission President von der Leyen on Twitter. “But that requires cooperation and trust – also in trade and investment.” The EU has the largest open market in the world. “But we value reciprocity and fair competition.”

China’s president said the deal demonstrates “China’s determination to open up further.”

The breakthrough came after China made new promises on the labor rights issue. The communist leadership has promised to undertake “permanent and sustainable efforts” to ratify two conventions of the international labor organization ILO against forced labor, according to an internal briefing to the EU member states that the dpa has received. However, critics saw only “superficial lip service”.

As the world’s most populous country with 1.4 billion people, China is an important trade and economic partner for the EU. Last year, goods worth an average of 1.5 billion euros were traded between the two sides every day. After the USA, China is the Europeans’ second most important trading partner. For the EU, the conclusion of the agreement is also a prerequisite for starting talks on a free trade agreement.

China deal would also be an important success for Merkel

The agreement in principle is a “first step”, which will be followed by further negotiations on the exact legal text of the agreement and “significant technical work”, according to the internal paper sent to the EU members. The EU Commission therefore does not expect a conclusion until “early 2022”.

For the Chancellor, the breakthrough shortly before the end of the German Council Presidency would be an important success. But it would also be a symbolic victory for China’s head of state and party against the background of the ongoing trade war with the USA – and during the transfer of power in Washington.

USA want to continue to drive tough against China

The elected US President Joe Biden wants to stick to the tough course against China and forge alliances with allies such as the Europeans. There are concerns that Brussels is acting too hastily and without further consultation with the new US administration.

“These concerns are understandable, but unjustified,” says the internal EU paper. The EU welcomes cooperation with the USA towards China, which should, however, be based on “different pillars”. Europe’s trading partners also benefited from more market access, transparency and better competitive conditions in China. Greater openness to state subsidies or obligations for state companies should also help the work of the World Trade Organization (WTO).

Manfred Weber: “Europe must not become the loser”

The agreement was fought for until the very end. China has made new concessions on transport services by sea or air, in the areas of finance, computers, research and development, alternative drive vehicles, telecommunications, cloud services and the operation of private hospitals, according to an EU paper.

The CSU European politician Manfred Weber welcomed the project. “There is currently a threat that China will be the big winner of the Corona crisis, and Europe must not become the big loser,” said the group leader of the European People’s Party in Brussels.

“That is why we must continue to have the strength to improve trade relations, also to conclude modern trade contracts and not to put them on the back burner.” Cooperation with China is a future task.

“Employee rights are part of commercial contracts”

China is not only an exciting sales market, but also a system competitor. “That is why modern trade policy today must be linked to our principles, to our agenda, which is shaped by our values,” said Weber.

“And that means in concrete terms that the question of forced labor, the question of labor standards, is part of modern trade contracts.” In addition, it is about fair competitive conditions. If Chinese corporations are allowed to go on a shopping spree in Europe, it must be the other way around.

“The agreement will have to prove itself”

The Greens’ foreign politician Jürgen Trittin also welcomed the agreement, but at the same time pointed out that the deficits remained. “After seven years of tough negotiations, China was apparently ready to make decisive concessions on issues of market access and forced technology transfer,” said Trittin t-online. “This is in the interests of Europe and its large and medium-sized companies.”

He also warned: “The agreement will have to prove itself in practice.” Despite some successes, he still sees various deficits. “Unfortunately, the regulations on sustainability and labor standards are only declamatory.” Trittin also criticized that regulations on the protection of investments in a separate agreement had been postponed. “Investments need legal certainty.”

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