What the EU and China have agreed on

At the last minute, after the deal with Great Britain, the EU agreed another important agreement. How it came about – and what access European companies should now get in China.

Before unloading: Chinese container ship in the port of Hamburg

NAfter the post-Brexit trade agreement with Great Britain, the EU is finally finalizing an extremely important agreement. At the beginning of the German EU Presidency in July, Chancellor Angela Merkel (CDU) named an investment agreement as one of the central goals of this presidency; The signing was planned at an EU-China summit in Leipzig in September. It was canceled due to the pandemic – and after a video conference between EU leaders and party leader Xi Jinping, which was arranged at the time, it did not look as if both sides would agree on an investment agreement that would give the European company better market access in China and Beijing secures final recognition as a geostrategic power.

But in the two weeks before Christmas things suddenly happened quickly. Immediately before Christmas, the responsible negotiators, Vice-Commissioner Valdis Dombrovskis and China’s Vice Prime Minister Liu He agreed on a draft contract, Xi Jinping and the three top EU representatives Ursula von der Leyen (Commission), Charles Michel (European Council) and Merkel for the German Council Presidency want to seal this Wednesday. It should take months before it is ready for signature because of the clarification of legal issues and the translation – but the content is apparently no longer in dispute.

Investments possible in all branches of the economy

According to the EU Commission, the agreement rests on three pillars. First, China is granting European companies much more access than before. In the future, they could invest in all sectors of the economy, including the automotive industry, the market for cloud services, financial services and healthcare. Second, fair competitive conditions (“level playing field”) are guaranteed in the future. This means new rules against the forced transfer of technology as well as new obligations for state-owned companies and full transparency for subsidies. Third, standards for “sustainable development” should be adhered to. This should apply above all to the working conditions in companies.

China has promised to undertake “sustained and sustained efforts” to ratify the Ilo Convention on Forced Labor, it said. In addition, the EU will autonomously develop further instruments to combat forced labor. The result of the negotiations is the most ambitious that China has ever agreed with a third country, the commission said. For the first time, China agreed to solid rules for sustainable development, also with a view to the environment and climate.

Great time pressure

The EU Commission sells the content of the agreement as a complete success for the European side – as if China had gained practically nothing apart from more legal certainty. What is certain, however, is that Beijing has received a clear geostrategic advantage. This advantage is also considered to be the reason why the agreement has now been negotiated under time pressure. The new American administration wants to take a tough political line towards Beijing.

According to Brussels diplomats, after President Joe Biden took office on January 20, the EU would have been forced to follow this line in the interests of improved transatlantic relations. “Then the negotiations with China would have run out of air,” as one diplomat put it.

The investment agreement has to be approved by the EU member states and the European Parliament. While the representatives of the member states already signaled their approval in principle on Monday, criticism arose in parliament on Tuesday. The Greens parliamentarian Reinhard Bütikofer said there was “no plausible reason for pushing this agreement through with maximum year-end hectic”. On the subject of forced labor in China, the Commission contented itself with “superficial lip service” instead of insisting on a timetable for the ratification of the crucial Ilo conventions.

In addition, it is regrettable that the Commission and the German EU Council Presidency did not even try to take their declarations of intent for renewed transatlantic cooperation with China so seriously that they left room for the consultations that should actually follow from it and from Biden team were expressly desired, it said. “In this way you can degrade your own statements to talk and make it more difficult to overcome transatlantic ruthlessness, as it shaped the Trump era,” criticized Bütikofer.