- 01 Jan 2021 20:23
#15145882
Overview from the Financial Times:
Political analysis by Politico:
The Financial Times wrote:
What is in the EU-China investment treaty?
Deal improves level playing field for European investors, while Chinese companies benefit from new openings
After seven years of talks the EU has secured one of its top priorities in relations with China: an investment agreement that Brussels insists will resolve longstanding problems faced by European companies.
But the agreement is likely to be controversial with human rights advocates, given allegations of abuses in China. It could also create friction with the incoming US administration of Joe Biden, who has made clear that he wants an alliance with the EU to bring joint pressure to bear against Beijing over aggressive trade practices.
Businesses will also now want to study the small print of the new rights created by the agreement, and how they will be enforced.
1. What does the deal do for the EU?
The deal tackles a number of EU grievances.
These include longstanding concerns that the bloc’s companies are being forced to share valuable technological knowhow in exchange for being allowed to compete on the Chinese market, along with fears that the country’s state-owned enterprises are unfairly favoured and that the Chinese system of state subsidies is opaque.
The deal will “significantly improve the level playing field for EU investors”, including by “prohibiting forced technology transfers and other distortive practices”, the EU said in a statement.
Other parts of the deal concern specific sector-by-sector market access rights, removing barriers such as requirements for companies to have partnerships with local firms in joint ventures, and eliminating caps on levels of investment.
Areas where EU companies will win enhanced access rights include the automotive sector, telecoms equipment, cloud-computing, private healthcare and ancillary services for air transport. The deal will also put the EU on the same footing as the US when it comes to operating in the Chinese financial services market.
2. Does it resolve problems in the EU-China trade relationship?
Speaking to the Financial Times on Wednesday, Valdis Dombrovskis, the EU’s trade commissioner, cautioned that the deal “is not a panacea to address all challenges linked to China, but it brings a number of welcome improvements”.
Crucially, the investment treaty is far narrower in scope than the comprehensive free trade agreements that the EU has negotiated with the likes of Canada, Japan and — most recently — the UK. It essentially covers certain non-tariff barriers to business and investment.
Mr Dombrovskis identified overcapacity in steel production, unequal access to public procurement contracts and trade in counterfeit goods as issues in the EU-China trade relationship that the deal could not address.
The EU is also seeking to tackle broader issues, such as China’s use of industrial subsidies, through reform of the World Trade Organization.
“This agreement is just one element, just one thread in a complex tapestry of the EU-China relationship, and of course it is clear that many complex challenges still need to be addressed,” Mr Dombrovskis said.
3. What does China get out of it?
For China, the deal is good diplomacy: the incoming Biden administration in the US has made clear that it wants to build an alliance of democracies to put pressure on Beijing over both its human rights record and aggressive trade practices. The deal on the investment treaty strengthens ties with Brussels at a pivotal moment.
China entered the talks with fewer market access goals than the EU, which argued that it was the victim of an unlevel playing field. Still, the deal locks in existing rights for Chinese companies in the EU market at a time when the EU is looking to expand its legal arsenal against unfair foreign competition.
It also offers China new openings in manufacturing and the growing EU market for renewable energy.
EU officials stress that the market opening on renewables is limited (capped at 5 per cent for each EU member state market) and contingent on reciprocal openness from China.
4. How will the deal affect relations with the new US administration?
The EU has taken a risk by pushing ahead, particularly in the light of its parallel efforts to revive the transatlantic relationship after severe tensions during Donald Trump’s presidency.
Just four weeks ago, it publicly urged the US to join it in an alliance to assert the interests of the democratic world against “authoritarian powers” and to meet the “strategic challenge” of China.
Critics say the EU deal undermines that call for partnership; the EU insists that it is merely winning similar trade benefits to those established in the so-called “Phase 1” trade deal struck by Mr Trump with Beijing.
The EU also argues that the deal can help other countries be more assertive in their dealings with China by establishing a new reference point in terms of commitments from Beijing.
“We want to engage very closely with the US,” Mr Dombrovskis said. “I am not seeing the Phase 1 deal or our comprehensive agreement on investment as hindering this co-operation in any way.”
5. Is the deal consistent with EU goals on human rights?
The EU claims that “universal, indivisible and interdependent” human rights are “at the heart” of its relations with other countries. But the accord has raised concerns among rights activists because of allegations — denied by Beijing — that Uighur Muslims detained in the western region of Xinjiang are being used as forced labour.
The bloc says it has won unprecedented commitments from Beijing, including that China shall make “continued and sustained efforts” to ratify two International Labour Organization conventions against forced labour — but human rights advocates argue this does not go far enough as a guarantee.
Reinhard Bütikofer, chair of the European Parliament’s delegation for relations with China, wrote on Twitter on Tuesday that “it is ridiculous [for the EU] to try selling that as a success”.
The EU emphasises that the agreement includes a strong “implementation and enforcement mechanism” that covers the commitments on labour rights, as well as other dispute-settlement arrangements.
Mr Dombrovskis said that neither the Phase 1 deal with the US nor a Regional Comprehensive Economic Partnership agreed this year by Asian and Pacific countries have “sustainable development commitments coming anywhere close” to the EU-China accord.
Tensions over this point are certain to feature prominently during the EU’s work on ratifying the agreement — a process that will require endorsement of the deal by the European Parliament.
Political analysis by Politico:
Politico wrote:For critics, it's a rushed deal that's too soft on labor rights. For Angela Merkel, it's a strategic win and icing on the cake of Germany's Council of the EU presidency.
EU diplomats and officials say the German chancellor played a crucial role in finalizing the long-delayed EU-China investment agreement, which has taken more than seven years of negotiations. Those talks are set to be wrapped up Wednesday in a high-level videoconference between Brussels, Berlin and Beijing, just before Germany hands over the rotating presidency of the Council of the EU to Portugal at the end of the week.
The video call with Merkel, European Commission President Ursula von der Leyen, European Council President Charles Michel and Chinese President Xi Jinping is scheduled for 1 p.m. Brussels time Wednesday, the EU confirmed late Tuesday.
The leaders plan to give political endorsement to the deal, which would then still have to be legally revised, translated into different languages, and be officially approved by EU governments and the European Parliament as well as potentially national parliaments — a process that would take until early 2022 at least.
The European Commission said the agreement was a success story because it not only increases market access for European investors in China and tackles forced technology transfer, non-transparent subsidies and state-owned enterprises, but also commits China to “make continued and sustained efforts” to ratify international conventions on banning forced labor.
However, some EU countries like Belgium and the Netherlands have raised concerns about the EU's ability to address human rights issues under the agreement. Others like Poland are questioning why the EU is rushing ahead to seal the deal with China without waiting for the inauguration of U.S. President-elect Joe Biden, whose transition team has already voiced concerns about the deal.
Strong criticism is also coming from the European Parliament. "The Commission has folded on the issue of workers' rights," said Green MEP Reinhard Bütikofer, the chair of Parliament's delegation for relations with China. Bütikofer said that simple commitments on abandoning forced labor were not enough: "It is ridiculous to try selling that as a success."
The German lawmaker also criticized the deal as "a solo-run as we know it from the Donald Trump administration," and said: "Explain why three weeks ago the EU — which likes to call itself the flag bearer of multilateralism — said it wants to coordinate with the Biden administration vis-à-vis China, and now it tries to push through this deal just before Biden is inaugurated as president."
Theresa Fallon, director for the Centre for Russia Europe Asia Studies, also lambasted the planned investment agreement. "The main deliverable from Beijing's point of view was to drive a wedge in transatlantic relations, and Brussels appears to have complied," she said.
EU officials are rejecting criticism of rushing ahead with a deal without consulting the U.S., stressing that Washington secured its own trade and investment deal under President Trump and the EU is simply trying to get similar market-access conditions, which would allow Brussels and Washington to coordinate their China policies from a similar starting point.
One Commission official recalled that Brussels and Beijing committed in April 2019 at the highest political level to finalize the investment deal by the end of this year, and that both sides were sticking to their own target by now finalizing the negotiations, after having repeatedly failed to make substantial progress in the talks during previous years — "to the chagrin of some of those who are now criticizing this deal," as the official put it.
Yet there's also hardly any doubt in Brussels that the planned end-of-year conclusion of the deal — at an unusual moment for such high-profile agreements, between Christmas and New Year's — has Merkel's handwriting all over it.
The investment agreement is part of a strategic outreach to China that Merkel made a cornerstone of Germany's six-month Council presidency. "I believe that it is right and important to strive for good strategic relations with China," Merkel said on September 14, the day on which she had originally planned a giant EU-China summit in Leipzig, which had to be canceled due to the coronavirus pandemic and was replaced by a videoconference with China's Xi instead.
Level playing field
For European businesses, particularly German carmakers and manufacturers, the agreement is of high importance as it would allow them to increase investments in the lucrative and steadily growing Chinese market without facing protectionist restrictions such as forced joint ventures, where local companies hold the majority of stakes and can access trade secrets.
"We must not have illusions at this point; instead, we must measure things against the realities," Merkel said in September. "Today, China is a clear competitor in many high technologies. So, of course, market access and the characteristics under which our trade takes place must be on an equal footing. A level playing field, as they say, must prevail."
Besides the strong steering from Berlin, which was reinforced in Brussels by German EU Ambassador Michael Clauss — who, by no coincidence, is the former German ambassador to Beijing — Merkel could also count on the “German engine" in the European Commission, as one EU diplomat put it: He named Björn Seibert, the head of cabinet of the Commission president; Sabine Weyand, the director general for trade; as well as Michael Hager, the chief of cabinet for Executive Vice President Valdis Dombrovskis, as part of that "engine."
Crucially, Merkel seems to have secured the backing of France for the accord. An official close to French Trade Minister Franck Riester, who just last week voiced criticism of the deal related to human rights, said on Tuesday that "things are moving in the right direction." One EU official said that Merkel had reached an understanding with French President Emmanuel Macron under which she would get to conclude the deal under the German presidency, while the ratification and signing of the deal would be finalized under the French Council presidency in the first half of 2022.
Until then, it will be crucial to address concerns over China's human rights record, particularly when it comes to forced labor among the Uighur Muslim minority. Beijing has faced further international criticism after a Chinese court on Monday sentenced citizen journalist Zhang Zhan to four years in prison for her reporting on the coronavirus pandemic in Wuhan.
One EU official said that the time still remaining to ratify the deal by 2022 or later could be used to exert pressure on China to fulfill its commitment to implementing international conventions against forced labor — something that the European Parliament will certainly push for.
"We will scrutinize this agreement very thoroughly," said Kathleen Van Brempt, the trade coordinator of the Socialist & Democrats group. "Market access, stricter rules on subsidies and state-owned enterprises as well as addressing forced technology transfers are important, but so are human rights and labor rights.
"The agreement should be a meaningful step towards improving labor conditions, particularly with regards to the Uighurs. It goes without saying that before ratification, a unilateral ban on the import of products from forced labor and child labor should be proposed," Van Brempt added.
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...take your common sense with you, and leave your prejudices behind...
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