EU and China between CAI and human rights. A test for the future trajectory

A result of the new perspective created by “The EU-China 2020 Strategic Agenda” is represented by the Comprehensive Agreement on Investment, a proposed investment deal between China and EU

External echoes about the new agreement were strong, announcement sparked a ‘firestorm of criticism’ towards EU for not consulting US. Critics have accused EU leaders of recklessness in agreeing to deal or trusting China on issues such as sustainable development. Despite criticism, EU has followed its goal of developing strategic autonomy and independent foreign policy by extending its networking to new prolific partners.

Valdis Dombrovskis, EU’s trade commissioner, has argued CAI will prevent our companies from being put at a disadvantage by the US-China trade deal. Devising this new approach, EU states will gain a major boost in one of the world’s biggest growing markets, helping them to operate and compete in China. Even though, in agreement were secured binding commitments on environment, climate change and combating forced labor, some EU states were skeptical to approve and to sustain the ratification.

Besides these disputes, after the reciprocal sanctions in March 2021, the perspective on ratifying the CAI has changed and the EU took a step back. In May 2021, The EU Parliament has overwhelmingly voted to freeze ratification of EU-China investment deal due to the sanctions Beijing has imposed on five members of the hemicycle.

Which is best for Europe: with or without China?

The fate of this agreement is very much in question and the dilemma is how maintain a balance, following your economic objectives and, at the same time, preserving your democratic values core. As part of EU family, we have to do close analysis on how ratification of CAI will affect us, advantages or disadvantages and the main effects of not ratifying it.

First of all, the most important weakness of the deal is lack of investor-state dispute settlement. In case of dispute, they have access to the EU’s independent courts but this is not the case when it comes to European entrepreneurs in China. CAI is mostly about the market access than protection of existing European investments in China. Considering CAI is incomplete, are also doubts about validity of bilateral investment treaty should be replaced by CAI.

Looking on bright side, based on this deal, European companies active in these industries would see new opportunities in China. For Beijing, the agreement would provide with a highly symbolic political win, demonstrating China is in business of globalization with major international partners. In terms of economics and foreign policy, not ratifying CAI could be a loss for EU, as China will extend its sphere of influence and will start to pose serious political, economic, security and technological challenges to EU.

Also, not ratifying CAI could possibly generate an imbalance inside Europe, as a part of states will continue to carry out bilateral agreements with China due to economic interests, a fact which could break the unity. Additionally, a good economic relation with China will assure the necessary resources and could also open a niche to Indo-Asia-Pacific market, providing a wider spectrum of cooperation.

On the other hand, in the EU’s vision, a major investment agreement is also a political act, advancing European norms and values or recognizing adequacy of the partner’s legal system, starting from the rule of law itself. That’s why genocide from Xinjiang, Beijing’s attitude to Hong Kong democracy, military harassment of Taiwan pose serious threats to rules-based multilateralism and core democratic values.

In conclusion, CAI needs amendments in order to improve its content, as a balanced deal is better than a premature one. In our view, CAI could represent the beginning of a new way of approaching and making external policy.

We strongly believe EU has to keep a balance in world and not to turn a blind eye of what it is happening. Moreover, EU has the power to influence the direction of events and to make use of its economic ties to convince China of the importance of these values and how violation of democratic principles could endanger the world order.

It is essential for EU to take an assertive turn on global stage and to play an active role, both as an economic power and as, a foreign policy actor. Given the geopolitical context and current tensions in EU-China relations, the agreement should be seen as a test for the future trajectory of the relationship.