Like the whole world, 2020 was a tough year for China. From the news of its ill-treatment of Uyghur Muslims, the imposition of new security law in Hong Kong to being accused of spreading the coronavirus, China’s relation with the world has remained somewhat multifaceted. However; the world cannot ignore the fact that China knows how to overturn things for its good. From successfully controlling Covid-19 to reaching the investment deal with the EU, China is emerging as a front-runner.
EU and China share good trading relations. In fact, China is the second-biggest trading partner of the EU in the world. CAI (Comprehensive Agreement on Investment) – an investment deal between China and the EU is not something new. The agreement has taken the whole seven years and a plethora of negotiations plus modifications to finally reach an agreement. The discussion over CAI between the EU and China started back in 2014 but the EU’s reservations over China’s discriminatory practices and human rights abuses in Hong Kong and Xinjiang have long prevented the deal from happening. Nonetheless, on 30th December after resolving the ideological differences and number of issues- the leaders of the EU and China finally signed the CAI deal.
The investment deal is a big step towards promoting free trade between China and EU firms. With the investment, the two blocs have become mutually dependent. For all the EU countries- something that remained of major concern in this deal was the point of market access and elimination of restrictions. China being a totalitarian state has a closed market system. Time and again, it has been accused of violating core labor standards and not providing full market access to the other party. Nevertheless; China has come to negotiate on the issue of market access which is being seen as a big victory by the world. It is being said that it is the most important negotiation China has ever done with any other third party.
Now, what is this investment deal that has caught the attention of the world? The CAI deal now permits certain EU industries to make investments in China. For quite a long time, the EU has been pretty serious to get better access to China’s market. In China, the EU was looking for an equal opportunity for EU industries such as manufacturing, production, advertising, real estate, and computing. According to the Organization for Economic Cooperation and Development, ‘China has one of the most strict and constricting foreign direct investment rules for EU industries working there’. However, China has shown concession by removing barriers to the foreign investment made by the EU industries such as energy vehicles, cloud computing, private hospitals, and other financial services. Likewise, China has agreed on eliminating joint venture requirements from a number of sectors. EU considered this practice of joint venture requirement as trouble to its companies working in the country. On the other hand, China also demanded access to the EU’s energy sector.
On the other hand, the deal has come as a surprise as well as a blow to the US and the advocates of transatlantic cooperation. The US-China relations particularly went worse after Trump came into administration. The newly elected President Joe-Biden has exhibited his wish of working closely with US allies and on the transatlantic cooperation to confront China on its biased practices. It has baffled the US to see the EU sign an investment pact with China just weeks before Joe-Biden officially sworn in as the President of the US. This sudden step by the EU might result in a number of things. It can compel the new US President to rethink its relationship with the EU. The country will find it hard to trust the EU and its offers in the future. Many contend that, by signing the deal with China, the EU wanted to imply that it is independent of the US. The CAI pact has made the US look like the underdog in this whole game as cooperation with the EU would have facilitated it in challenging China. But, now with EU-China involved in a deal, it has become more than difficult for the US to avert China’s impact from spreading across Europe.
Many top EU officials and civil society organizations in the EU have raised objections to the deal by commenting that the EU has decided to cooperate with China even after being aware of the country’s sternness of human rights. It has urged the EU to first ensure that China first binds to the International Covenant on Civil and Political Rights and International Labor Organization conventions. Correspondingly, countries like Poland have objected to the deal for not taking the US into confidence while making the agreement. China has vouchsafed that it will make sustained efforts to follow the commitments. EU also holds the choice to divagate from the deal if China discriminates against the workers and violates human rights. The deal has been signed but it has yet to be ratified by the European Council as well as the European parliament.