Sun, 13 Jun 2021

EU puts massive China investment deal on hold

06 May 2021, 17:47 GMT+10

A European Union spokesperson has said that remarks by a high-ranking EU Council member to the effect that the ratification of the EU-China investment deal has been "suspended" were taken out of context. But will the treaty, that has been seven years in the making, be put into effect any time soon?

On Tuesday, the EU Commission's Trade Councillor Valdis Dombrovskis cast doubt on the prospects of a rapid ratification of the China EU Comprehensive Trade Agreement (CAI,) a deal which was signed "in principle" last December, after seven years of intense negotiations.

In an interview with the French Press Agency, Dombrovskis said that "with the EU sanctions against China and the Chinese counter-sanctions, including against members of the European Parliament, the environment is not conducive to the ratification of the agreement."

The deal has faced growing criticism. The CAI would massively boost China's investment in Europe, but also lift certain Chinese restrictions on European investors in China. Just one week before it was signed, France's Junior Minister for Trade, Franck Riester, told Le Monde newspaper that Paris would block the CAI if the issue of forced labour was not addressed.

Trade deals should be used as leverage "to advance social issues," Riester said. He also warned that the agreement would lead to greater market access, but not to investment protection. "It's important to protect our companies from the risks of sudden nationalisation" of China-based assets by the Beijing government.

Following last-minute negotiations, China agreed that it will "on its own initiative" look into ratifying International Labour Organisation (ILO) conventions against forced labour.


"It is the first time that China has committed to an international agreement," on labour rights, Francois Godement, Senior Asia Advisor with the Montaigne Institute in Paris told RFI.

However, after parts of the deal were made public, criticism became heated. On 25 January, a group of more than 100 renowned China experts signed a written statement saying that the CAI was "based on a naïve set of assumptions and would entrench Europe's strategic dependency on China," citing human rights concerns.


On 22 March, friction between China and the EU escalated after Europe imposed sanctions on China over concerns about the human rights situation in Xinjiang. China reacted with countersanctions, including a travel ban for five members of the European Parliament.

An article in the Hong Kong based South China Morning Post quotes an "EU Spokeswoman" as saying that Dombrovskis words were "taken out of context" but adds that a "written statement" by the EU makes it clear that the ratification process "cannot be separated from the evolving dynamics of the wider EU-China relationship."

The article goes on to say that "in this context, Chinese retaliatory sanctions targeting members of the European Parliament...are unacceptable and regrettable. The prospects for...ratification will depend on how the situation evolves."

Meanwhile, in the German Bundestag, Margarete Bause, a co-chairperson of the Inter Parliamentary Alliance on China (IPAC) warned that Beijing's crackdown "on freedoms in Hong Kong should not be rewarded with a lucrative investment deal."

Ironically, in April, the German publication reported that the first freight train from China arrived at a transfer terminal in Frankfurt Höchst, carrying 44 containers with Chinese goods, and quoted Kawus Khederzadeh, Managing Director of the Frankfurt-Höchst industrial park, as saying that the region "is finally connected to the New Silk Road," part of China's controversial Belt and Road Initiative (BRI), a trillion dollar infrastructure investment project that spans the Eurasian continent.

With the ratification of the CAI now in doubt, European projects under the BRI may face delays.

Originally published on RFI

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