The European Union-China Comprehensive Agreement on Investment (CAI), agreed in principle by both sides after long negotiations, will ensure greater and better access to the Chinese market for investors, according to the European Commission (EC).
The deal follows a call between Chinese President Xi Jinping and European Commission President von der Leyen, European Council President Charles Michel and German Chancellor Angela Merkel on behalf of the Presidency of the EU Council, as well as French President Emmanuel Macron.
“China has committed to a greater level of market access for EU investors than ever before, including some new important market openings. China is also making commitments to ensure fair treatment for EU companies so they can compete on a better level playing field in China”, the EC said.
These improvements, the EC adds, include disciplines for state owned enterprises and transparency of subsidies and rules against the forced transfer of technologies.
“For the first time, China has also agreed to ambitious provisions on sustainable development, including commitments on forced labor and the ratification of the relevant ILO fundamental Conventions”, the EC underlines.
The conclusion in principle of the negotiations is a first step in the process; deliberations for the adoption and ratification of the agreement are yet to take place.
According to the EC, the agreement “will create a better balance in the EU-China trade relationship, as the EU has traditionally been much more open than China to foreign investment”. “This is true as regards foreign investment in general. China now commits to open up to the EU in a number of key sectors”.
In terms of market access for EU businesses, China has made significant commitments on manufacturing, the most important sector for EU investment in China, more than half of total EU investment – including 28% for the automotive sector and 22% for basic materials. This includes production of electric cars, chemicals, telecoms equipment and health equipment, among others.
China is also making commitments for EU investments in various services sectors, such as cloud services, financial services, private healthcare, environmental services, international maritime transport and air transport-related services.
“The CAI will bind the parties into a values-based investment relationship underpinned by sustainable development principles. This is the first time that China agrees to such ambitious provisions with a trade partner”, the EC adds.
Amongst others, China is undertaking commitments in the areas of labor and environment such as not to lower the standards of protection in order to attract investment, to respect its international obligations, as well as to promote responsible business conduct by its companies.
The package deal reached includes a commitment by both sides to try to complete negotiations on investment protection and investment dispute settlement within 2 years of the signature of the CAI.
The common objective is to work towards modernized protection standards and a dispute settlement that takes into account the work undertaken in the context of UNCITRAL on a Multilateral Investment Court.
Both sides are now working towards finalizing the text of the agreement, which will need to be legally reviewed and translated before it can be submitted for approval by the EU Council and the European Parliament.
Reacting to the deal, the European Union Chamber of Commerce in China said the business community “looks forward to parsing through the details and what they mean for solidifying the legal position of European companies already in China, as well as for those that may be new entrants to the market as a result of the agreement”.
“Of course, the agreement will not come into force until final texts are developed and then ratified by both sides, which will likely require overcoming additional hurdles. The European Chamber hopes to see that decision-makers maintain the same spirit of engagement that carried the day for the political agreement so that they can deliver an enforceable pact”, it adds.