Sarah Raine
The first step on the long road towards ratification and implementation of the EU–China Comprehensive Agreement on Investments was taken not out of budding mutual trust, but naked and contradictory mutual opportunism, argues Sarah Raine.
In her first address to the European Parliament as president-elect of the EU Commission just over a year ago, Ursula von der Leyen told members she would lead an explicitly ‘geopolitical Commission’. She wanted the EU to develop its international relevance and be ‘the shaper of a better global order’.
‘A stronger Europe in the world’ was duly declared a key political priority of the von der Leyen Commission. She undertook to ensure that each weekly meeting of her College of Commissioners would also make time to discuss ‘external actions’ and never simply what was going on within the Union. For the first subsequent meeting, the agenda included discussions on NATO, Albania and the UN Climate Change conference.
Developments over the past year have not made the EU’s long-standing ambitions to look outwards and act more strategically any easier to fulfil. A pandemic, tortured multi-year EU budget negotiations, ongoing internal challenges to the rule of law, and the search for an EU–UK free-trade agreement as the clock ticked down on transition, have all constrained the time available for considering the EU’s ‘external’ activities.
Nevertheless, on 30 December 2020, the EU and China finally concluded a Comprehensive Agreement on Investments (CAI), under negotiation since 2014. This is a significant ‘external action’ by the EU, even as its popular reception has been mixed.
For critics, the CAI marks a moment of startling and self-defeating geostrategic naivety on the part of the EU. In their eyes, the agreement needlessly damages the restoration of closer transatlantic ties, while handing CCP General Secretary Xi Jinping a gratuitous PR win, all in the midst of ongoing CCP crackdowns in Xinjiang and Hong Kong. And all this for the sake of yet another international agreement that China can be expected to do little to respect.
For others, it marks a moment of stark and savvy geopolitical realism from an EU coldly calculating that it can seize the opportunity for a deal which, EU officials claim, on certain issues such as market access, goes beyond what they had previously understood China might be willing to offer. Meanwhile, transatlantic ties can be rebuilt with close cooperation with the US in other areas and on other aspects of China’s strategic footprint.
An unsurprising surprise
German Chancellor Angela Merkel’s support for a CAI between the EU and China has been consistently clear, in particular during the early planning for possible deliverables from Germany’s six-month stewardship of the rotating presidency of the Council of the EU, which ran from July to December 2020. Furthermore, the EU–China summit of April 2019 publicly agreed to aim for a conclusion to CAI negotiations by the end of 2020. The timing of the deal shouldn’t therefore be entirely surprising, not least in that it came less than one month after the EU and China reached agreement on geographical indicators.
But in autumn 2020, China’s unwillingness to make the fundamental concessions required for there to be any agreement to sign, combined with COVID-19 to help downgrade plans for a grand heads of state and government meeting between the EU27 and China to an unremarkable video conference between Merkel, von der Leyen, EU President Charles Michel and Xi. Yet despite EU concerns about human-rights abuses in Xinjiang and the situation in Hong Kong, the door was left open. ‘We just see that our investors face too many barriers’, complained von der Leyen. ‘We need China to move’.
The EU claim is that, in early December, China did indeed move, in particular on market access and with regard to the automotive sector and financial services. Although the text is not yet public, the deal is trailed to include commitments on state-owned enterprises, and on measures to stymie forced technology transfer. It should also support greater transparency in the provision of subsidies.
Albeit likely limited in scope and certainly in implementation, these modest shifts themselves will have been proffered by the CCP for geopolitical reasons. China’s hope will be that in enabling this deal’s conclusion now, it can amplify transatlantic differences on China prior to the arrival in the White House of a president explicitly set on rebuilding closer cooperation with allies, including with regard to China policy.
This means that both sides used each other to get what they wanted. The first step on the long road towards ratification and implementation was taken not out of budding mutual trust, but naked and contradictory mutual opportunism.
Divisions remain
The deal was helped across the finishing line by the EU’s big players, most notably by the enthusiasm of Merkel. One challenge for the EU is to bring all of its member states and parliaments along with it.
Divisions are already clear. Poland’s Foreign Minister Zbigniew Rau, for example, was quick to criticise the deal. Concerns are particularly acute on the issue of forced labour, where China has committed to nothing more concrete than making ‘continued and sustained efforts’ to pursue ratification of two key conventions on forced labour, something it has continually shown little interest in achieving. The chair of the International Trade Committee in the European Parliament, Bernd Lange, has suggested that the CAI’s ratification by the European Parliament would depend on the robustness of China’s forced labour commitments.
A long road ahead
The path to ratification will not be easy. Indeed, some European supporters of the deal suggest that this is precisely the point, arguing that the deal gives the EU leverage in pushing China to step up to its commitments in order to help get the deal across the line.
The CAI will require ratification by the European Parliament, and possibly also by member-state parliaments. In a likely best-case scenario, ratification will not come until the French presidency of the EU in 2022. Before then, there are dangers for both the EU and China. Can (and should) EU unity hold as China’s transgressions and repressions intensify in other areas, undermining the values that the EU purports to uphold? Meanwhile, can China hold back from pressuring EU member states it perceives as hostile to the CAI should the issue end up being debated in national parliaments?
And then will come the challenges of implementation. Even the deal’s supporters will be aware of China’s ambivalence on many of the commitments it is making. The theory on what this agreement allows is unlikely to be fully aligned to its eventual practice. The CAI may well permit greater foreign competition, but the CCP will still put limits on what it will allow in reality.
Looking forward
Von der Leyen surely knows that her claim that the CAI is an agreement that will ‘promote our core values’ is farcical. The deal might well provide ‘a lever to eradicate forced labour’, but it is at best a weak one.
The CAI may have been misguided. It is almost certainly unprincipled. But it seems anything but naïve. There was a window when Xi – albeit for his own reasons – shifted position and offered more. And the EU’s key players – for reasons of their own – decided to take it. To accuse the EU of naivety on the geostrategic implications when the US president-elect’s nominee for national security advisor, Jake Sullivan, was openly tweeting, on 21 December, asking for ‘early consultations … on common concerns’, seems itself naïve. Rather, this was brutal and calculated geopolitical opportunism, caked with more than a little bit of vanity legacy searching by a German chancellor better known for defending the status quo than for progressing new projects.
Importantly and perhaps fortunately though, the CAI is hardly the defining attribute of the EU–China relationship – for either side. Even as the realities for European business interests of maintaining close relations with China have continued, the EU and member states have been sharpening other instruments, including foreign subsidy control and investment screening. Moreover, the EU also has the capacity for autonomous sanctions that it can use with regard to China’s ongoing human-rights violations, should it so wish. These are all tools that will continue to need sharpening irrespective of the progress of the CAI, and where there is obvious mutual benefit in developing a stronger transatlantic dialogue.
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