The European Parliament on Thursday suspended progress on a landmark trade deal with China, highlighting Beijing`s « totalitarian threat » over its human rights record and sanctions against Europeans, who criticize the Chinese government. The Comprehensive Agreement on Investment (CAI) is a planned trade agreement between the People`s Republic of China and the European Union. The agreement proposed in 2013 had not yet been signed as of 31 December 2021. [1] In December 2020, the European Commission announced that the agreement had been concluded in principle by the Heads of State or Government of the European Council pending its ratification by the European Parliament. [2] The EU hopes that the agreement known as the CAI will create new investment opportunities for European companies in China by ensuring that they can compete on an equal footing and help correct a trade imbalance. By an overwhelming majority, MEPs passed a resolution refusing to ratify the so-called comprehensive investment agreement until China lifts sanctions against prominent European critics of Beijing. Lawmakers also warned that they could refuse to approve the deal because China treats Muslim minorities and suppresses democracy in Hong Kong. Zhao reiterated China`s position that the agreement is a « balanced, win-win agreement that benefits both sides, not a gift or favor that one side gives to the other. » The EU and China started negotiations on the CCM in 2014. The European Commission carried out an impact assessment in 2013. A sustainability impact assessment was carried out between 2015 and 2018 to assess the potential economic, social and environmental impacts of the agreement. On 30 December 2020, EU and Chinese leaders agreed on the content of the ICC after starting initial negotiations in 2014. The deal gained momentum belatedly after the June 2020 negotiations had a trap.

In addition, many EU Member States have already concluded bilateral agreements with China covering similar areas. Of the 27 EU Member States, Ireland is the only one without a bilateral investment agreement with China. If passed, the deal would make it easier for European and Chinese companies to do business with each other. For European companies, the deal would go further than most of China`s business with other countries to open the country`s markets to foreign investment. The CAI also represents an important milestone, as it is the first time that China has committed to upholding labour and environmental standards as part of an economic agreement. Conversely, the phase one trade deal reached between the United States and China under the Trump administration does not include a section on sustainable development. In addition, it is important to stress that the agreement incorporates the current level of market access in China into international law. In this context, the CICA will form the basis for an EU-China roundtable on key issues such as a level playing field (ensuring fair and open competition between companies on both sides), labour and climate change. The investment agreement was already in trouble. Valdis Dombrovskis, the EU`s trade commissioner, said in early May that work on finalising the pact had been delayed due to China`s repressive policies. The European Commission, the administrative arm of the European Union, also took steps this month to crack down on Chinese companies that receive government subsidies, giving them an unfair competitive advantage. The vote was the latest setback for relations between the European Union and China, just months after the signing of a pact to make it easier for their companies to do business on each other`s territory.

The agreement shall be subject to Parliament`s assent. Following these sanctions, the European Parliament adopted on 20th May the resolution freezing the ratification of the agreement. In addition, the resolution called for greater unity among EU member states to address other China-related issues, such as threats. B of cybersecurity. Although the CAI has been suspended, it can still be ratified once geopolitical tensions are resolved. The ratification vote was initially scheduled for later in the year, around autumn. Moreover, even without a deal, China outperformed the US and became the EU`s largest trading partner in 2020. Thus, while the CAI can boost trade and investment, it is not a prerequisite for this. The deal is « the most ambitious deal China has ever reached » by significantly opening up its internal market to EU companies.

[5] For example, China has agreed to remove requirements for joint ventures, forced technology transfer, capital caps and quantitative restrictions in a number of sectors in which most EU companies operate in China. [5] It will also protect EU foreign direct investment (FDI) in China. [5] In the manufacturing sector, where half of the EU`s foreign direct investment is generated, China will « match the OPENING up of the EU »; a concession that was previously unprecedented in Chinese trade or investment agreements and is seen as an important step towards market liberalization in China. [5] The investment agreement was a priority for German Chancellor Angela Merkel because of the importance of China to German car manufacturers and other companies. Among other things, the deal would allow European companies to hold majority stakes in their Chinese subsidiaries instead of forcing them to operate through joint ventures with Chinese partners and exchanging trade secrets. As far as sustainable development is concerned, the agreement is based on two pillars: labour and the environment. The EU and China agreed to effectively implement the objectives of the Paris Agreement and committed to effectively implement ilo conventions already ratified and ratify core conventions that have not yet been ratified, in particular on the abolition of forced labour. Negotiations on these provisions have been extremely difficult and have even become the main obstacle to an agreement.

Nevertheless, the CAI is not error-free. There is no mention of human rights in the agreement. In November and December 2020, just before the EU and China announced that they had agreed on the text, the European Parliament issued two resolutions stressing that « respect for human rights is a prerequisite for establishing trade and investment relations with the EU » and « the government-led system of forced labour ». condemned, inter alia, the exploitation of Uyghurs and other Muslim minority groups. in Xinjiang. In addition, 36 civil society organisations have signed an open letter to the EU. The appeal calls for the inclusion of a binding human rights clause in the CAI. It also urges the EU to make its accession to the agreement conditional on China`s ratification of key human rights instruments, such as the International Covenant on Civil and Political Rights and ILO conventions. However, the agreement had to be ratified by the European Parliament before entering into force. Some members of the European Parliament have rejected a deal with China amid alleged allegations of human rights in the country and growing political disputes with the EU and its allies. The CAI also included commitments on a level playing field to avoid setbacks in agreements, as well as a dispute settlement mechanism similar to the mechanism contained in the Phase One trade agreement between the United States and China.

The EU-China IAC is an investment agreement that does not contain trade issues and is mainly based on existing obligations under WTO law. Therefore, the agreement in principle is structured around three main themes: investment, sustainable development and monitoring and implementation mechanisms. Whether the AIC is adopted or not, skeptics argue that the deal is not as effective as its proponents suspect. In 2016, the two sides agreed on the scope of the future agreement. They agreed that it would go beyond a traditional investment protection agreement and cover market access for investment and a number of important disciplines. It would also contain provisions on sustainable development and dispute settlement. In its final sections, the draft treaty provides for the establishment of an institutional framework to ensure effective monitoring of its implementation and the settlement of disputes between States. The pre-judicial phase will be determined at the political level and will have a separate working group on the provisions of the Sustainable Development Agreement.

Dispute settlement consists of a two-stage mechanism: first, mediation and, in the absence of an agreed solution, recourse to a panel arbitration procedure. Foreign Ministry spokesman Zhao Lijian said the sanctions were justified and called on the European side to « immediately stop interfering in China`s internal affairs (and) abandon its confrontational approach. » On 20 May 2021, the European Parliament adopted a resolution on freezing the ratification of the EU-China Comprehensive Investment Agreement (CAI) in response to Chinese sanctions against European human rights defenders. The vote was adopted by 599 votes in favour, 30 against and 58 abstentions. In March 2021, it was reported that given China`s « unacceptable » behavior towards parliamentarians, the European Council`s Political and Security Committee and European think tanks, there would be serious doubts about the adoption of the agreement in the European Parliament. [3] [4] This textual analysis examines how the agreement removes market access barriers faced by European businesses, advances the EU`s WTO reform agenda on a wto plus set of procedural rules, and enshrines the European Union`s values in the context of international sustainability commitments. . . .