China-EU Comprehensive Investment Agreement may be forthcoming

Legislation | 10 April 2019

The EU and China have committed to a new trade agreement for 2020.


China and the European Union have committed to concluding a comprehensive bilateral investment agreement next year, they have announced in a joint statement from Brussels.

Both blocs said they wish to achieve the "decisive progress required" to produce a China-EU Comprehensive Investment Agreement in 2020, something that could have a significant impact on global trade.

A fruitful meeting and its conditions

The news came after the 21st annual meeting of Chinese and EU leaders, which was co-chaired by Chinese premier Li Keqiang, European Council president Donald Tusk and European Commission president Jean-Claude Juncker.

As part of the commitment, both China and the EU said they wish to substantially improve market access, eliminate discriminatory requirements and practices affecting foreign investors, establish a framework for balanced investment protection and boost sustainable development.

Pledges also came from both sides to increase openness and fair competition based on the mutual benefits this could create.

"China and the EU commit to ensure equitable and mutually beneficial cooperation in bilateral trade and investment. With this in mind, China and the EU will intensify work toward finding mutually agreeable solutions to a number of key barriers as identified by both parties," a joint statement said.

As part of the proposed bilateral agreement, the EU and China have reaffirmed their commitment to upholding the UN Charter and international law relating to peace and security, development, and human rights.

They have also promised to cooperate with reforms of the World Trade Organization that are likely to have to come into effect to ensure its continued relevance, and to discuss how international rules on industrial subsidies can be strengthened.

Meanwhile, Mr Keqiang has promised the EU that foreign companies will no longer be required by China to share sensitive information when they operate there.

Sticking points for trade in China

Many businesses have long complained that they felt pressure to hand over technological know-how to their Chinese joint-venture partners when they did business there, which had been a sticking point against a bilateral agreement in the past.

Both sides have now agreed that the price for investment should not be the forced transfer of technology.

"When we say it, we have got to do it. When we do it, there will be achievements," Mr Keqiang said.

The conclusion of the talks follows months of discussion against a backdrop of trade tensions between China and the US, with Donald Tusk calling the development a major turning point in diplomatic relations.

Trade and relations between the EU and China

In 2017, China was the largest exporter and the third largest importer in the world. In 2018, the Asian nation was the second largest partner for EU exports of goods and the largest partner for EU imports of goods.

In terms of member states, the Netherlands was the largest importer of goods from China and Germany was the largest exporter to China.

There has been a long history of negotiations between the EU and China before this commitment to a trade agreement was reached. The EU stated its respect for China's sovereignty and territorial integrity in the 2013 EU-China 2020 Strategic Agenda for Cooperation, while China reaffirmed its support for EU integration.

Back in 2014, then-Chinese state councillor Yan Jiechi expressed enthusiasm for a free trade agreement and told the press he thought both sides should "work jointly to create conditions for launching a feasibility study".

Then-UK prime minister David Cameron also said he would put his "full political weight behind such a deal".

However, the relationship has also been stifled by spats like that in 2013, when the EU accused China of dumping solar panels and China retaliated by investigating EU wine exports.

Now, though, it seems like this is behind them, with China perhaps accepting that it needs to make compromises if it is to be a true global leader and to benefit from the enormous economic opportunities on offer in Europe.

Global trade bodies like the WTO may also be hoping that if the EU and China can come to such a far-reaching agreement, then others might follow - and even the US could be persuaded to rebuild its bridges with the Asian superpower.