China-EU investment deal suspension seen as more politically symbolic than economic, but risks to trade exist
- European Parliament’s failure to ratify Comprehensive Agreement on Investment may have diplomatic implications, but most EU countries already have separate bilateral investment treaties with China
- However, ‘it would not be surprising if some European exports start experiencing delays at the [Chinese] border’, one trade expert says
China sees the CAI as diplomatically significant, as it was a deal successfully struck with a Western power without first being vetted or blocked by the United States. But as an economic instrument, it poses no threat to the deals that European countries can make with China, because most of them already have separate bilateral investment treaties with China, international trade lawyers say.
“For China, that it successfully concluded a deal with a Western power thereby demonstrates it has the ability to compromise and is not an unreasonable negotiating partner,” he said. “That the CAI may never come into force doesn’t change that.
“But there may be economic fallouts due to the worsening relations between the EU and China. China has a long history of using trade measures to strike at countries with which it has broader policy disputes – Norway, Canada, United States and now Australia – and it would not be surprising if some European exports start experiencing delays at the border.”
Those are not the words of a body [the European Parliament] that seeks to de-escalate the situation. I would expect China will react, with words and action
A majority of the European Parliament voted on Thursday to stall the CAI’s ratification – required to make the pact legal. The move was aimed at hitting back at China on human rights and political issues, namely the reciprocal sanctions on EU and Chinese officials earlier this year.