Explainer | Deal or no deal? What next for China-EU investment pact and why it may fail
- Comprehensive Agreement on Investment was announced on December 30 but the devil may be in the detail, which is yet to be negotiated
- Head of European Parliament’s China delegation among those against ratifying the deal, while some EU states say others forced it through hastily
How is CAI ratified?
According to a statement by the European Union (EU) on the day the deal was reached, both sides would now work towards finalising the text of the agreement, which would then undergo legal review and be translated before it can be submitted for approval by the EU Council – heads of state or government of the EU member states – and the European Parliament. The EU has said it wants that process completed by early 2022.
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The CAI is not required to be adopted in the legislature of each EU member country. But the European Parliament is required to ratify the agreement before it can take effect.
Ratification of a trade deal by the EU normally takes several months, or even years. Although the deal was proposed by the European Commission – the EU’s executive branch – there needs to be scrutiny and ratification from the 27 member states of the council and from the 705-seat parliament.
The EU Council could ratify the agreement by qualified majority voting – requiring a higher proportion in favour than a simple majority – or by unanimity, depending on the scope of the agreement. In practice, member states always aim to reach consensus.
European Parliament representatives would vote for or against the agreement. To be approved, a simple majority of all the votes cast must be in favour.
Opponents to CAI
The pact is already expected to face political opposition in the European Parliament. Some European parliamentarians have signalled that they plan to argue against the accord on the basis that it does not do enough to stop human rights abuses or protect labour rights in China.
What is the China-EU CAI and how is it different from a trade deal?
“Trade does not take place in a vacuum,” Bernd Lange, chairman of the European Parliament’s trade committee, said on Twitter after the deal was announced.
European Green Party member Reinhard Buetikofer, chairman of the European Parliament’s Delegation for Relations with China, has also promised to fight against ratification of the CAI.
Apart from opposition in the European Parliament, the announced deal has been greeted with varying degrees of confidence by member states.
German Chancellor Angela Merkel – whose country held the EU’s rotating presidency until the day after the deal was struck – and French President Emmanuel Macron have been the strongest drivers behind the deal.
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Yet fellow EU members Poland and Italy have complained publicly that Germany and France pushed the deal through over the heads of the other member states. Italian foreign affairs undersecretary Ivan Scalfarotto told media that the EU should have waited for the new US administration to take office.
Polish Foreign Minister Zbigniew Rau tweeted: “We need more consultations and transparency bringing our transatlantic allies on board. A good, balanced deal is better than a premature one.”
Could Biden influence EU?
There are still uncertainties in the deal relating to the incoming US administration, which has urged the Europeans to consult it over China’s economic practices.
US president-elect Joe Biden said in early December that he planned to conduct a full review of the trading relationship with China and consult allies in Asia and Europe on developing a coherent strategy before making changes to America’s terms of trade.
The EU ignored Biden’s advisers’ attempts to persuade it to wait before striking a deal that was largely seen as a significant geopolitical victory for China.
Sticking points for China and EU
Despite the EU and China saying they had reached broad agreement, talks regarding specifics in the investment deal will continue.
The extent to which European investments can be protected in China has been described by those opposed to the deal as one of the ambiguous areas in the documents available.
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China and the EU have committed to “try to complete the negotiations on investment protection and investment dispute settlement within two years of the signature of CAI”, according to the statement by the EU when it announced the deal.
The statement said the common objective of China and the EU was to work towards “modernised protection standards and a dispute settlement [mechanism]”, with reference to the United Nations Commission on International Trade Law.
A further potential hurdle in negotiating the finer points is China’s treatment of labour rights. In its official statement, the European Commission said China “commits to working towards the ratification of the outstanding ILO [International Labour Organization] fundamental conventions and takes specific commitments in relation to the two ILO fundamental conventions on forced labour that it has not ratified yet”.
No deadline has been set for committing to these conventions, but the EU is expected to continue to press China on the matter.
