The European Union – China Agreement

On December 30, 2020, the European Union and China completed political negotiations for a Comprehensive Agreement on Investment (CAI). The pact was signed at the end of a videoconference involving Chinese President Xi Jinping and top European representatives: Ursula von der Leyen, President of the European Commission; Charles Michel, President of the European Council; and German Chancellor Angela Merkel, the rotating President of the EU Council. President Emmanuel Macron of France was also connected.^[1]

In general terms, the agreement reflects the intention of the EU and China to deepen economic relations, granting each party more secure opportunities to invest in the other party’s economy. European industry will gain more secure access to China’s huge domestic market; this comes at a time when China is entering a decade of restructuring toward a green and digital economy, and Europe is striving to stay at the forefront of technology in those areas. It will become possible for EU member states to invest in electric vehicle manufacturing, telecommunications, healthcare, financial services, environmental services, international shipping and airline-related sectors.

Brussels points out that China has never gone this far in opening up its markets. In the sectors covered by the agreement, the activity of European companies becomes more secure, since the Chinese giant will no longer be able to prohibit access to the market, nor will it be able to introduce new discriminatory practices. For the first time, the Middle Kingdom has agreed to ambitious provisions on sustainable development, has made commitments on forced labor and has acknowledged the ratification of the fundamental conventions of the International Labor Organization (ILO).

The President of the European Commission commented that the agreement will certainly rebalance economic relations with China. The Chinese President noted that this agreement between China and the EU (two of the world’s major powers, civilizations and markets) will give a strong impetus to the global recovery following the Covid-19 pandemic, help build an open economy between Beijing and Brussels, facilitate investment, and strengthen confidence in economic globalization and free trade. In addition, Xi Jinping asked the two sides to seek synergies in development strategies, taking advantage of the prospects related to the Belt and Road Initiative to connect Europe to Asia, and to cooperate in the digital sector.^[2]

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