EU-China investment deal opens up new geopolitical scenarios

EU-China investment deal opens up new geopolitical scenarios

On December 30, 2020, the news of the historic investment agreement between China and the European Union was reported.
After seven years of negotiations, during a conference call between Chinese President Xi Jinping and the President of the European Commission, Ursula Von Der Leyen, with French President Emmanuel Macron, German Chancellor Angela Merkel and the President of the European Council, Charles Michel, the “Comprehensive Agreement on Investments” (CAI) was adopted. It is a historic agreement that opens a new “Silk Road” between Europe and the huge Chinese market.
The CAI’s basic principles aim at a substantial rebalancing of trade betw-een Europe and China, as the latter has so far shown little openness towards the former. With this agreement, China is opening up to Europe in many significant sectors, with particular regard to manufacturing and services.
In these sectors China commits itself to removing rules that have so far strongly discriminated against Europ-ean companies, by ensuring legal certainty for those who intend to produce in China, as well as aligning European and Chinese companies at regulatory level, and encouraging the establishment of joint ventures and the signing of trade and production agreements. In the manufacturing field, the “automotive” sector will be boosted, with specific reference to the production of electric cars, but also to the production of chemical products, materials for telecommunications and new generation health devices.
As far as the service sector is concerned, China will foster European investment in cloud services, financial services, private healthcare and the services related to air and maritime transport. In all the sectors covered by CAI, European investors and producers will no longer suffer any discrimination with respect to Chinese competitors, including state-owned companies, nor will they be denied access to productive sectors so far forbidden to foreigners.
The agreement also provides for guarantees that will make easier for European companies to deal with the paperwork needed to fulfil all administrative procedures and obtain legal authorizations, thus removing the bureaucratic obstacles that have traditionally made the operation of European companies in China difficult.
It is the first time in its history that China opens up in this way to foreign companies and investment.
In view of attracting them, China is committed to lining up in terms of labour costs and environmental protection, thus progressively aligning its standards with European ones, in terms of fight against pollution and trade union rights. With a view to making this commitment concrete and visible, China adhe-res to both the Paris Climate Agreements and the European Conve-ntion on Labour Organization.
While commenting on the signing of the agreement, President Von Der Leyen stressed that “this is a fundamental step in our relations with China. The agreement will provide European investors with unprecedented access to the Chinese market, thus enabling our business to grow and create jobs. It also commits China to adhering to the principles of transparency and non-discrimination and fundamentally rebalances our economic relations with China.
The China-Europe agreement is another piece in the mosaic of commercial and political relations on which China wants to build the geopolitical role of a nation which, according to growth estimates, is destined to reach the first place in the world ranking in terms of GDP by the end of the decade.
In fact, CAI follows by just a month the signing of the “Regional Compreh-ensive Economic Partnership” (RCEP), an agreement of strategic importance signed by China with the ten ASEAN countries and with Japan, South Korea, Australia and New Zealand.
The RCEP has been described as “the world’s largest trade and investment bloc” and essentially creates an area of economic cooperation and free trade involving 2.2 billion people producing 28%of world trade and over 30% of global GDP.
The RCEP countries account for 50% of the world’s manufacturing output, 50% of automobile production and 70% of electronics. The RCEP eliminates 90% of tariffs on trade in the signatories’ region, thus creating a huge Asian free trade area that sees, on the one hand, India’s marginalization and, on the other, the growth of China’s role throughout East Asia. The CAI agreements with Europe and the RCEP agreements with Asian partners undoubtedly mark a historic turning point in relations between China and the rest of the world. The United States remains excluded from these relations, as it is currently blocked in a process of transition that limits not only its democratic activity, but also its operativity and international credibility.
After the hallmark of U.S. foreign policy in Trump’s era was reduced to imposing tariffs on trade with China, the gradual loss of credibility of the U.S. administration has stultified Secretary of State Mike Pompeo’s attempts to gather a broad international anti-Chinese coalition led by the United States.
The RCEP is there to demonstrate how fragile the U.S. attempts to counter China economically and politically have been, as two once strategic partners of the United States like South Korea and Australia have literally turned a deaf ear to American appeals and have struck a historic and strategic deal with China. The CAI puts Europe in communication and in ever closer connection with what for centuries was “The Middle Kingdom”, i.e. a China that has chosen to lower its ideological barriers in order to open up new pathways of economic progress and hopefully democratic development. French and German representatives were present at the CAI signing.
While Europe was opening the “new Silk Road”, the country that gave birth to De Gasperi, one of the founding fathers of the European Union, and to Marco Polo, protagonist of the opening of the first “Silk Road”, was conspicuously absent from the negotiation table.
—Modern Diplomacy