EU Governments Signal Support to Complete China Investment Deal

(Bloomberg) — European Union governments signaled support on Monday for completing work on a long-sought agreement with China to open the Chinese market further to EU investors, bringing closer a major economic and political victory for both sides.

© Bloomberg Shipping containers at the Port of Zeebrugge in Zeebrugge, Belgium, on Wednesday, Nov. 25, 2020. European Commission President Ursula von der Leyen said the coming days will be “decisive” for trade negotiations with the U.K. and crucial differences between the two sides remain.

EU member-country envoys urged the European Commission, the bloc’s executive arm, to complete negotiations with the Chinese government within days, according to a European official who spoke on condition of anonymity because the deliberations in Brussels were confidential. Another official said the commission could announce a draft deal imminently.

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Read More: China Says EU Investment Deal in Final Stage, Hails Progress

A successful conclusion of talks that began in 2013 on an EU-China investment accord would be a salvo against the “America First” challenge to the multilateral order by outgoing U.S. President Donald Trump.

For the EU, the deal would expand access to the Chinese market for foreign investors in industries ranging from cars to biotechnology. Furthermore, the pact would tackle underlying Chinese policies deemed by Europe and the U.S. to be market-distorting: industrial subsidies, state control of enterprises and forced technology transfers.

EU-China Relations

For China, the agreement promises to bolster the country’s claim to be a mainstream geopolitical force and may limit risks resulting from a tougher EU stance on Chinese investments in Europe. It also would strengthen Beijing’s longstanding call for the start of negotiations on a free-trade accord with the EU, which has insisted such a move depended on an investment deal being reached first.

China’s Foreign Ministry didn’t immediately comment on the latest developments. The Commerce Ministry said last week it was proceeding with negotiations at its own pace and seeks a comprehensive, balanced and high-level investment agreement with the EU bloc.

The expected achievement highlights global cross currents after Trump shook the post-war system over the past four years by sidelining the World Trade Organization, starting a tariff war against China and hitting or threatening U.S. allies in Europe with controversial import duties.

EU-China relations themselves have been strained this year. A recent Chinese law curbing Hong Kong’s autonomy has sparked sharp criticism across Europe, while the EU has accused Beijing of spreading disinformation about the coronavirus and targeted China-based operators with the bloc’s first-ever sanctions over cyber attacks.

Video: UK and EU strike post-Brexit trade deal (CNBC)

And while the EU and China pledged in April 2019 to strike an investment accord by the end of 2020, the European side spent recent months downplaying the prospect of a deal this year on the grounds the Chinese government needed to make more concessions.

Climate Goals

Through all the ups and downs, the EU has criticized Trump’s confrontational tactics toward China and urged western engagement with Beijing on everything from fighting climate change to overcoming the pandemic.

The bloc helped prod the Chinese government three months ago to commit to a more ambitious climate-protection goal and, when it came to the investment-pact talks, the EU ended up saying significant progress was made across the board.

The planned deal also signals the EU’s determination to assert itself and focus on economic opportunities in Asia even while reaching out to U.S. President-elect Joe Biden to revive transatlantic cooperation. China ranked as the EU’s second-largest trading partner last year (behind the U.S.), with two-way goods commerce valued at more than 1 billion euros ($1.2 billion) a day.

U.S. ‘Snub’

The new U.S. administration may not view the EU-China accord favorably, according to Frank Lavin, a former U.S. undersecretary of commerce for international trade, who urged Brussels to consult with Biden’s team in order to better coordinate interactions with China.

“There might be some in Washington who view this as a bit of a gratuitous snub,” Lavin said Tuesday in an interview on Bloomberg Television. “I don’t think it’s helpful in the transatlantic relationship and I don’t think it’s helpful in trying to craft some kind of interaction with China that’s a win-win. I think we want to be in a position where both Washington and Brussels are looking to coordinate their approach to China.”

The final parts of the investment accord have been put into place in recent weeks in the shadow of higher-profile EU negotiations with the U.K. on a post-Brexit trade agreement and of a hard-fought deal among member countries on a new European budget and pandemic-recovery fund.

While the Brussels-based commission has negotiated the investment pact for the EU, the imminent breakthrough marks another result for Germany during the country’s six-month presidency of the bloc ending Dec. 31. Berlin has long championed the goal, stressing the importance of more balanced and deeper European economic ties to China.

(Updates with comments from China’s Commerce Ministry and former U.S. official.)

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