The South China Morning Post reported that the Comprehensive Agreement on Investment (CAI) between the EU and China would be discussed again at the European level next month, but it was unlikely to be revived. Major trading nations will insist on discussing the CAI at summits of EU Foreign Ministers and other leaders in May, according to an EU official who spoke on condition of anonymity. This will be part of a broader conversation on China, as the EU’s 27 member states try to find ways for “de-risking” bilateral ties. Some officials do not view the CAI in conflict with these aims, since the deal was designed to protect European investments in China. At summits in Stockholm and Brussels, top leaders and diplomats are likely to discuss whether there is any way of unlocking the pact – even if the prospect looks remote at present. The CAI was agreed at a political level in the last days of 2020, but ran aground after a row over sanctions months later. The EU sanctioned Chinese officials and entities over alleged human rights abuses in Xinjiang in March 2021, and Beijing immediately retaliated with sweeping measures against EU lawmakers, academics and diplomats.
Chinese envoys have floated the idea of simultaneously dropping sanctions in recent months to try to revive the pact, but Brussels has not yet taken up the suggestion. Instead, officials point to the human rights situation in China that does not appear to be improving. The European Parliament – which holds ratifying power over the deal – maintains that it will not approve the CAI while its members remain under Beijing’s sanctions. Moreover, the mood towards China has worsened since Russia’s invasion of Ukraine in February 2022. Members have criticized Beijing for failing to condemn the war and chastised EU officials for continuing to engage with the Chinese Communist Party.
This stance is expected to be renewed during debates on EU-China ties in the parliament. “Nobody should expect that the parliament will do China the favor of signing on to a deal which is out of step with the development of economic relations between the EU and China,” said Reinhard Buetikofer, head of the European Parliament’s China delegation. “CAI as it stands represents old thinking. We need a new approach,” he said. Diplomats in Brussels were doubtful that the deal could be salvaged, given the general lack of high-level political backing. Three Western European envoys said their countries were unlikely to support the deal. The blowback from French President Emmanuel Macron’s recent trip to China and the French public’s general anti-trade sentiment is likely to mean France would not sponsor efforts to resuscitate the CAI, one diplomat said.
Senior EU leaders – and even business associations – have also said the deal would need to be reassessed in light of the major changes the bilateral relationship has experienced in recent years. “Much has changed in China and the rest of the world since then. Before resuming the ratification process, a reassessment of the agreement would first be necessary,” said Tanja Gönner, Managing Director of the Federation of German Industries in a statement this month. In the first two months of the year, Germany accounted for 27% of all trade between the EU and China. The Netherlands, France, and Italy followed in terms of trade values with China.
European Commission President Ursula von der Leyen, who was among the signatories of the deal in December 2020, said last month in Brussels that “we have to recognize that the world and China have changed in the last three years, and we need to reassess the CAI in light of our wider China strategy”. Von der Leyen reiterated that “we have seen during that time further deterioration in market access for EU companies in China”. She even proposed to restrict EU companies’ investments in Chinese tech sectors like artificial intelligence, quantum computing and semiconductors; and reducing reliance on Chinese exports of critical raw materials like rare earths and lithium, although she also emphasized that there is no desire to decouple from China.
According to a senior EU official, the 27 EU member countries were roughly on the same page, although they sometimes expressed it differently. He added that nobody was questioning the overall approach, the South China Morning Post reports.
