The European Union has “no intention” of trying to revive the Comprehensive Agreement on Investment (CAI), according to Marjut Hannonen, head of trade for the European Union’s Delegation in Beijing, who insisted the focus should be on making “progress on existing problems” instead. He added that trade ties with China had “steadily deteriorated” in the past 15 to 20 years as it put in place more barriers for business. Chinese officials, including the former ambassador to the EU, Fu Cong, have been lobbying to revive talks on the stalled CAI. The agreement was initially touted as a landmark deal between the two sides, but in 2021 the European Parliament voted to delay ratification over a round of tit-for-tat sanctions triggered by alleged human rights abuses in Xinjiang, accusations Beijing denies.
Recently, ties between the EU and Beijing have shown some signs of thawing and last month Chinese sanctions on five members of the European Parliament and on the Parliament’s Subcommittee on Human Rights were lifted – prompting speculation that Beijing was hoping to revive talks on the deal. But when asked about the suggestion that negotiations on the investment deal could resume, Hannonen said: “The European side has no interest in doing anything on the CAI. There are no intentions in this direction. We have quite some issues with China to address. We should focus on addressing those issues and we should put our energy into that. It is already challenging enough to try to make progress on existing problems so there is absolutely no intention on the EU side to do anything on CAI, which is there somewhere in the closet.” Hannonen was speaking at a discussion on EU-China trade relations as part of a forum organized by the EU Delegation to Beijing to mark 50 years of diplomatic relations.
She said there were still bright spots in the economic relationship – such as the services sector – but major challenges remained, including Beijing’s heavy subsidies for domestic firms and the “weaponizing” of its trade policy. “The overcapacity problem is huge, it’s growing, it’s massive and it goes across the sectors,” she added. “Overcapacity is an issue which we don’t see China addressing at all. On the other hand, they are just doubling down on more manufacturing capacity, which is going to make this situation much worse and this is a global problem.” Europe has repeatedly aired concerns over industrial overcapacity, saying it allows Chinese companies to sell products cheaply in Europe and puts local firms at a disadvantage. This culminated in hefty tariffs on Chinese-made electric vehicles last year, prompting countermeasures from Beijing.
Michel Barnier, France’s former Prime Minister, told the forum that China’s trade and investment strategy had strained relations. But he also called the two sides to work together to safeguard economic stability at a time when the global economy and world order needed certainty and predictability. “President Trump is here but what is important is not what he says or will say in the future. The important thing is what the Europeans will do, what the Chinese will do,” he said. “We, as Europeans, will keep engaging constructively with China to ensure that competition and trade are free, fair and rules-based. And, where possible, we will even expand our trade and investment ties,” Barnier said, as reported by the South China Morning Post.
