EU-China CAI is an investment agreement, not a panacea

As part of its Intelligence Series webinars, FIPRA International and the China Chamber of Commerce (CCCEU) co-organised an online discussion titled: “Building a win-win: Exploring the potential of the EU-China investment treaty.”

The event was held to explore the effects of the Comprehensive Agreement on Investment (CAI) on EU-China trade and investment relations, and on its concrete benefits for businesses on both sides.  

Panellists exchanged their views and discussed the opportunities stemming from the CAI, its ratification process as well as the geopolitical implications the investment treaty will have.

Minister Xia Xiang, Head of the Economic and Commercial Office of the Chinese Mission to the EU, highlighted the CAI will be one of the most influential economic agreements and that once the agreement comes into force, it will certainly stimulate more opportunities for the entire world.  

Panellists agreed that the CAI reflects a new development pattern and contains provisions which will promote investment to help China and the EU move closer to sustainable development goals and give a strong impetus for the economic recovery after the pandemic.

History has repeatedly proven that when China and the EU are open to cooperation, trade exchanges can develop quickly, and both sides benefit.

Xu Haifeng, Chairman of the CCCEU, emphasised the CAI will bolster the economy, as there is significant room for China and the EU to further strengthen economic ties. Mr. Xu said that with the CAI, China is trying to introduce measures for the first time in an agreement with other countries on state-owned enterprises as well as environment and labour standards, reflecting a shift towards more openness to EU investors.  

He then stressed that the Chinese business community hopes the level playing field in the EU will continue to benefit foreign investors, including Chinese enterprises and that both sides will achieve a win-win situation in terms of cooperation. “Chinese businesses in the EU look forward to the ratification of the agreement,” he added.  

Maria Martin-Prat, Director of DG TRADE of the European Commission and Chief Negotiator of the CAI, explained the objectives of the agreement: addressing the imbalance in terms of market access, helping to establish a level playing field and making sure that the agreement contained obligations related to investment and sustainable developments, particularly in relation to ILO Conventions and the principles and the Paris agreement. 

She highlighted that for the EU the CAI is only one tool within a broader China strategy, which is as complex as the EU’s relations with China. The European Commission, Ms. Martin-Prat reminded, remains convinced that given the size of the Chinese economy, building bilateral and multilateral relationships is needed. But it is very clear that economic interests will not prevent the EU from standing up for global values, including, when necessary, the use of autonomous tools.

When asked whether she would expect substantial changes to the agreement, Ms. Martin-Prat explained that the CAI is an investment agreement with mandatory rules rather than a political agreement. Despite being discussed within a political context, the CAI is a binding international treaty. Negotiations were finished in December, so technical adjustments are required (like the legal scrubbing of the text) but not reopening of negotiations. 

Chen Xin, Deputy Director-General of the Institute of European Studies of the Chinese Academy of Social Sciences, explained that the agreement is a milestone in the China-EU relations as the two sides had not updated trade and investment legal framework since 1985, which was challenging due to the huge trade volume and increasing volume of bilateral investment flows.  

As China and the EU are moving towards quality development and sustainability, the CAI will provide a vision for the future investors. 

Ignacio Herrero, Senior Executive Vice President of China Three Gorges, agreed the CAI comes at a time of significant political volatility and uncertainty when the EU is positioning itself strategically. He has seen that in the past 2-3 years Chinese investors lacked visibility and for this reason, the CAI is a very important milestone to set a clearer framework in which transactions can occur.  

When it comes to the ratification, Mr. Herrero admitted there would be discussion but stressed to bear in mind that no other economic region has achieved what the EU has through the CAI. 

Robert Madelin, Chairman of FIPRA International, congratulated Ms. Martin-Prat for her work, as the European Commission has achieved what the EU has wanted to include in the global rule book for many years. It is natural that the CAI is not, and was never intended to be, a panacea for all problems between the EU and China, therefore it is important to recognize that implementing the treaty will be a step-by-step process.  

Mr. Madelin then added that the CAI is a very important step in a very delicate area, and Europe has shown courage in doing it, and now it needs to show similar courage in acting on this agreement.

Yuan Haiying, Founder of Yuan Associates / FIPRA China, remarked that the CAI provides very good investment opportunities for both sides. People on the ground already have very good expectations for this agreement.  

On one hand, European companies believe that with the CAI they will be able to invest in China in broad areas and with a level playing field, especially in the areas of manufacturing, communication, aviation, pharmaceutical and finance. On the other hand, the CAI will provide more opportunities for Chinese companies to invest in Europe, which in turn will provide more job opportunities in European countries.

(Written by Giacomo Pizza)