Comprehensive Investment Agreement One Year Later: View from European Capitals

09.08.2022

The policy brief titled "Comprehensive Investment Agreement One Year Later: View from European Capitals" seeks to clarify the prospects for an "unfreezing" of the EU-China investment agreement based on current developments in the European Union.

30 December 2021 marked one year since the successful negotiations between the EU and China on a major investment deal, the Comprehensive Investment Agreement (CIA). However, over the past year this agreement has not been ratified or implemented. In the spring of 2021, increased tensions between the EU and China led to the freezing of the CIA.

Such deadlock is not due to the ad hoc politicization of the EU-China economic relations, but is largely a consequence of the EU’s domestic and foreign policy dynamics. The reasons why the EU and its member states are not pushing to break the deadlock lie firstly in substantive characteristics of the document; secondly, in changes in the Franco-German tandem and the EU’s attempt to demonstrate a more value-oriented foreign policy to strengthen the transatlantic partnership; thirdly, in the lack of solidarity within the EU regarding China.

I. Specifics of CIA and Criticism

The specifics of the CIA are that it deals only with investments, not trade issues. Two aspects can be said to be closely linked: the majority of European FDI in China is in the export-oriented production sector. The CIA uniqueness is that, compared to most international investment treaties, which focus mainly on investment protection mechanisms and investor-state dispute settlement, the EU-China agreement covers issues of increasing investor market access, prohibiting forced technology transfer, increasing transparency in economic governance and reducing discrimination by state authorities.

II. Positions of the EU Institutions and Member States regarding CIA to Date

Discussions in the EU and member states on prospects for the agreement and the EU relations with China in general demonstrates that European leaders are unlikely to find the resources to ratify the agreement in the short term. Over the past year there has been an intensification of the anti-Chinese policy of the EU and national capitals in view of the reanimation of transatlantic relationship with the accession of Biden to the US presidency and changes in the Franco-German tandem.

III. Lack of Solidarity with China among Member States

The EU’s lack of solidarity over relations with China and the polarization of debates thereon complicate the fate of the CIA. There are many more opponents outside the Franco-German tandem in European capitals. In addition, as already noted, Italy, Belgium, Spain, and Poland felt «ignored», Belgium and the Netherlands criticized the CIA in terms of their obligations to protect labor rights.

Thus, we can conclude that the situation with the «freezing» of the CIA will not change in the short term.

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