Europe’s disappointing investment deal with China

Europe’s disappointing investment deal with China

Why rush a deal that is so inherently complex?

After more than seven years of negotiations, the European Union and China appear to have reached a deal for their Comprehensive Agreement on Investment to go forward right before the deadline pressed by President Xi Jinping at the EU-China summit back in September.

The deal is important politically as it shows the EU’s commitment to its own economic sovereignty without constraints from the U.S. and it follows the example set by the 10-members of the Association of Southeast Asian Nations, Australia, Japan and South Korea in signing the Regional Comprehensive Economic Partnership back in November. Suddenly, it looks as if U.S. President-elect Joe Biden has been left alone in his pursuit to contain China even before he is sworn in on Jan. 20.

Still, RCEP and now the CAI have their limitations. When it comes to CAI, much of what has been written relates to the lack of enforcement for China regarding international conventions on labor — including forced labor — but much less attention has been paid to the economic consequences of this deal. Alas, the reason for that might be because the deal amounts to so little.

To start, the purpose of CAI is limited to foreign direct investment and contains no trade clauses. While some aspects of the deal are about more than market access, including sustainability, climate change, international conventions and labor, those provisions remain general and contains limited enforcement possibilities.