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BRUSSELS. China opens its doors to Europeans. Negotiators from the EU and Beijing, after seven years of close and complex negotiations, find the political agreement that allows foreign investment in production, including electric vehicles, telecommunications and private hospitals. The Union rejoices: it is a historic result that opens up Europe’s presence on the eastern dragon market. Be careful not to confuse it with a business agreement, because that is not what it is about. This does not open up a flow of merchandise trade, but rather the possibility for Europeans to go and do business in China, under the same conditions as companies in the People’s Republic.
It is an agreement in principle, which establishes general guidelines. This was sanctioned by the extraordinary EU-China summit held today by videoconference by the Presidents of the Commission and the European Council, Ursula von der Leyen and Charles Michel, and by Chinese President Xi Jinping. “We welcome the political agreement reached,” Michel commented at the end of the meeting. “The EU remains committed to rules-based international cooperation,” comments the confident comment to Twitter given that, as is often the case when it comes to Beijing, the press has been avoided and it has been decided not to hold conferences.
The next few months will serve to better define the scope and conditions, translate the text into the respective languages, analyze it and only then will the actual agreement be signed. But the step achieved is still significant. The EU opens the possibility of accessing a new market, with around 1,500 million people. You can start your own business in the eastern country, limited to specified sectors.
Chinese markets open to the EU
Green light and for joint ventures and companies, the EU-PRC business associations. Those who managed to close the deal recall that the main concessions are all Chinese-style. “Reciprocity is typical of the European approach”, so there are no favors from the EU. “The single market has always been more open than the Chinese one. We wanted to rebalance this situation. Mission accomplished. Under the agreement, Europeans have the opportunity to invest in air transport services (IT systems, ground services and signaling), the automotive sector (including electric and hybrid cars), healthcare (private) and telecommunications.
Here a clarification of obligation. The investment deal in no way affects Huawei, the Chinese operator of great concern in Europe. The Asian brand will continue in its limitations until the issue of hiring, which is not part of this agreement, is addressed.
Equal treatment and verification
The EU gets the guarantee that the principle of reciprocity will apply. It means non-discrimination for non-Chinese operators entering China, with transparency mechanisms and monitoring possibilities. The current monitoring scheme provides for the state-to-state resolution mechanism, which leads to penalties for violations. A political review of the agreement is also foreseen, with meetings at least once a year to take stock of the situation and the possibility of meeting on more than one occasion. Both parties can carry out investment controls for security reasons.
Stop unfair competition
The principle of equal treatment also implies respect for fair competition. China is committed to ensuring the transparency of subsidies. The Europeans, when negotiating the conditions of reciprocity, wanted guarantees of state intervention in support of their operators. “The agreement signed today is the first agreement that complies with the obligations for the behavior of state-owned companies and the rules of total transparency for subsidies,” emphasizes the European Commission.
Two years for a protection regime
The EU-China investment agreement does not include investment protection at this time. The reason is the impossibility of finding a mechanism. The Chinese do not like the technical-legal devices of the Europeans, the Europeans do not like the Chinese. However, there is a will to find a solution, and the agreement confirms the commitment to reach it within two years of signing the agreement.
Energy, a separate chapter
The EU and China will also work in the energy sector, but in a particular way. The Chinese will be able to make investments in Europe in terms of retail and wholesale, but platforms are excluded. Concessions for renewables are also foreseen, but since imbalances persist here, capital investments of 5% were chosen, always based on the principle of reciprocity. “In solar and wind energy, Europe has little in China, so the more they open, the more we give,” they explain in Brussels.
Labor and climate sustainability
In principle, China also agrees to “make sustained and sustained efforts” to advance the ratification of the fundamental conventions of the International Labor Organization on the labor force. Likewise, Beijing respects the main international conventions such as the Paris Agreement and the commitment to adhere to those that it has not signed.
The geopolitical value
The bilateral investment agreement also goes beyond financial importance. The EU intends to work with the new US administration on China-related issues, and Joe Biden’s inauguration in the White House offers this opportunity. Not only. The EU is presented with an agreement, the one launched today in principle, which creates precise rules, especially in matters of reciprocity, “that can be replicated for multilateral use.”
What’s left out
The deal is limited to investments. Issues such as overproduction, foreign subsidies in the EU market, procurement are all business issues that must be resolved within such an agreement.
