China sees EU investment deal as diplomatic coup after US battles

When negotiators from the EU and China began talks on an investment deal seven years ago, Beijing hoped it would help counter the Trans-Pacific Partnership trade pact championed by former President Barack Obama. American.

The TPP was a much more ambitious project than the China-EU Comprehensive Agreement on Investment and a potential geopolitical coup for Washington, because it excluded Beijing. But Donald Trump, Mr. Obama’s successor, left the TPP on his first full day in office.

Ultimately, it is Chinese President Xi Jinping who will steal a march on his American rival by signing both the CAI and the Comprehensive regional economic partnership, a separate regional deal with many of America’s closest allies in the Asia-Pacific, in the final days of Mr. Trump’s administration.

Mr Xi and Ursula von der Leyen, President of the European Commission, signed on the CAI Wednesday, but it will take at least another year to officially conclude. Valdis Dombrovskis, European Commissioner for Trade, hailed the pact as “the most ambitious [trade deal] that China has never agreed with a third country ”.

Beijing sees the deal as a strategic breakthrough, especially after Joe Biden’s new administration has expressed concern about the pact in recent weeks.

Jake Sullivan, Mr. Biden’s new national security adviser, wrote on Twitter last week that the new administration “would welcome early consultations with our European partners on our common concerns about China’s economic practices.” The language was diplomatic but a former Obama official said the message to the EU was to “slow things down”.

Matt Pottinger, Mr. Trump’s outgoing Deputy National Security Advisor, also spoke after the CAI concluded. “The leaders of both US political parties and the US government are perplexed and astonished that the EU is heading for a new investment treaty just on the eve of a new US administration,” he told the Inter-Parliamentary Alliance on China, an international group. parliamentarians who want a stricter approach from Beijing.

A Biden transition official said after signing the deal, “The Biden-Harris administration looks forward to consulting the EU on a coordinated approach to China’s unfair economic practices and other significant challenges.”

“What the United States wants is not necessarily in the best interests of the EU,” said Cui Hongjian, a European scholar at the China Institute of International Studies, a state-affiliated think tank in Beijing. “The EU should have learned this over the past four years,” he added, referring to Brussels. many trade disputes with the Trump administration.

The EU asserts that the CAI “will not affect our commitment to transatlantic cooperation, which will be essential to address a number of challenges created by China.” Privately, however, EU officials have expressed frustration with Biden’s team. last minute sniping at CAI, especially after German Chancellor Angela Merkel publicly pledged last year to conclude it by the end of 2020.

“It was as if no one was paying attention to the German Chancellor saying it had to be done this year – it was communicated very clearly,” said a person familiar with the talks. “For the American side, it’s a very bad start.

“They believe they can tell their allies what to do instead of being a little humble and trying to resolve bilateral issues. [US-EU] problems first. “

The EU also argues that the CAI represents a “major breakthrough” in the long-frustrated efforts of Western countries to get Beijing to accede to International Labor Organization conventions banning the use of forced labor and protecting association rights. workers.

The former has emerged as a critical area of ​​divergence in recent weeks of negotiation, largely due to the controversy over the Chinese government. incarceration of millions of Uyghurs in the northwestern region of Xinjiang.

Franck Riester, France’s small trade minister, said last week that Paris would block the deal if the CAI did not force Beijing to abolish forced labor. However, the Chinese government has simply agreed to make “continuous and sustained efforts” to ratify the relevant ILO Conventions.

“On labor, it is impossible for China to come to an agreement,” said Shi Yinhong, professor of international relations at Beijing Renmin University and adviser to the State Council, the Chinese cabinet. “Can you imagine China with independent unions? Forced labor also concerns Xinjiang, so that’s another “no” for China. “

Mr Pottinger condemned what he called the “EU’s haste to join forces with Beijing despite its grotesque human rights violations”.

“The bureaucrats in Brussels or in Europe have nowhere to hide,” he added. “We can no longer kid ourselves that Beijing is on the verge of honoring workers’ rights as it continues to build millions of square feet of forced labor factories in Xinjiang.”

EU companies have invested more than 140 billion euros in the world’s second-largest economy. Most large European multinationals support the agreement, which they say will help them catch up with the “market access” concessions Mr. Trump secured for US companies in January’s “phase 1” trade deal with China.

But a senior European leader complains that the CAI, like Mr Trump’s deal, is doing little to address the “structural problems” of the Chinese economy that create informal barriers for foreign investment.

“We need enforcement mechanisms,” the executive said. “If my Chinese competitors are receiving grants from the central or local government, who exactly do I talk to and what should I do? On the other hand, in Europe, Chinese companies can freely argue against us. “

Additional reporting by Xinning Liu in Beijing

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