The negotiation of EU–China comprehensive agreement on investment and its potential impact in the post-pandemic era

ABSTRACT

The negotiation of the Comprehensive Agreement on Investment (CAI) between the EU and China has convened over 34 rounds in the last seven years. The CAI, when finally established, will constitute a historical first, unprecedented in being the most detailed and important agreement between the EU and China ever. It is expected that both parties will bring negotiations to a close with the signing of the agreement either by the end of 2020 or not long thereafter. This paper presents an overview of these negotiations, with an assessment of its potential impact on bilateral investment and economic cooperation between the two parties. Consequentially, the further elimination of investment and trade barriers between China and Europe should lead to the steady recovery and growth of the global economy in the post-pandemic era.

KEYWORDS:

• EU–China relation
• FDI
• negotiation
• COVID-19

Acknowledgments

We would like to thank Dr Xinyi Hong, Dr Mu Li and Ms Yujie Shi for their helpful comments and assistance in collecting sources and data for this paper.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1. As mapped in China’s report Made in China 2025, one of China’s industrial strategies aims at developing indigenous technology in several strategic high-tech sectors so as to reduce the country’s reliance on foreign technology.

2. Preamble (4) of the Regulation (EU) 2019/452 of the European Parliament and of the Council of 19 March 2019 establishing a framework for the screening of foreign direct investments into the Union, also see comments at: https://www.cliffordchance.com/briefings/2019/03/_.html

3. It is called the de minimis rule or ‘contamination effect’, that a foreign-made commodity is subject to the US Export Administration Regulations if that foreign-made commodity contains more than 25% controlled U.S.-origin content by value. The thresholds amount to 0%, 10% and 25% depending upon its post-ECR ECCN and whether it is in the ‘600 series’ or ‘515 series’ of classifications (the so-called ‘Commerce Munitions List’ or ‘CML’).

4. Article 9 of Agreement between the People’s Republic of China and the Federal Republic of Germany on the Encouragement and Reciprocal Protection of Investments. Available at: https://arbitrationlaw.com/sites/default/files/free_pdfs/china-germany_bit_0.pdf

5. For example, until now, the 2017 Hela Schwarz vs. China case is the only case known to have been brought against China by an EU company. Some academics explain China’s limited exposure to investorstate-arbitration (ISA) by ‘the reluctance of foreign investors to lodge claims against China for fear of jeopardizing their future dealings, including wishing to avoid the review of ISA proceedings before Chinese courts’. L. Trakman, ‘Resolving the Tension Between State Sovereignty and Liberalizing Investor-State Disputes: China’s Dilemma’, in J. Chaisse (ed.), Handbook of International Investment Law and Policy, Springer, 2019, p. 6.

Additional information

Notes on contributors

Liming Wang

Liming Wang is currently Professor of Economics and Director of the Irish Institute for Chinese Studies at University College Dublin.

Yuan Li

Yuan Li is  is a Professor of School of North East Asia Studies, Vice Dean of Institute of International Studies, Shandong University.