How the EU's market-access deal with China will affect global competition

After seven years of tough negotiations, the EU leadership and China's ideologically communist and economically capitalist government, have appeared to come together to sign an extensive investment deal. 

In a few days, both sides will reveal the technical annexes to the deal, according to the Financial Times newspaper (FT). Brussels is scheduled to ratify this in early 2022. 

But the market-access deal has opposition inside and outside the EU for various reasons, ranging from a global power struggle between the US and China, to Beijing’s despicable human rights records. 

With the deal, the EU hopes to extend its access across the Chinese market as it was secured by the former Trump administration for US companies operating in China under “Phase 1” trade deal.

For top European officials, the deal is aimed at bringing the EU on par with the US in trade relations with China. On the other hand, for Beijing, the market-access deal is a strategic move that increases divisions between the EU and the US, according to experts. 

As a result, some former American officials view the deal as a diplomatic victory for China, displacing Washington’s displeasure toward the investment agreement. 

“By any measure it’s a setback. It validates China’s view that its economy is an irresistible force — despite Hong Kong, Xinjiang, Taiwan and India,” a former Obama administration official told the FT in late December, when both sides announced the potential deal. 

The former official refers to China’s anti-democratic measures in Hong Kong and its suppressive policies against Uyghur Muslims in the Xinjiang region, one of the largest provinces in the country. China also has various disagreements with Taiwan and India. 

What the deal offers

The deal proposes to remove some of China’s trade barriers to EU companies, working in industries like the automotive sector, cloud computing, private healthcare and ancillary services. It also allows some improved conditions in terms of EU car manufacturing firms including electric vehicles and hybrids. 

China has already had a trade advantage across the EU and the deal appears to fix that situation in favour of the bloc by ensuring transparency of subsidies and preventing forced technology transfer. With the deal, Brussels also seeks to secure non-discriminatory competition guarantees for EU companies against Chinese companies owned by Beijing.  

In exchange for Chinese concessions to the EU, Beijing appears to secure a form of a get out of jail free card from Brussels related to its suppressive policies in Xinjiang and Tibet and its controversial labour practices across the world. 

But the EU leadership wants to believe another story, that the investment deal included “such ambitious provisions” on labour rights from China, it made concessions for “the first time” to a trade partner, according to a European Commission statement in 2019. The statement also drew attention to a crucial fact that “EU needs to find a balance of interests” with China. 

China promises to “make continued and sustained efforts” to adopt the International Labour Organisation conventions, according to the deal. 

But Robert Tyler, political projects manager at European Conservatives and Reformists (ECR) Party, doubts both the EU's assurances and the Chinese promises. 

According to the deal, “the EU won’t force China to sign up to the International Labour Organisation conventions on the use of forced labour,” Tyler wrote. 

“What this means is that the Communist Party in China will be given a blank cheque to continue using ethnic Uyghurs and Tibetans as forced labour across the country.” 

Who supports? 

The EU leadership, backed by both German and French governments, supports the investment deal despite many dissident voices in the European Parliament. 

Experts point out different motivations for both Paris and Berlin. 

“The French establishment in Paris and in Brussels want to have CAI (Comprehensive Agreement on Investment) without coordinating with the U.S. to show the European ‘strategic autonomy’,” wrote  Jakup Janda, director of European Values Center for Security Policy, on Twitter. 

For Germany, Chancellor Angela Merkel wants to satisfy the country’s big automotive industry by signing the agreement, which allows European auto companies to operate in China under better terms, according to Janda. 

Obviously, other than the EU leadership, Beijing passionately wants to put the deal in motion. 

Who opposes? 

A considerable part of the European Parliament finds the deal problematic. 

Reinhard Butikofer, chair of the European parliament’s delegation for relations with China, is among them. He described the deal as a “strategic mistake” in a tweet in late December, ridiculing the EU leadership’s attempts to define the agreement as “a success”. 

Many leading MEPs from both left and right political persuasions across the parliament also voice similar views to Butikofer in different degrees. 

Washington, China’s biggest economic rival, also does not like the agreement. In a well-crafted message, Jake Sullivan, National Security Advisor to the new Biden administration, previously suggested to Brussels to conduct “early consultations” with the US before signing any deal with Beijing, in order to develop a common understanding “about China’s economic practices”. 

Many human rights groups and trade unions also fiercely oppose the deal on the grounds that Beijing continues to violate various minorities, from Uyghurs to Tibetans, and do not abide by international labour standards.