Parliament sets conditions on EU-China investment deal

European Parliament. Plenary session week 11, 2013, Strasburg. Discussion on EU-China relations. (EP Audiovisual Services)

European Parliament. Plenary session week 11, 2013, Strasburg. Discussion on EU-China relations. (EP Audiovisual Services)

A proposal for a resolution on the EU-China investment and market access agreement will be discussed in the October 8 plenary session of the European Parliament. A vote is scheduled to follow on the same day. The resolution, drafted by Helmut Scholz (GUE/NGL, DE), was passed by 25 votes to 2 with 3 abstentions, during the 17 September meeting of the External/international trade Parliamentary Committee (INTA).

If this resolution, setting out Parliament’s demands, is approved by the plenary as it is most probable, the Council of Ministers is expected after a few days to authorize, the launch of EU-China bilateral investment talks. The talks will be conducted by the Commission. The Parliament however will follow closely the progress of negotiations. Once the deal is struck, Parliament’s consent will be needed in order for it to enter in force.

According to INTA Committee, EU-China talks on this investment and market access accord will touch interests that are highly sensitive for the EU public. The Committee insists therefore that negotiations must be conducted, “with the highest possible level of transparency and subject to parliamentary oversight”. This will be a precondition for the European Parliament’s consent to the deal, which will be required later.

A level playing field

This deal, designed to protect investors on both sides, would be the first after the Lisbon Treaty made foreign direct investments an exclusive EU competence. When the agreement will be concluded and approved by all three EU decision-making bodies – the Parliament, the Council and the Commission – it would replace the 26 bilateral investment agreements that EU member states have signed with China and are in force today.

According to Scholz the agreement will create “A level playing field for investors from all EU member states, while currently some of the existing agreements are less favourable than others. This will also ease the flow of much-needed investments from China into the EU, as Chinese investors won’t have to deal with a mosaic of regulations in Europe any longer”. Germany and Britain, being the first EU countries to have actively promoted investments in China and having signed such bilateral deals many years ago, are favoured by a preferential regime in comparison to other member states. This new agreement is expected to create the same conditions for all member states’ investments in China.

MEP Crescenzio Rivellini (EPP, IT), member of the INTA Committee, commented on the deal as follows: “In bilateral negotiations (separately with each member state) China will always be stronger. It is true that some countries had their advantages; however now it’s clear that it was only in the short-term. Today it is not favourable anymore. Bilateral agreements create a hidden internal competition that can only damage Europe”.

Solving problems in both sides

In many respects this agreement is an internal affair of the European Union, aiming at securing the same conditions for all EU member states’ vis-à-vis China. However there is a major administrative impediment that all EU businesses encounter where in China. To overcome that disadvantage the resolution adopted by the INTA Committee contains the following paragraph: “Whereas the Chinese perceive the EU as a stable investment environment, EU firms’ investments in China are often burdened by, inter alia, the review mechanism that China uses to “filter” foreign investments and the strategic technology transfers demanded in exchange for allowing foreign investors in. Any deal must therefore remove these burdens and create a level the playing field for competition between China’s state-run firms and the EU’s private ones”.

EU legislators also confronted two crucial issues in EU – China relations, concerning the cultural/audiovisual services and EU data protection standards. On the first account MEPs demand that the cultural/audiovisual chapter should be completely excluded from the market access talks. As for data protection, they considered it as ‘cine qua non’ that the deal ensures compliance with EU data protection standards.

Thorny issues

Coming to the social and environmental sides of the deal the Parliament has made two uncompromising statements. “Any deal should include binding corporate social responsibility, social and environmental clauses”. Last but not least the MEPs demand that, “Goods produced in China’s Laogai forced labour camps, should not benefit from investments made under this bilateral investment agreement”.

Undoubtedly, negotiations on this EU-China investment and market access deal will last for quite some time. For one thing some major EU countries will have no strong incentives for a swift conclusion of the talks. On top of that the possible strong Chinese objections to some of the terms set out by the European Parliament may delay the conclusion of the deal.

With or without an EU investment deal though, economic relations between the two sides have skyrocketed. EU-China trade has grown rapidly in the past 30 years, to €433.8 billion in 2012. China’s trade surplus with the EU was €146bn in 2012, up from €49bn in 2000. In 2011, EU firms’ investments in China totalled €102bn and China’s investments in the EU €15bn.

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