Europe finds deal with China in hopes of rebalancing trade

Published on : 31/12/2020 – 09:30

The European Union and China have reached an agreement in principle that is supposed to facilitate mutual investments. Barely signed, this agreement is already widely criticized. Will he really change the game and rebalance the trade?

For more than twenty years, European companies present in China have been dealing with Beijing’s bad manners: unfair competition with subsidized companies, forced technology transfers, or even the compulsory passage of joint ventures with Chinese companies. For these companies, the signing of an agreement to better regulate their investments is therefore welcome. If endorsed and finalized, it will enter into force in two years.

Brussels negotiated fiercely for seven years to achieve real progress on paper. The very existence of such an agreement is in itself a good thing, say several experts, although we must remain cautious. The economist Jean-François Huchet, president of Inalco, recalls that “ with China you never know if it will really keep its promises ».

Concretely what are the advances obtained by the Europeans?

New sectors are now authorized for them: the automobile, provided it is electric, telecoms, partially chemistry, health provided that the establishments only take place in large metropolitan areas. In the details available today, it is certainly an opening, but still very corseted. Beijing is committed to more transparency, for example by publishing the list of companies benefiting from public aid in real estate, telecoms or banking, which is not required by the World Trade Organization (WTO). A first, says the Commission.

On the other hand, China will be able to continue to conceal the aid given to industry, in defiance of the rules precisely set by the WTO. In return, the Chinese retain significant access to the European market, and they even gain a portion of the energy market, up to a maximum of 5%.

What are the guarantees on compliance with this agreement?

Sanctions are possible, but at this stage there is no systematic recourse to an independent arbitration court. The implementation of the agreement will depend more on the political goodwill of the two powers than on the law. And each retains the freedom to refuse the other’s investments. If China does not keep its word, Europe will have to find the means of pressure itself. Why not limit access to its market, as the Americans have done?

This agreement is still very imperfect, but, “ European side, we are less naive, believes Jean-François Huchet, even though there are still many things that we cannot change ” in China. To believe, for example, that the forced labor camps in Xinjiang will close is illusory, but the fact that Beijing undertakes to sign the conventions of the International Labor Organization will at least give a legal instrument to challenge these practices.

Europe acted without prior consultation with the United States. Does this weaken the scope of this agreement? On the contrary, the Commission believes that this agreement allows Europe to discuss on an equal footing with the Americans their future relations with China. Because this investment agreement is only a catch-up compared to the so-called phase one agreement signed in January between China and the United States by Donald Trump. Of course, China reveled in these apparent divisions in the Western camp. The signing with the Europeans brings her out of her isolation, and it is also because she needs it that she made unthinkable concessions two years ago.

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