Legislative Train Schedule
European Parliament
Please fill in this field to search

EU-China Comprehensive Agreement on Investment (EU-China CAI)

In “A Stronger Europe in the World”

PDF version

Background and state of play

On 30 December 2020, the EU and China reached an agreement in principle on a comprehensive agreement on investment (CAI). The text agreed upon was set to first undergo legal scrubbing and after that to be translated into all official EU languages prior to being submitted formally to the Council of the EU for approval and to the EP for consent.  

On 20 May 2021, the European Parliament (EP) adopted a resolution on Chinese counter-sanctions to EU human rights sanctions against selected Chinese officials in connection with reported human rights abuses in Xinjiang, China. The resolution states that the EP will not consider the agreement until Chinese counter-sanctions are lifted. The CAI is therefore on hold.

The EU’s general objective for the CAI was to use the exclusive competence for large parts of foreign direct investment it gained with the entry into force of the Lisbon Treaty to replace the bilateral investment treaties (BITs) all EU Member States except Ireland concluded with China with a single EU-China agreement which takes into account the latest developments in EU investment policy. The CAI was designed as a stand-alone investment agreement that does not include trade issues (thus excluding substantive rules on public procurement, subsidies, etc.).

The EU’s specific objectives were to:

  • provide for new opportunities and improved conditions for access to the EU and Chinese markets for Chinese and EU investors;
  • address key challenges of the regulatory environment, including those related to transparency, licensing and authorisation procedures;
  • establish guarantees regarding the treatment of EU investors in China and of Chinese investors in the EU, including protection against unfair and inequitable treatment, unlawful discrimination and unhindered transfer of capital and payments linked to an investment;
  • ensure a level playing field by pursuing, inter alia, non-discrimination as a general principle subject to a limited number of clearly defined situations;
  • support to sustainable development initiatives by encouraging responsible investment and promoting core environmental and labour standards;
  • allow for the effective enforcement of commitments through investment dispute settlement mechanisms available to the contracting Parties and to investors.

What was originally supposed to be a 'comprehensive' agreement has become a 'partial' one, since the CAI does not cover investment protection. The EU and China were set to continue negotiations on these issues in the years to come.

As regards market access, China has made commitments in manufacturing sectors (f. ex. electric cars, chemicals, telecoms equipment and health equipment) and in services sectors, such as cloud services, financial services, private healthcare, environmental services, international maritime transport and air transport-related services. The annexes setting out the schedules of commitments were published on 12 March 2021.

In respect to level playing field issues, the CAI includes provisions on Chinese state-owned enterprises, transparency of subsidies, and forced technology transfer as well as on authorisations and administrative procedures.

On sustainable development, China has made commitments in the areas of climate change, corporate social responsibility, the environment and labour rights for instance by pledging to 'effectively implement' the Paris Agreement and to 'make continued and sustained efforts' to ratify the ILO core conventions on forced labour and to 'work towards' the ratification of the ILO core conventions it has not yet ratified.

The implementation of the deal would be monitored by an Investment Committee and a working group at the level of Executive Vice President on the EU side and Vice Premier on China's side. Disagreements would be governed by a state-to-state dispute resolution mechanism. Another working group would be set up to monitor the implementation of sustainable development commitments for which a different dispute resolution mechanism would apply which ultimately would involve an independent panel of experts.

Position of the European Parliament

In its resolution of 2013 on the EU-China negotiations for a bilateral investment agreement the EP

  • stressed the need for the highest possible level of transparency in the negotiations as one of the preconditions for EP consent;
  • urged the Commission to negotiate an ambitious and balanced CAI that seeks to improve market access for EU investors in China and vice versa, to increase the reciprocal capital flows and to guarantee transparency as regards the governance of state-owned enterprises and private companies;
  • pointed to the need to address Chinese interventionist industrial policies, ambiguities in the substance and the application of laws and regulations;
  • requested the Commission to complement its impact assessment by also evaluating the CAI’s impact on human rights.

In its 2015 resolution on EU-China relations, the EP called for a sustainable development chapter with binding commitments to international labour and environmental standards. In its 2020 resolution on the EU-China geographical indications agreement, the EP called for the creation of a parliamentary dimension for the CAI's implementation.

In its 2020 resolution on the national security law for Hong Kong and on the implementation of the Common Foreign and Security Policy and in its 2021 resolution on the crackdown on the democratic opposition in Hong Kong Parliament states that it ‘will carefully scrutinise the agreement, including its provisions on labour rights and reminds the Commission that it will take the human rights situation in China, including in Hong Kong, into account when asked to endorse’ the CAI’ or future trade deals with the PRC.’

The Committee on International Trade (INTA) and the Sub-committee on Human Rights (DROI) held an exchange of views on the CAI in their meetings of 24 and 25 February 2021 respectively.

References:

 Further reading:

Author: Gisela Grieger, Members' Research Service, legislative-train@europarl.europa.eu

As of 20/03/2024.