{"id":70547,"date":"2021-03-09T16:34:01","date_gmt":"2021-03-09T16:34:01","guid":{"rendered":"https:\/\/chinadialogue.net\/?p=70547"},"modified":"2021-07-23T15:11:44","modified_gmt":"2021-07-23T15:11:44","slug":"the-eu-china-investment-deal-is-a-missed-opportunity-for-sustainable-development","status":"publish","type":"post","link":"https:\/\/dialogue.earth\/en\/business\/the-eu-china-investment-deal-is-a-missed-opportunity-for-sustainable-development\/","title":{"rendered":"The EU\u2013China investment deal is a missed opportunity for sustainable development"},"content":{"rendered":"\n

After seven years of difficult negotiation, China and the European Union announced in December that a Comprehensive Agreement on Investment<\/a> (CAI) had been reached \u201cin principle\u201d.<\/p>\n\n\n\n

China and the EU after the pandemic<\/p>

Read more from this series<\/a>, in which we compare the post-Covid policies of China and the European Union, and how their relationship is evolving<\/p><\/div><\/div>\n\n\n\n

You might expect a strong focus on sustainable development to be at the centre of the agreement. After all, it was reached during a pandemic and following strong statements from both sides favouring ambitious climate action and \u201cbuilding back better\u201d. What better time to rethink and redesign traditional approaches to economic liberalisation?<\/p>\n\n\n\n

The European Commission released the CAI draft text<\/a> in January following multiple requests from policymakers, policy influencers and the public. Many wanted to know whether the deal would yield the benefits both sides have promised. The text allows for a preliminary analysis of where the two parties have applied a sustainable development lens \u2013 and where they might have done more.<\/p>\n\n\n\n

Market access: How much is gained?<\/h2>\n\n\n\n

The European Commission boasts that the CAI will give EU investors an \u201cunprecedented level of access<\/a>\u201d to China, citing broad liberalisation commitments following a \u201cnegative list\u201d approach \u2013 meaning all sectors are included except those specified.<\/p>\n\n\n\n

The EU also highlighted market access commitments in the manufacturing and services sectors. However, the parties have not publicly released detailed schedules and annexes. This makes it difficult to assess how much these commitments go beyond what China has already pledged through its recent domestic reforms in regulating foreign investment.<\/p>\n\n\n\n

China adopted<\/a> its unified Foreign Investment Law<\/a> (FIL) in 2019 and it came into effect in January 2020<\/a>. The law takes a pre-establishment negative listing approach similar to the draft CAI provisions. Unless the foreign investors and their investments fall within the specified sectors, the law commits to national treatment and equal protections in their establishment and operation in China (Article 4). The same law also establishes a flexible framework in which experimental policies can be tested, and the scope for further liberalisation has been expanded (Article 13). In this context, the draft CAI seems to provide little improvement for EU investors on their existing access to the Chinese market.<\/p>\n\n\n\n

On the other hand, China also praised the provisions<\/a> of the draft CAI for providing \u201cChinese business with more transparent and predictable business and legal environment[s].\u201d This may refer to the Regulatory Framework<\/a> (Section III), where parties agreed to make all investment-related laws and regulations publicly available in a timely manner. Parties also agreed to allow stakeholders opportunities to comment on these laws and regulations, establish contact points to respond to investors\u2019 enquiries, and streamline standard-setting and administrative procedures.<\/p>\n\n\n\n

\"<\/div>
A virtual EU\u2013China summit on 14 September 2020 (Image: Yves Herman \/ Alamy)<\/div><\/div><\/div><\/div>\n\n\n\n

Environment and labour provisions: Room for improvement<\/h2>\n\n\n\n

Brussels and Beijing both also highlighted the section on sustainability, Section IV<\/a>. The EU claims<\/a> this part \u201cincludes all of the key elements of the EU approach to sustainable development.\u201d China also considers<\/a> it to be indicative of the \u201chigh-level quality\u201d of the agreement. The current text does not support this satisfaction.<\/p>\n\n\n\n

<\/div>
Recommended<\/span><\/span><\/div><\/a>\n\n\n\n

For example, the text recognises the importance of enhancing the contribution of investments to the environment and to combating climate change, but it only commits the parties to facilitate and encourage investment in environmentally or climate-friendly goods and services generally. In so doing, the parties fail to prioritise sustainable investments because the text does not include references to tools such as the EU\u2019s Taxonomy for Sustainable Activities<\/a> or China\u2019s Green Bond Endorsed Project Catalogue<\/a>. These would clarify which goods and services are most effective in achieving environmental and climate objectives.<\/p>\n\n\n\n

The labour provisions seem even weaker since the draft text does not appear to create new obligations. There is a commitment to pursue the ratification of unratified fundamental International Labour Organization (ILO) conventions, but the CAI allows each party to make \u201cefforts on its own initiative.\u201d<\/p>\n\n\n\n

In 2017, the European Commission published a Sustainability Impact Assessment report<\/a> to assess how the CAI could affect sustainability issues in the EU and China. Among several recommendations, the report said the CAI should include provisions that:<\/p>\n\n\n\n