Economy

European Parliament votes to freeze EU-China investment deal

One of the buildings of the European Parliament. On 20 May, members voted on a resolution regarding Chinese sanctions against MEP's.
One of the buildings of the European Parliament. On 20 May, members voted on a resolution regarding Chinese sanctions against MEP's. AFP - SEBASTIEN BOZON

With an overwhelming majority, the European Parliament passed a motion recommending to formally freeze the EU-China Comprehensive Agreement for Investment (CAI).Tension has escalated since Brussels condemned China's human rights situation in Hong Kong and Xinjiang, resulting in tit-for-tat sanctions.

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The Parliament voted 599 in favor, 30 against and 58 absentions to postpone ratifying the CAI. Its resolution states that China's human rights record was "at its worst since the Tiananmen Square Massacre" and focused on violations in Hong Kong and Xinjiang.

It also expressed anger over Chinese sanctions against eight members of the European Parliament and national parliaments, which came hours after the EU had imposed sanctions on Chinese officials accused of violating human rights in Xinjiang.​​​​

The draft motion also calls on the EU to intensify cooperation with the United States in the Transatlantic Dialogue on China, aimed at developing a coherent response to Beijng, and stresses that any trade deals with Taiwan "should not be held hostage" by the deal with Beijing.

In a first reaction to the vote, the Global Times, a newspaper close to China's Communist Party angrily remarked that it was "yet another baffle to subject the investment deal to certain European Parliament members' preposterous motions using groundless human rights claims as an excuse to block progress on the deal that bodes well for European businesses and consumers."

Blow

The vote deals a further blow to initial expectations that the CAI, which came about in a seven year period of arduous negotiations, could enter the ratification process in a just a few months.

Earlier this month, the European Commission had indicated that the ratification of the CAI may be delayed, when the EU Commission's Trade Councillor Valdis Dombrovskis said that “with the EU sanctions against China and the Chinese counter-sanctions, including against members of the European Parliament, the environment is not conducive to the ratification of the agreement.” 

Trojan horse

In strong language, the motion states that "any consideration of the CAI, as well as any discussion on ratification by the European Parliament, has justifiably been frozen because of the Chinese sanctions in place," while it demands that China lift "the sanctions before Parliament can deal with the CAI" and "reminds the [European] Commission that Parliament will take the human rights situation in China, including in Hong Kong, into account when asked to endorse the CAI.

The CAI was signed "in principle" in December 2020, generated wide-spread criticism from the outset. "Beijing sees investment deals as a kind of Trojan Horse," Clive Hamilton, Professor of Public Ethics at Charles Sturt University in Canberra, Australia.

He is the co-author of Hidden Hand, an investigation into China's growing economic and political influence in the West, "a means by which it can smuggle greater political and economic influence into other countries through the channels opened up by these investment deals."

Meanwhile, China's Global Times points at recent figures that show a quarter-on-quarter GDP contraction in the first three months of the EU's economy with 0.6 percent, that contrasts sharply with China's spectacular 18.3 percent rebound.  

It notes that "the EU has lately displayed accelerating confrontational attitude toward China, its largest trading partner, by trying to interfere in China's internal affairs, politically kidnapping European companies' operation in China with baseless human rights accusations, and now, obstructing the ratification of the important agreement of bilateral investment."

An "ill-advised policy shift," the newspaper argues as "reckless politicians in Europe are stripping their own domestic companies of a competitive advantage" in China, "the world's second largest economy and a huge market."

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