Will the EU-China Investment Agreement Survive Parliament’s Scrutiny?

On December 30, the European Union (EU) and China concluded negotiations for a Comprehensive Agreement on Investment (CAI).

Through the agreement the EU hopes to address the asymmetry in bilateral relations, a serious concern EU member states have had vis-à-vis China for years (and a concern they share with Washington).

Reaching an agreement, however, is only the first step in the process. While the European Parliament (EP) does not have the power to amend the negotiated text, it has the power not only to ratify but also to monitor the implementation of CAI.

“There is no deal until the European Parliament says it is a deal,” Reinhard Bütikofer, German Green Member of the European Parliament (MEP), and the leader of the EP’s EU-China Delegation, stressed. Belgian MEP Guy Verhofstadt of the Renew Europe Group tweeted: “Arrests [in Hong Kong] again show that China is not becoming more open and democratic as a result of international agreements.” The vice chair of the international trade committee (INTA), Iuliu Winkler of the European People’s Party, stated that the committee’s members stand committed to fully engage in the EP’s scrutiny process. Understanding the EP’s role in the process is therefore crucial.

Grasping the dynamics within the EU’s foreign policy, which involves multiple layers and players, is also key to making sense of the strategic implications of CAI for the EU’s global clout. This facilitates an appreciation of the limitations that the EU’s inherent fragmentation as an international actor places on what Brussels can actually do when it comes to China. Putting things into perspective therefore helps adjust expectations about the EU’s influence over China, a strategic partner it now also considers a “systemic rival.”

For the Chinese leadership, reaching an agreement before the end of 2020 was crucial for at least two reasons. First, China wanted to ensure negotiations were completed under the rotating German presidency and Chancellor Angela Merkel’s pragmatic, pro-business approach, especially given her ambition to crown her EU Council presidency – and her 16 years in power – with a memorable deal before she steps down as leader later this year. With the agreement reached, Beijing has avoided the negotiations being dragged into the Portuguese and Slovenian presidencies (2021), or further into the French and Czech presidencies (2022), which could prove less predictable for China.

Second, by completing negotiations by the end of December, Beijing avoided further complications under a new administration in the White House. U.S. President Joe Biden, who took office on January 20, has promised to return to cooperation with Europe on global challenges, including to jointly address the “China threat.” There is little doubt that already at this stage, the CAI is a geopolitical win for China. In contrast, for Europe the gains so far appear much less significant. Moreover, there is a real chance that, if ratified by the EP, CAI could even undermine the EU’s élan for toughening its stance on China, and could undermine its credibility as a global human rights actor.

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