China and the European Commission were about to announce a landmark deal this week that would make it easier for their companies to invest in each other’s economies. Then it hit another catch: a tweet from a top aide to Joseph R. Biden Jr. signaled that the president-elect was not happy with the deal.
The nearly seven-year pact remains a top priority for Chancellor Angela Merkel, as it would give companies like Daimler and Volkswagen better control over their activities in China.
China, which has long been cautious about giving foreign companies better access, appears to be eager to reach an agreement now before the new US administration can attempt to build a united front against Chinese policy and action as sir Biden has agreed.
Ms. Merkel and other heads of state and government have urged the agreement to be concluded before the end of the year, while Germany holds the rotating six-month presidency of the European Council. Last week they even distributed a 126-page draft that was largely complete, apart from unsolved formulation problems.
Their efforts and an anticipated announcement on Tuesday have instead dented the growing hostility towards China and the increasingly vocal opposition in recent rounds of talks.
In the European Parliament, the pact has met with significant opposition from members who say it is insufficient to open up China’s economy or stop Chinese human rights abuses.
In Washington, members of the new administration openly indicated that they hoped Europe would wait.
The decision of Mr. Biden to serve as National Security Advisor, Jake Sullivan, wrote on Twitter on Monday that the new administration would “welcome early consultations with our European partners about our shared concerns about China’s economic practices.”
The White House also weighed. A spokesman for the National Security Council, John Ullyot, warned that any commitment by China “that is not accompanied by strong enforcement and review mechanisms is merely a propaganda victory for the Chinese Communist Party”.
The Trump administration has tried, with mixed success, to encourage its allies to follow suit in order to diminish economic and technological ties with China. As talks in Europe have gained momentum in recent weeks, President Trump has instead been faced with an attempt to reverse the presidential election results while many top advisors focused on the new economic stimulus plan or the response to the coronavirus.
If a deal is reached, it would be an unexpected diplomatic victory for China after a year of waning international renown over covering up the pandemic, its aggressive actions in Hong Kong and the South China Sea, and most recently over a heated dispute with Australia.
“The Chinese are eager to weaken any kind of transatlantic alliance by enforcing this,” said Theresa Fallon, director of the Center for Russia-Europe-Asia Studies in Brussels.
Leader in Brussels after four years of dealing with a Trump administration that was alternately hostile to Europe or simply indifferent want to show that they can deal with China on their own. At the same time, they hope to rebuild relations with the United States under a Biden presidency.
Representatives from China and the European Commission, the administrative arm of the European Union, continue to negotiate and continue to hope to reach an agreement by the end of the year.
“Progress has been made in a number of areas,” said a European Commission statement. “There are still some important unanswered questions and discussions will continue this week.”
Economy & Economy
Apr. 22, 2020 at 6:42 am ET
According to the draft contract, a copy of which was examined by the New York Times, some linguistic differences remained unsolved until last week. The two sides had not yet agreed on what to call the pact. Europe advocates an “agreement” while China prefers a “treaty”.
In a section on investment and sustainable development, China had also asked to insert a phrase that is often used to argue that rules other than developed countries should be followed. It says: “The contracting parties acknowledge that the differences in the respective level of development of the contracting parties should be taken into account.”
The agreement also meets with opposition for what it does not address. Critics have already complained that the deal is insufficient to open up China’s markets, honor previous trade and environmental commitments, or tackle human rights abuses such as forced labor and the mass internment of Uyghurs and other Muslims in far west China’s Xinjiang.
An investment deal with China would require the approval of the European Parliament, and opponents could have enough votes to block it.
“From the time the agreement is signed, Europe will lose influence not only on issues of vital importance to future competitiveness, but also on fundamental value issues ranging from human rights to the future of coal-fired power plants,” said one group Chinese scholars in Europe wrote in an open letter as the deal was nearing completion.
European officials view the investment agreement as a relatively limited effort to facilitate trade relations with China that has had no major geopolitical impact. The pact is strongly supported by European companies operating in China, as it would increase the requirements for joint ventures with Chinese partners and the exchange of sensitive technologies. The deal would also open the Chinese banking market to European Union companies.
Brussels and Beijing have been discussing investment rules since the beginning of 2014 without making significant progress, partly because China is cautious about opening up its economy to foreign competitors. Efforts failed again this year, but talks resumed after the US presidential election in November.
China’s leader Xi Jinping intervened directly and spoke to Ms. Merkel and President Emmanuel Macron of France. He told the French leader that relations between China and Europe “take on a more global and strategic importance under the new circumstances,” according to the official Xinhua report on the call.
Officials and analysts in China and Europe said Beijing recently made some concessions – enough to move negotiations forward but not enough to reassure everyone. The progress was welcomed in China. A Foreign Ministry spokesman Wang Wenbin said Tuesday that the China-Europe deal would “bring more stability to the world.”
Any deal closed could be a major blow to Mr. Biden’s trading ambitions. He has harshly criticized Mr Trump for fighting Europe and other allies with its global trade wars, and vowed to work more closely with like-minded governments to counter China’s unfair economic practices.
While Mr. Biden has not made it clear what such a partnership might look like, it could focus on drawing more commitments from the Chinese government, including issues such as intellectual property enforcement, state-owned companies and discrimination against foreign companies in China.
A short-term deal with China, while not excluding other partnerships between Europe and the United States, would undermine some of Mr Biden’s rhetoric and show that Western companies are still competing hard to access the lucrative Chinese market.
One of the main points in the talks was China’s willingness to adhere to international standards for workers. Beijing has so far only agreed to “promote” better working conditions without expressly agreeing to comply with standards for minimum wages and health and safety according to the draft agreement. Members of the European Greens and other groups consider such a promise vague and unenforceable.
European views on China are contradictory. While China is an important source of investment and a critical market for industrial goods, the acquisition of assets like Volvo Cars or Kuka, a German manufacturer of industrial robots, by Chinese companies has led the European Union to give its member states more power to block investments.
As Chinese companies have become more demanding, they have also become competitors in industries such as machine tools that were previously dominated by German companies. With government support, Chinese automakers are trying to use the transition to electric vehicles to play a role in the international auto market, a challenge facing European automakers.
Ms. Fallon of the Center for Russia Europe Asia Studies said China would stay ahead even if the European Parliament were to wedge the investment deal by wedge between the Commission and Parliament and between Europe and the United States.
“You win no matter what,” she said.
Keith Bradsher reported from Beijing and Matina Stevis-Gridneff from Brussels. Claire Fu did research in Beijing.