The EU-China Investment Treaty

Business district Beijing © Fotalia

Business district Beijing © Fotalia

An EU-China investment agreement is long overdue. So far, the negotiations for the Comprehensive Agreement on Investment (CAI), which had started in 2013, are proving difficult at best. The CAI is so cover both investment protection and improved market access. To ensure a level playing field for German companies, the negotiations should finally be concluded in 2020.

The CAI would replace the 26 existing bilateral investment promotion and protection agreements (BITs) between China and EU member states (Ireland has no BIT with China; Belgium and Luxembourg have a joint agreement). 

The EU and China had decided the scope of the agreement in early 2016. In summer 2018, China submitted a negotiation offer. However, according to the European Commission, this offer essentially consisted of international commitments that the country had already entered into, for example under the General Agreement on Trade in Services (GATS) of the World Trade Organisation (WTO). Even in the 25th round of negotiations in December 2019, no major progress seems to have been made. At least, the negotiating partners agreed to conclude the negotiations by the end of 2020. German industry hopes that a substantial agreement will be signed at the China summit to be held in Leipzig in September 2020.

Market Access and Investment Protection

In the past, the BITs of EU member states focused primarily on investment protection and dispute settlement. This is also the case for the CAI. Among other items, the negotiation partners are yet to agree on how disputes will be settled. The EU proposed an Investment Court System (ICS). Such a system is part of the EU’s newer trade and investment agreements such as the trade agreement with Canada (CETA) and the investment agreements with Singapore and Vietnam.

However, the CAI goes one step further than traditional BITs. In addition to investment protection, it is also to deal with market access. Currently, European companies are still oftentimes discriminated against. For example, China continues to pursue a selective investment policy: the government decides in which sectors investments are desired and tolerated. Among others, China should commit to abolish the previously applicable joint venture obligation.

The BDI outlined the expectations of German industry regarding the design of the CAI.