By Yogesh Gupta
In a sign of shifting political dynamics, a Brexited EU led by German Chancellor Angela Merkel concluded the Comprehensive Agreement on Investment (CAI) with China on December 30, 2020, ignoring a request by President-elect Joe Biden’s group in the US for early consultations. Under discussion for seven years, negotiations for the CAI acquired a new momentum in current weeks just after an anxious Xi Jinping directed his negotiators to “make enough concessions” to snatch the deal just before the German presidency of the EU concluded on December 31 and Biden’s takeover on January 20, 2021.
Xi was keen to forestall any joint efforts by the Biden administration (with its EU allies) to try a widespread technique to challenge China’s (unfair) trade practices (the US and the EU having about 45% of China’s exports). Xi had feared China’s diplomatic isolation due to its crackdown in Hong Kong, Tibet and Xinjiang. Merkel wanted this deal as it would enable its carmakers and other producers to operate in China with no going by means of joint ventures with Chinese partners and sharing their sensitive technologies. She had also been upset with President Donald Trump for his recurrent jibes and lowering the presence of American troops in Germany, with no consulting her.
Merkel personally ensured the approval of EU’s 26 Head of States with the dissenting Poland (obtaining close relations with the US) becoming sidestepped. Merkel’s job became simpler with the exit of Britain, which had constantly assured that Washington’s views identified resonance in the EU choices.
Under the CAI, European companies would get far better (not complete) access than their American counterparts to China’s industry in new power automobiles (of significance to Germany), healthcare, telecom, finance and cloud services. The EU also obtained a couple of concessions from China on ending forced technologies transfers and publishing a list of subsidies offered to designated sectors annually for the initially time, China has agreed to open up its services sector partially.
How a lot China would in fact implement these choices remains to be noticed, in the absence of any certain monitoring or dispute settlement mechanism provided Beijing’s identified reticence in observing agreements of not its liking.
On forced labour, China agreed to seek ratification of 4 ILO conventions, but no date has been agreed for it nor any verification mechanism agreed the EU has been happy with the lip service paid by the Chinese. There was no progress on enhanced labour rights, as China did not agree to enable independent trade unions or give them the proper to collectively bargain with employers. In return, China will get reasonably free of charge access to the EU industry (16% of the worldwide economy in 2019).
The deal nonetheless demands to be authorized by European Parliament exactly where some members are hawkish on China the European Commission led by (German) President Ursula von der Leyen is canvassing for supporting this “good and solid” deal saying it is the “most ambitious outcome that China has ever agreed with any country.”
Xi is projecting the CAI, quickly just after the conclusion of the Regional Comprehensive Economic Partnership (RCEP) with 14 Asia-Pacific nations a couple of weeks earlier, as a win for his diplomatic efforts. He will now be a lot more emboldened in resisting the US stress for restructuring of China’s financial policies.
After Britain’s departure, the EU is becoming driven increasingly by the Franco-German partnership and has turn out to be more independent of the US in its financial and other policies. With the mutual trust broken below Trump, it will turn out to be a lot tougher for the Biden administration to align EU’s policies more closely with theirs.
The deal illustrates the troubles of dealing with an authoritarian China, which is each a strategic rival and profitable industry for most nations. It undoubtedly provides a blow to the transatlantic solidarity, producing it clear that when its interests so demand, the EU would not hesitate to pursue an independent policy towards China or other nations. For India and other folks, the lesson is that financial interests of other nations would generally be an vital determinant in shaping their attitude towards a resurgent China.
(The author is a former ambassador)