In the final days of 2020 the European Union and China announced a Comprehensive Agreement on Investment (CAI). The European Commission has said the deal will make history as the most ambitious agreement that China has ever concluded with a third country.
According to the European Commission, cumulative EU FDI flows into China over the past 20 years have reached more than €140 billion, while Chinese FDI into the EU amounts to almost €120 billion. The CAI binds China to its liberalisation of investments over the past 20 years, preventing backsliding, in turn making the conditions of market access for EU companies clear and independent of China’s internal policies. It also sets up a dispute resolution mechanism in case of a breach of commitments. The deal will remove some barriers faced by EU companies investing in China, such as specific joint-venture requirements and caps on foreign equity. Greater market access, fair competition and sustainable development are provided for European investors in China, but at what cost?
Members of the European Parliament have opposed ratifying the agreement because of China’s response to pro-democracy protestors in Hong Kong as well as its treatment of the Uighur Muslims in Xinjiang Province. Further afield, the deal has also faced widespread criticism from those in the incoming Biden administration, with many arguing this instance of EU strategic autonomy at play will complicate any rapprochement in Transatlantic relations.
On a more micro-level, labour is proving to be one of the most politically contentious parts of the deal. The CAI will make it easier to bring Chinese staff into the EU where they will be allowed to work in subsidiaries of Chinese companies for up to three years if they are considered ‘specialists’ or if they are deemed responsible for establishing a new investment in Europe. “The permissible length of stay shall be for a period of up to ninety days in any twelve month period for business visitors for established purposes and up to three years for managers and specialists” the agreement says.
Controversy surrounds a provision whereby EU governments will not be allowed to impose quotas or other limits on the number of such specialised workers that come into their country. China has been criticised for its shipping out of cheap Chinese labour to Chinese projects around the world for many years.
In an attempt to address Member State concerns around an over-liberalisation of labour provisions from China to Europe, a spokesperson for the European Commission confirmed that “provisions on business visitors and intra-corporate transferees apply to all sectors” but insisted that the EU would not be opening its market to “labour dumping” arguing that Chinese specialists would have to comply with all local EU rules. “Provisions on intra-corporate transferees do not apply when their temporary presence in the EU aims at circumventing labour disputes or negotiations, and Member States may require them to demonstrate that they possess the professional qualifications and experience needed in the company to which they are transferred.”
The deal will have to be ratified but is expected to take effect in early 2022.