Merkel pushes European Union-China investment deal over the finish line

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For critics, it’s a rushed deal that’s too soft on labor rights. For Angela Merkel, it’s a strategic win and icing on the cake of Germany’s Council of the EU presidency.

EU diplomats and officials say the German chancellor played a crucial role in finalizing the long-delayed EU-China investment agreement, which has taken more than seven years of negotiations. Those talks are set to be wrapped up Wednesday in a high-level videoconference between Brussels, Berlin and Beijing, just before Germany hands over the rotating presidency of the Council of the EU to Portugal at the end of the week.

The video call with Merkel, European Commission President Ursula von der Leyen, European Council President Charles Michel and Chinese President Xi Jinping is scheduled for 1 p.m. Brussels time Wednesday, the EU confirmed late Tuesday.

The leaders plan to give political endorsement to the deal, which would then still have to be legally revised, translated into different languages, and be officially approved by EU governments and the European Parliament as well as potentially national parliaments — a process that would take until early 2022 at least.

The European Commission said the agreement was a success story because it not only increases market access for European investors in China and tackles forced technology transfer, non-transparent subsidies and state-owned enterprises, but also commits China to “make continued and sustained efforts” to ratify international conventions on banning forced labor.

However, some EU countries like Belgium and the Netherlands have raised concerns about the EU’s ability to address human rights issues under the agreement. Others like Poland are questioning why the EU is rushing ahead to seal the deal with China without waiting for the inauguration of U.S. President-elect Joe Biden, whose transition team has already voiced concerns about the deal.

Strong criticism is also coming from the European Parliament. “The Commission has folded on the issue of workers’ rights,” said Green MEP Reinhard Bütikofer, the chair of Parliament’s delegation for relations with China. Bütikofer said that simple commitments on abandoning forced labor were not enough: “It is ridiculous to try selling that as a success.”

The German lawmaker also criticized the deal as “a solo-run as we know it from the Donald Trump administration,” and said: “Explain why three weeks ago the EU — which likes to call itself the flag bearer of multilateralism — said it wants to coordinate with the Biden administration vis-à-vis China, and now it tries to push through this deal just before Biden is inaugurated as president.”

Theresa Fallon, director for the Centre for Russia Europe Asia Studies, also lambasted the planned investment agreement. “The main deliverable from Beijing’s point of view was to drive a wedge in transatlantic relations, and Brussels appears to have complied,” she said.

EU officials are rejecting criticism of rushing ahead with a deal without consulting the U.S., stressing that Washington secured its own trade and investment deal under President Trump and the EU is simply trying to get similar market-access conditions, which would allow Brussels and Washington to coordinate their China policies from a similar starting point.

One Commission official recalled that Brussels and Beijing committed in April 2019 at the highest political level to finalize the investment deal by the end of this year, and that both sides were sticking to their own target by now finalizing the negotiations, after having repeatedly failed to make substantial progress in the talks during previous years — “to the chagrin of some of those who are now criticizing this deal,” as the official put it.

Yet there’s also hardly any doubt in Brussels that the planned end-of-year conclusion of the deal — at an unusual moment for such high-profile agreements, between Christmas and New Year’s — has Merkel’s handwriting all over it.

The investment agreement is part of a strategic outreach to China that Merkel made a cornerstone of Germany’s six-month Council presidency. “I believe that it is right and important to strive for good strategic relations with China,” Merkel said on September 14, the day on which she had originally planned a giant EU-China summit in Leipzig, which had to be canceled due to the coronavirus pandemic and was replaced by a videoconference with China’s Xi instead.

Level playing field

For European businesses, particularly German carmakers and manufacturers, the agreement is of high importance as it would allow them to increase investments in the lucrative and steadily growing Chinese market without facing protectionist restrictions such as forced joint ventures, where local companies hold the majority of stakes and can access trade secrets.

“We must not have illusions at this point; instead, we must measure things against the realities,” Merkel said in September. “Today, China is a clear competitor in many high technologies. So, of course, market access and the characteristics under which our trade takes place must be on an equal footing. A level playing field, as they say, must prevail.”

Besides the strong steering from Berlin, which was reinforced in Brussels by German EU Ambassador Michael Clauss — who, by no coincidence, is the former German ambassador to Beijing — Merkel could also count on the “German engine” in the European Commission, as one EU diplomat put it: He named Björn Seibert, the head of cabinet of the Commission president; Sabine Weyand, the director general for trade; as well as Michael Hager, the chief of cabinet for Executive Vice President Valdis Dombrovskis, as part of that “engine.”

Crucially, Merkel seems to have secured the backing of France for the accord. An official close to French Trade Minister Franck Riester, who just last week voiced criticism of the deal related to human rights, said on Tuesday that “things are moving in the right direction.” One EU official said that Merkel had reached an understanding with French President Emmanuel Macron under which she would get to conclude the deal under the German presidency, while the ratification and signing of the deal would be finalized under the French Council presidency in the first half of 2022.

Until then, it will be crucial to address concerns over China’s human rights record, particularly when it comes to forced labor among the Uighur Muslim minority. Beijing has faced further international criticism after a Chinese court on Monday sentenced citizen journalist Zhang Zhan to four years in prison for her reporting on the coronavirus pandemic in Wuhan. 

One EU official said that the time still remaining to ratify the deal by 2022 or later could be used to exert pressure on China to fulfill its commitment to implementing international conventions against forced labor — something that the European Parliament will certainly push for.

“We will scrutinize this agreement very thoroughly,” said Kathleen Van Brempt, the trade coordinator of the Socialist & Democrats group. “Market access, stricter rules on subsidies and state-owned enterprises as well as addressing forced technology transfers are important, but so are human rights and labor rights.

“The agreement should be a meaningful step towards improving labor conditions, particularly with regards to the Uighurs. It goes without saying that before ratification, a unilateral ban on the import of products from forced labor and child labor should be proposed,” Van Brempt added.

Barbara Moens and David Herszenhorn contributed reporting.

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