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2020-09-16 | All chapters

European Chamber Welcomes EU-China Talks, Laments Slow Progress on Investment Deal

Background

On 14th September, leaders from the EU and China held a virtual meeting on a range of bilateral issues. The discussion was joined from the EU side by Commission President Ursula von der Leyen, European Council President Charles Michel and Chancellor Angela Merkel, representing the German Presidency of the Council of the EU, and from the Chinese side by President Xi Jinping.

The meeting covered a wide range of topics of concern to both sides, including the EU-China Comprehensive Agreement on Investment (CAI), bolstering the World Trade Organisation (WTO), digital issues, climate change, COVID-19, human rights and areas of geopolitical friction. Additionally, the long-awaited EU-China bilateral Agreement on the Cooperation on, and Protection of, Geographical Indications (GIs) was formally signed.

Please find the joint press release from EU participants here, and the Xinhua article detailing the proceedings from the Chinese perspective here.

Stance

Although 2020 was meant to be a critical year for driving forward EU-China engagement, the business community has witnessed stagnation in certain areas. The European Union Chamber of Commerce in China (European Chamber) is therefore encouraged that the EU and China summoned the political will to hold this important meeting. The frank discussions that took place on a range of sensitive issues indicates a growing maturity in the relationship. The commitment to create high-level dialogues for digital as well as climate and environmental issues is encouraging in this regard as it establishes a mechanism to continue frank discussions on challenging issues.

The European Chamber welcomes the signing of the EU-China GI Agreement. Set to protect 100 European and 100 Chinese GIs in the respective markets, which is set to increase to 175 GIs for each side within four years, the agreement should strengthen consumer confidence in the famous products included on the list.

However, several hurdles in China still exist that could impact the implementation of the GI Agreement. First, China’s complicated GI protection mechanism—actually composed of three separate systems—still does not define GIs as intellectual property rights. This incoherent method can create inconsistencies in GI infringement cases, which can result in losses for European companies. Second, relevant food standards in China make it impossible to import some of the items now granted GI protection, specifically some of the cheeses. The European Chamber hopes that this signed agreement will drive China’s regulators to make the necessary reforms to remedy these issues. 

The European business community laments the slow progress made on the CAI. In part, the talks have slowed as some Chinese leaders have pushed for opening on the EU side to parallel China’s market access offers. As the EU’s market is already far more open than China’s, such a one-to-one exchange of commitments is simply not feasible. The CAI will lay a new foundation for bilateral investment, so it is imperative that unequal treatment and non-reciprocal market access not be institutionalised.

The EU has in recent years concluded investment agreements and even free-trade agreements with diverse partners as far flung as Japan, MERCOSUR, Canada, Mexico and Vietnam. Having already gone through more than 30 rounds of negotiations over seven years, an investment agreement deal that provides an open market with a level playing field is hardly a radical aim.  

The European business community is also concerned that not enough is being done on the Chinese side to counter the shift in European public opinion on China. European leaders currently still have the appetite for engagement, but public opinion in the Old Continent is souring on China: voters are voicing their concerns over the unbalanced economic relationship, allegations of forced labour in Xinjiang and the autonomy of Hong Kong. These issues present a real challenge for the EU and China to find an effective way forward before the window of opportunity closes.

“We worry that the Chinese side may not have fully appreciated the EU’s message of urgency to reach a political agreement on the CAI by year’s end,” said Joerg Wuttke, president of the European Union Chamber of Commerce in China. “As welcome as the signed GI Agreement is, it is a far cry from the kind of deal needed to rebalance our economic relationship. It has to be now or never.”

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Yichi Zhang