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EU-CHINA: Will the Investment Agreement survive Parliament’s scrutiny?

Credit: Flickr/Friends of Europe

A look at the remaining process for the CAI and the crucial role of the European Parliament, which could still vote the deal down.

 

  • HRWF consultant Dr Zsuzsa-Anna Ferenczy, currently in Taiwan, has just published a very interesting article in The Diplomat about the role of the European Parliament concerning the possible future of the CAI. Her very informative analysis will be extremely useful for NGOs willing to define their human rights advocacy strategy.  

 

By Zsuzsa Anna Ferenczy

 

 

 

 

The Diplomat (27.01.2021) – https://bit.ly/3af20yq – On December 30, the European Union (EU) and China concluded negotiations for a Comprehensive Agreement on Investment (CAI). Through the agreement the EU hopes to address the asymmetry in bilateral relations, a serious concern EU member states have had vis-à-vis China for years (and a concern they share with Washington). Reaching an agreement, however, is only the first step in the process. While the European Parliament (EP) does not have the power to amend the negotiated text, it has the power not only to ratify but also to monitor the implementation of CAI.

 

“There is no deal until the European Parliament says it is a deal,” Reinhard Bütikofer, German Green Member of the European Parliament (MEP), and the leader of the EP’s EU-China Delegation, stressed. Belgian MEP Guy Verhofstadt of the Renew Europe Group tweeted: “Arrests [in Hong Kong] again show that China is not becoming more open and democratic as a result of international agreements.” The vice chair of the international trade committee (INTA), Iuliu Winkler of the European People’s Party, stated that the committee’s members stand committed to fully engage in the EP’s scrutiny process. Understanding the EP’s role in the process is therefore crucial.

 

Grasping the dynamics within the EU’s foreign policy, which involves multiple layers and players, is also key to making sense of the strategic implications of CAI for the EU’s global clout. This facilitates an appreciation of the limitations that the EU’s inherent fragmentation as an international actor places on what Brussels can actually do when it comes to China. Putting things into perspective therefore helps adjust expectations about the EU’s influence over China, a strategic partner it now also considers a “systemic rival.”

 

For the Chinese leadership, reaching an agreement before the end of 2020 was crucial for at least two reasons. First, China wanted to ensure negotiations were completed under the rotating German presidency and Chancellor Angela Merkel’s pragmatic, pro-business approach, especially given her ambition to crown her EU Council presidency – and her 16 years in power – with a memorable deal before she steps down as leader later this year. With the agreement reached, Beijing has avoided the negotiations being dragged into the Portuguese and Slovenian presidencies (2021), or further into the French and Czech presidencies (2022), which could prove less predictable for China.

 

Second, by completing negotiations by the end of December, Beijing avoided further complications under a new administration in the White House. U.S. President Joe Biden, who took office on January 20, has promised to return to cooperation with Europe on global challenges, including to jointly address the “China threat.” There is little doubt that already at this stage, the CAI is a geopolitical win for China. In contrast, for Europe the gains so far appear much less significant. Moreover, there is a real chance that, if ratified by the EP, CAI could even undermine the EU’s élan for toughening its stance on China, and could undermine its credibility as a global human rights actor.

 

The foreign policy provisions of the 2009 Lisbon Treaty represented the most ambitious reform effort in the history of the EU’s external relations policy, and sought to strengthen the bloc’s global standing by consolidating its internal foundation. Yet, the EU has been in a state of permanent crisis management since the 2008 global financial crisis. The consequences of the unprecedented (and ongoing) migration crisis, Brexit, and the COVID-19 pandemic are yet to be understood and addressed. Dynamic change in Europe’s southern neighborhood, an aggressive Russia, an assertive China, and a United States reluctant to cooperate with Europe on global problems have all intensified internal debates on how to gain and preserve the bloc’s strategic autonomy.

 

Despite the past decade being marked by enormous challenges for Europe, and as the EU-China CAI negotiations inched forward, the EP saw its role substantially enhanced. With Lisbon, the EP has now joint powers with the Council to adopt trade and investment legislation. Expectations that the EP will use its power in the ratification as well as the implementation of CAI are therefore well placed. That MEPs could actually refuse to ratify the agreement in protest against Beijing’s human rights abuses is a real possibility.

 

In the case of the CAI negotiations, the European Commission (after the Council adopted its negotiating mandate) has been required to report regularly to the EP’s INTA committee. While the EP has not had the power to engage directly in the negotiations or set their objectives, its oversight role has remained significant in several ways: first, by ensuring transparency; second, by insisting that the agreement is both rules- and value-based; and third, by giving it a role in the implementation of the CAI. Judging by the EP’s track record of being the most vocal EU institution concerning the respect of core values, MEPs will definitely use their power to oversee the implementation process, once and if they ratify the agreement.

 

On January 22, the Commission made parts of the agreement public for key stakeholders. The text must still undergo the necessary legal and technical review. Then it must be approved by the European Council and translated into all official languages before it can be ready for official referral to the EP so that MEPs can start their scrutiny work. The formal procedure is therefore only expected to start in the last months of 2021, with a vote foreseen for the first months of 2022. Within six months after the official request for consent, a period extendable by further six months, INTA, as the committee in charge, will submit a recommendation to approve or reject the deal, and might accompany it with a resolution setting out the reasons why MEPs should give or refuse their consent. Finally, the EP will decide by means of a single vote on consent; no amendments may be tabled. If the majority required is not obtained, the CAI is deemed to have been rejected.

 

Assessing the EP’s stance on China in the past years is a good place to start to appreciate the EP’s likely approach to the CAI. For years, the EP has systematically called for measures to address China’s growing economic weight and political influence in Europe, its attempts to undermine democracy, the continuous deterioration of human rights, the lack of political and economic reciprocity in bilateral ties, the government’s repression of religious and ethnic minorities, in particular Uyghurs, Kazakhs, Tibetans, and Christians, the arbitrary detentions and enforced disappearances, China’s growing aggressive posture in the region, the introduction of the National Security Law in Hong Kong, and threats against Taiwan. The list has grown longer, and the grievances deeper, over time.

 

At the start of CAI negotiations, in its October 2013 “Resolution on EU-China negotiations for a bilateral agreement,” the EP demanded that negotiations “be conducted with the highest possible level of transparency.” In November 2020, the EP urged greater transparency and the establishment if “a parliamentary dimension with regard to the implementation of the agreement.” It stressed “respect for human rights is a prerequisite for engaging in trade and investment relations with the EU.”

 

Then, in its December 2020 “Resolution on forced labor and the situation of the Uyghurs in the Xinjiang Uyghur Autonomous Region,” MEPs stressed that the CAI must include “adequate commitments to respect international conventions against forced labor.” This echoes its June 2020 Resolution on the National Security Law for Hong Kong, whereby MEPs stated that they would take the human rights situation in China into consideration when asked to endorse an investment agreement. The same point is at the core of its January 2021 Resolution on Hong Kong, the first since the two sides concluded negotiations, giving a clear indication of what to expect from MEPs in the months to come.

 

These are just a handful of actions the EP has taken to make its position clear, in addition to its reports, parliamentary questions, and public hearings in its foreign affairs, security and defense, international trade (INTA), and human rights committees. The fact that in 2019 MEPs awarded renowned Uyghur human rights activist Ilham Tohti the Sakharov Prize for Freedom of Thought, stands as testament of the collective power of MEPs across different political groups and national delegations, to Beijing’s great chagrin.

 

It is through these measures that MEPs have sought to hold the EU to its foreign policy ambitions on values, as articulated in the EU’s 2020-2024 Action Plan on Human Rights and Democracy, including to build resilient, inclusive, and democratic societies and promote a global system for human rights. While EP Resolutions on China are not legally binding, they must be viewed as part of a larger process seeking to hold China accountable for its own commitments. This process, however, remains driven by national and corporate interests. As the German presidency rushed through the CAI, some deplored that reaching a deal on the CAI represents one step forward, two steps backward in the EU’s policy on China, discrediting its claims to be taking a tougher stance.

 

In this context, the EP has set itself high standards that it now must live up to. It is hard not to see the irony in the fact that now one EU institution, the Commission, will have to convince another, the EP, that China can be trusted. It seems that China was successful in convincing the Commission – and first and foremost, member states – that it is worth having an investment agreement. Will the Commission succeed in convincing the Parliament now? Nota bene, this is the same Commission that promised to be geopolitical; to be ambitious, strategic, and assertive, and to employ a defensive toolbox to protect its values and interests in the face of a mercantilist China. Will these tools become less relevant with a bilateral CAI in place?

 

Clearly, a huge gap remains in perspectives between the EU and China with respect to what a fair competition environment means. This comes in addition to a deep normative divergence between the two sides, which has limited the EU’s normative power. Yet, for European democracies, there should be no doubt on the content of fair competition. Nor should there be any hesitation on the imperative to make the agreement value-based.

According to the Commission, the CAI foresees an institutional framework for monitoring the implementation of commitments, an ad hoc mechanism for fast engagement at the political level, and regular dialogue with relevant stakeholders. On the question of values, the Commission claims that the CAI includes a “commitment” with regard to China’s ratification of outstanding ILO Conventions, provisions subject to a specifically tailored enforcement mechanism, including an independent panel of experts, and a high degree of transparency. The Commission maintains the CAI provides a specific working group to discuss matters related to sustainable development, including labor.

 

Using their collective power, MEPs must demand that the Commission ensures that international labor and environmental standards in the sustainable development chapter are respected. MEPs must urge the Commission to ensure transparency and clarify, in no uncertain terms, the institutional framework for monitoring the implementation. Should MEPs settle for less, their image as the most outspoken and consistent EU institution on China will be dented, along with the Parliament’s credibility, and that of the EU as a normative power. If ratified by the EP, the Commission will have to convince the world that the CAI will strengthen its strategic autonomy, and that it was not a strategic mistake to reach an agreement.

 

Zsuzsa Anna Ferenczy is a Ph.D. research fellow at the European Union Centre in Taiwan at National Taiwan University, Taipei; affiliated scholar at the Political Science Department at Vrije Universiteit Brussel; associate at 9dashline; and former political advisor in the European Parliament (2008-2020). She tweets @zsuzsettte

Photo Credit: Flickr/Friends of Europe


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