(CN) — The European Union and China on Wednesday reached a major business investment deal that lets European firms into lucrative Chinese markets and calls for China to ban forced labor and ramp up efforts to protect the environment.
The strengthening of economic ties between the EU and China is a setback for President-elect Joe Biden and American efforts to build an alliance against China.
Following a video conference, EU leaders announced that they had agreed “in principle” on the investment deal with China. Both sides set the end of 2020 as a deadline for reaching the landmark agreement.
Ursula von der Leyen, the European Commission president, called the deal “an important landmark in our relationship with China and for our values-based trade agenda.”
“It will provide unprecedented access to the Chinese market for European investors, enabling our businesses to grow and create jobs,” she said in a statement. “It will also commit China to ambitious principles on sustainability, transparency and non-discrimination. The agreement will rebalance our economic relationship with China.”
Chinese President Xi Jinping called it a “balanced, high-standard and mutually beneficial” deal that will open up markets on both sides and help the world recover economically from the coronavirus pandemic.
The deal, known as the EU-China Comprehensive Agreement on Investment, had been stalled by sparring between China and the EU over human rights abuses by the repressive Chinese regime and Chinese demands for access to Europe’s energy markets. In recent days, though, EU diplomats said China conceded to demands to uphold workers’ rights, do more to fight climate change and protect the environment.
Since 2013, the EU and China have held talks on giving European companies more access to Chinese markets and its 1.4 billion consumers. The EU, like the U.S., has long complained that China unfairly bars foreign companies from competing in its markets.
The EU said the deal opens up many new markets in China, including manufacturing, cloud services, financial services, private health care, environmental services, international maritime transport and air transport-related services.
EU officials also say the deal includes provisions against forced technology transfers and limits competition from Chinese state-owned enterprises. European and American companies have long complained that doing business in China involves forcing them to give up technology secrets to China and unfairly having to compete against Chinese companies that are heavily subsidized by the state.
The geopolitical dimensions and optics to the accord are seen as highly significant because such a deal, if approved by EU leaders and the European Parliament, would engender a deepening of ties between China and the EU at a time when the U.S. is seeking to build an alliance against China, which is now projected to overtake the U.S. economy by 2028.
Thus, the EU-China deal could be a setback for Biden, who is expected to continue the Trump administration’s tough stance on China. In recent days, the incoming Biden administration said it wanted to work with the EU on coordinating policy toward Beijing. But it appears the EU is pushing ahead regardless of Biden’s overtures.
“Not sure if the EU realizes how much damage it is doing to its interests in the U.S. with the investment pact with China,” Tom Wright, an expert with the Brookings Institution, a U.S. think tank, said on Twitter. “Overall this just makes EU offers of a renewed partnership sound insincere. I'm sure Biden will work to revitalize transatlantic relations but this episode is unquestionably damaging.”
For China, the EU deal may open up European markets even more to Chinese enterprises, though many analysts believe China sees the deal as more of a political victory than an economic one because it drives a wedge between the U.S. and EU. Still, the deal is expected to open up the EU’s renewable energy sector to Chinese investors.