China is a key trading partner for the EU with a fast growing domestic market of 1.4 billion consumers. It is expected to contribute to almost 30% of global growth in the next five years. Over the past 20 years, European companies have invested €148 billion in China. The agreement will provide increased legal certainty, improved market access and fairer rules of engagement in this key global market for European companies, investors and service providers.
Commission Executive Vice-President and EU Trade Commissioner Valdis Dombrovskis said: “The CAI rebalances the EU-China investment relationship.Today’s publication of market access offers demonstrates how the CAI will help to level the playing field and provide more market openings for EU companies and investors. The agreement provides a clear and enforceable framework of rules, which will give EU businesses greater access and more certainty when investing in China.”
The CAI’s objective is to rebalance the asymmetry in terms of market access and investment between the EU and China. This means new openings for EU operators in several sectors, on top of the autonomous market access already made by China over the last 20 years.
In concrete terms, China takes substantial commitments in manufacturing, which makes up more than half of total EU investment in China – including 28% for the automotive sector and 22% for basic materials. China has currently no commitments vis-à-vis the EU in this area.
In the services sector, China takes substantially improved commitments across the board, and in particular in telecommunications, financial services, private healthcare, environmental services, R&D and air transport-related services.
Importantly, China also offers new targeted market openings that go beyond its current autonomous level of liberalisation. These consist of lifting current restrictions on joint venture requirements (in hospitals and clinics), economic needs tests (in electric cars manufacturing), foreign investment bans (in cloud services) or monopoly rights (in computer reservation systems).
All these openings are reflected in the market access offers that detail the economic sectors to which the commitments apply (and possible reservations to those commitments).
Chinese companies seeking to invest in Europe will continue to be able to do so. Any restrictions the EU or its Member States may have in place remain unaffected, as well as the policy space needed, for example, to enable the autonomous measures.
Details of the schedule of commitments (Annexes)
The schedules of commitments are technically complex documents consisting of several annexes. In the CAI, both sides agreed to use the so-called “hybrid approach” for the scheduling. The schedules of commitments need to be read as follows:
Annexes I and II follow a negative list approach in relation to the commitments on National treatment, Most-Favoured-Nation treatment, prohibited Performance Requirements and non-discriminatory requirements on Senior-Management-and-Boards-of-Directors. This means that the relevant commitments are taken for all sectors except those that are explicitly excluded, or to the extent they are being reserved. Any reservation must be based on an existing (non-conforming) measure, which must be clearly identified. This means that if a given sector is not listed, it is fully committed under the relevant obligations.
In Annex II, the Parties list the sectors for which they reserve the right to derogate from those same commitments, including in cases where no non-conforming measures currently exist (this results on the so called ‘policy space’).
Annex III follows a positive list approach as regards the commitments in relation to quantitative restrictions affecting market access (such as so-called “economic needs tests” or limited number of licencing, etc.). This means that both sides take commitments (not to impose quantitative restrictions) to the extent that the relevant sectors are listed in their offer.
Lastly, Annex IV describes which additional reservations and restrictions apply to the entry and temporary stay of intra corporate transferees and business visitors.
All reservations come on top of the relevant carve-outs in the agreement, including the exclusion of sectors such as the audio-visual and air transport (with regard to traffic rights).
The text of the agreement will now be legally reviewed and translated before it can be submitted by the Commission for adoption and ratification by the Council of the European Union and the European Parliament.
On 30 December 2020, the EU and China concluded in principle the negotiations on the Comprehensive Agreement on Investment (CAI). The agreement grants European investors a greater level of access to the Chinese market and improves the level playing field for those already there.
In the agreement, China has committed to ensure fairer treatment for European companies, allowing them to compete on better conditions in China. These commitments cover state-owned enterprises, transparency of subsidies, and rules against forced technology transfers.
China also agreed to provisions on sustainable development, including commitments on climate and forced labour.
The CAI commitments are enforceable (under state-to-state dispute settlement mechanism) and subject to a monitoring mechanism seeking implementation of the commitments on the ground. The agreement ensures involvement of the civil society, including in the monitoring of implementation and enforcement of sustainable development provisions.
Both sides agreed to continue separate negotiations on investment protection to be completed within two years of the signature of the agreement.
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