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CAI rears its ugly head again

Euro Intelligence | 6 July 2021

CAI rears its ugly head again

Hope for the EU-China comprehensive agreement on investment (CAI) springs eternal, after Emmanuel Macron and Angela Merkel had another call with Xi Jinping yesterday.

As always, the three countries’ readouts of this call varied considerably. Germany’s account was not exactly detailed, mentioning views on EU-China relations, international trade and biodiversity. France was the only one to mention human rights, reporting that both Macron and Merkel shared their serious concerns. Debt relief for African countries and the phasing out of coal-fired power plants also made the cut.

But as Finbarr Bermingham at the South China Post noted, China’s readout was far more detailed, and was the only one to focus on the elephant in the room – CAI. Beijing wrote that Macron supports the conclusion of the deal, while Merkel hopes that it will be approved as soon as possible.

CAI was put on ice in May after the European Parliament moved to halt all discussions on its ratification until China lifts sanctions it imposed against European politicians, think tanks and NGOs. The deal will not be finalised until the European Parliament ratifies it, because it does not require approval for member states’ national parliaments.

Some stakeholders are now making the argument that CAI may not need to be ratified at all.

The European Round Table, a business lobby group, is pushing hard for European businesses to gain better access to the Chinese market, to the point where it has suggested it may not even be necessary to ratify the agreement at all. Yesterday the group published a report, Making Open Strategic Autonomy work – European Trade in a Geopolitical World – that makes a rather astonishing argument about CAI – it is not a free trade agreement, and its provisions are therefore not contingent on ratification. According to the group:

“If the ratification of the agreement is delayed for a prolonged period, then the EU should seek to apply some of its core components on an interim basis. This could be done in those areas that offer the biggest immediate benefits and where there is a mutual understanding that early implementation would benefit both parties. These areas include investment liberalisation in the renewable energy and new energy vehicle sectors.”

France and Germany have clearly not learned their lesson from a similar call with Xi to finalise an in-principle agreement on CAI in December last year. Both leaders were heavily criticised for acting unilaterally and excluding other member states. Trade and investment prerogatives are driving a wedge between the Franco-German alliance and the rest of the EU. More importantly, however, we recall France’s mentioning of phasing out coal.

As we have been arguing recently, difficult decisions regarding climate change cooperation lie ahead. Rather than continue to push a contentious deal that will benefit only a handful of large European corporates, the EU should be channelling all of their efforts into securing cooperation on climate change. Concessions on human rights in China would be easier to swallow in that case. CAI is distracting from larger and more significant issues.

 source: Euro Intelligence