Updated: Feb 1
Late last month, the European Commission and the Chinese government finalized a new investment deal that, if approved by the EU member states and the EU Parliament, would break down many of the barriers to entry and investment in the two countries’ bilateral trade relations. Seven years in the making, the deal would remove domestic partnership requirements for European firms seeking to compete in Chinese technology markets, provide new intellectual property protections in the way of ending forced technology transfers, and open up European energy markets to Chinese investors.
But, the deal’s finalization could not have come at a worse time for China. 2020 was a public relations disaster for China. First, the Communist Party aggressively extended its authority over Hong Kong in a perceived violation of its agreement with the United Kingdom. Secondly, China’s persecution of Uighur muslims in Xinjiang province has been described as the largest episode of ethnic cleansing since the Holocaust and each new report that comes out of China’s concentration camps only adds to the gallery of horrors said to be committed there, including forced sterilization and forced labor. Finally, all of this has happened against the backdrop of the coronavirus pandemic which China vigorously attempted to cover up in its early days and which Europeans largely blame China for unleashing onto the world (and particularly on Europe who faced an early and debilitating wave and whose suffering could have at the very been alleviated had China been more forthcoming with information about the virus). All of these things have severely soured Europeans’ attitudes towards China and have jeopardized a deal that, even a year and a half ago, would have only faced inconsequential American opposition.
Now, though, a coalition of European and American actors have vocally announced their opposition to the deal, including incoming U.S. President Joe Biden who considers the deal to be something of a shot across the bow against his plan to build a multilateral coalition of democracies to combat China’s encroaching authoritarianism. But, Mr. Biden is joined by a large group of European ministers and MPs who have two broad objections to the deal. The first is China’s record on trade relations. It is no secret that China has no qualms about not following through on its promises. Perhaps the most prominent piece of evidence to this effect for Europeans is China’s repression of Hong Kong which was to remain independent from the mainland until 2047, as specified in China’s agreement with the United Kingdom. But, evidence abounds of China reneging on or failing to fulfill its end of its bargains, including most recently in its trade deal with the United States signed at the beginning of last year. Come November 2020, China had only purchased just over fifty percent of the $159 billion of U.S. goods it had agreed to purchase in 2020, one of the primary concerns of U.S. President Donald Trump in crafting the deal. Furthermore, since joining the group in 2001, China has routinely violated the World Trade Organization’s prohibitions on currency manipulation and has ignored its intellectual property protections, the subject of many American complaints. So, European policymakers are certainly wary of passing this deal, opening up the European market, and then realizing that China has not adequately opened its markets to European firms.
Despite these concerns, the deal’s biggest hurdle actually lies in Europe’s issues with China’s human rights record. Days before the finalized deal was announced, Franck Riester, a French trade minister, announced that France would not support the deal unless China committed to ending its use of slave labor in Xinjiang. For France, the birthplace of human rights, this position holds both moral and political significance. With Britain out of the EU, French President Emmanuel Macron has sought to project the French vision of Europe onto the EU and position himself and his country as the leader of Europe. Part of that vision requires that Europe be something bigger than just a trade union and single market, Europe needs to be a geopolitical superpower that defends democracy and human rights around the world and turning a blind eye towards China’s blatant violation of such values runs counter to those goals.
France, though, is unlikely to be the deal’s demise. The economic dividends that French automakers and other manufacturers stand to gain are too great for France to exercise its veto. But, the deal’s greatest hurdle was never going to be France or any of the other EU heads of state who have long made sacrifices of the EU’s values on the altar of pragmatism. The killing blow will likely be delivered by the EU Parliament who has to ratify the deal before it can take effect. Designed to be the voice of everyday Europeans, the EU Parliament has taken on the role of making sure the EU is accountable to its founding values, recently exercising that authority when it forced the inclusion of a “rule-of-law” mechanism in the EU’s COVID-19 relief plan over the objections of Hungary and Poland. A large coalition of European MPs find China’s concessions on the matters of human rights and forced labor in Xinjiang to be insufficient and their numbers may very well be large enough to block to deal outright. The fate of this deal will hold many consequences for the world’s three largest economic markets. Should the deal be approved, it will be a major victory for China and will further fracture the trans-Atlantic partnership, making it much more difficult for the West to mount an united defense against China. But, should the deal be rejected, it would add to China’s present geopolitical woes, further isolating the country, and would signal Europe’s eagerness to work with the Biden administration to confront China. More than that though, it would signal a distinct shift in Europe’s vision of itself and its view of China. It would signal that access to the Chinese market is no longer an obvious advantage; it would signal that more countries have decided that it is not worth playing by China’s rules just to have access to its markets. And that would turn China’s disastrous year into a nightmare.