The European Union has been determined to achieve a level playing
field in economic relations with each of its trading partners. Given
China's growing importance on the international scene, European
companies' trade with and investments in China has risen exponentially
over the years, especially since China's entry into the World Trade
Organization in 2001.
Since 2013, China has been the world's largest trading nation and the
second-biggest consumer nation in the world. It is now the EU's
second-largest trading partner (after the United States), while the EU
is China's biggest trading partner. Under the leadership of Xi Jinping,
China is striving to modernize its economy by liberalizing
government-controlled areas - the upcoming liberalization of interest
rates, authorization for private banks to be owned entirely by private
investors and the contribution of Internet financial services to free up
the financial market are just some examples.
Still, investment flows show untapped potential. Although bilateral
trade in 2012 accounted for almost 1 billion euros ($1.1 billion) a day,
Chinese investments into the EU represented only 2.6 percent of total
FDI flows into the EU.
The recent settlements to disputes between the EU and China in the
solar panel and wine industries show a willingness on both sides to
strengthen relations. The wine industry agreement includes a pledge by
the European wine industry to help China develop its domestic wine
production and helping the nation better understand the EU wine market.
In return, China will organize tastings of European wine in China.
Twenty-six EU member states have already signed individual bilateral
investment treaties with the world's second-biggest economy in an aim to
lower protectionist measures that often prevent European companies from
fairly competing in the Chinese market. Since the 2009 Treaty of Lisbon
granted the EU the exclusive rights to negotiate new investment
treaties, the union has had the opportunity to negotiate an overarching
agreement that would replace the 26 existing BITs. The idea of such an
agreement emerged in 2010 and China and the EU wrapped up their fourth
round of negotiations in January.
Over the past few years, China has adopted a different economic
strategy worldwide, shifting from "ordinary" pacts that focus on trade
in goods - primarily with Asian countries - to deals involving
investment and trade in services. Both the BIT with the EU and the
proposed talks on a Free Trade Area for the Asia-Pacific are signals of
this change, likely triggered by two key trade agreements involving the
US that will introduce new norms to the global economy: the
Trans-Pacific Partnership and The Transatlantic Trade and Investment
Partnership.
In a globalized environment where a growing number of international
challenges are addressed with "soft" instruments, such as decrees or
joint plans of action, it is up to mega/multi-regional trade and
investment agreements to establish global standards for the future.
China is ready to take on high-quality commitments and shake off its
"non-market economy" status, although considerable concern remains over
China's compliance with its WTO obligations and international trade
rules generally. After the fourth round of BIT negotiations, European
Commissioner Cecilia Malmstrom called for China to ensure that a pair of
closely watched negotiations - expansion of the WTO's Information
Technology Agreement and Environmental Goods Agreement - are brought to
fruition within the WTO framework.
The EU is going to pursue an ambitious BIT that not only involves a
high level of investment protection, but also market access, removals of
transfer of technology requirements and a more transparent and
predictable market. This treaty can serve both parties as a crucial
stepping stone toward better economic and cultural understanding and
hopefully further more agreements.
MORE NEWS:
