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2020-06-24 | All chapters

European Chamber Stance on the 2020 EU-China Summit

Background

The EU-China Summit was held virtually for the first time ever on 22nd June. The annual meeting covered topics of political and economic importance. The 2019 summit had culminated with the release of a joint statement that contained pledges to complete the Comprehensive Agreement on Investment (CAI) negotiations by 2020, and to make significant progress regarding industrial subsidies as part of the EU-China 2025 vision, among other ambitious commitments. Unfortunately, the 2020 Summit failed to produce a joint communique, and the separate announcements regarding the outcomes of the summit had minimal overlap.

Stance

The European Union Chamber of Commerce in China (European Chamber) notes several positive outcomes from the 2020 EU-China Summit:

  • The commitment to finally sign the Agreement on Geographical Indications is good news for European agriculture, food and beverage products, and will protect exports going in both directions.
  • Pledges to continue CAI negotiations, with the goal of concluding it in a timely manner, are welcomed. The European Chamber continues to stress that substance must take precedence over speed.
  • Continued discussion on WTO reform and upgrading is also constructive, although the lack of details leaves much to be desired.  

Despite these positives, the overall tone of the event was not particularly encouraging to European companies in China. In particular, the notable decrease in the number and depth of commitments made between the 2019 and 2020 summits cannot be ignored. While the continuation of constructive dialogues is critical to maintaining good EU-China relations, actual results are urgently needed to buoy business sentiment, which has deteriorated rapidly due to COVID-19-induced economic uncertainty.

The European Chamber hopes that CAI negotiations will continue with the aim of securing a robust agreement that creates an open market with a level playing field, especially between European and Chinese private companies on the one hand, and China’s state-owned enterprises on the other. The European Chamber’s Business Confidence Survey 2020 found that China had not only fallen short of SOE reform hopes, but had actually regressed considerably, so it is positive that the EU has explicitly called for more progress on SOE reform as a condition for concluding the CAI.

Recent remarks about the EU needing to ‘meet [China] half-way’ on the CAI have done little to improve optimism. Quite simply, the high level of openness of the EU’s economy relative to China’s makes a one-for-one investment deal impossible. However, it seems that a willingness to commit is not lacking on the European side. In recent years, the EU has secured far-reaching bilateral investment treaties and comprehensive free trade agreements with partners from Japan, Korea, Vietnam and MERCOSUR, among others, with far fewer rounds of negotiation in a comparatively shorter time frame.

On the political front, tensions have emerged that are deeply concerning to European businesses. Allegations of forced labour in Xinjiang, the potential that Hong Kong’s autonomy could be eroded and the recent association of the coronavirus with “imports” and “European”—which is feeding xenophobic tendencies—all make compromises more difficult.  

Frictions are expected, and the fact that sensitive issues can be discussed in such a setting at all is noted as a sign of the maturity of the EU-China relationship. The European Chamber remains committed to advancing closer ties between the EU and China, and will continue to facilitate progress between these two very different economic and political systems.

“Six months ago, 2020 was hailed as the year for EU-China relations to reach new heights, but the vast differences between our two respective systems is now more apparent than ever,” said Joerg Wuttke, president of the European Union Chamber of Commerce in China. “While our economic relationship continues to bridge that gulf, if more is not done to shorten the distance there is a danger we will drift even further apart.”

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Yichi Zhang