When Europe Dances with the Dragon: Legal novelties and the policy implications of the China–EU investment agreement

Author Name Alisher UMIRDINOV (Nagoya University of Economics)
Creation Date/NO. June 2022 22-E-055
Research Project Comprehensive Research on the Current International Trade/Investment System (pt.V)
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The main goal of this paper is to analyze the novelties and limitations of the European Union (EU)–China Comprehensive Agreement on Investment (CAI) and examine its policy implications for investment rulemaking in the Asia-Pacific region. As rightly put by the EU side, the CAI is the most ambitious investment liberalization agreement that China has ever concluded with a third party. The CAI aims to improve market access to China’s manufacturing and services sectors, introduces a definition of state-owned enterprise that is even broader than the Comprehensive and Progressive Agreement on Trans-Pacific Partnership (CPTPP), tightens subsidy regulations, ensures equal participation in standard-setting, prohibits compulsory technology transfers, and requires transparency in the operation of competition law. That being the case, the paper argues that by subjecting China to these groundbreaking obligations, the CAI could be a litmus test for China’s bid for membership in the CPTPP. From the perspective of sustainable development, China committed to making sustained efforts to ratify the fundamental Conventions of the International Labour Organization (ILO). In this regard, effective implementation and ratification of ILO Conventions may show whether China is honest in making labor protection commitments in the wake of its membership bid to the CPTPP. Finally, the CAI does not cover investor–state dispute settlement since the parties decided to continue negotiations on investment protection on a separate track while aiming to complete negotiations within 2 years of the signature of the CAI. If China supports it, then a Multilateral Investment Court based on the approach developed by the EU may increase its influence globally. Although the ratification of the CAI has been frozen indefinitely due to bilateral sanctions, it is still too early to be certain that the CAI has been completely shelved.