[Beijing and Brussels were on the
brink of an agreement to roll back restrictions on investment. But the deal’s
fate is uncertain amid growing animosity toward China and increasingly vocal
opposition.]
By Jack Ewing, Steven Lee Myers and Ana Swanson
China and the European Commission appeared close this week to announcing a landmark agreement that would make it easier for their companies to invest in each other’s economies. Then it hit another snag: A tweet by a top aide to Joseph R. Biden Jr. signaled that the president-elect was not happy about the deal.
The pact, nearly seven years in the
making, remains a top priority of Chancellor Angela Merkel of Germany because
it would give companies like Daimler and Volkswagen better control over their
operations in China.
China, which has long been wary of
allowing foreign companies greater access, seems eager to strike a deal now,
before the new U.S. administration can try to rally a united front against
Chinese policies and actions, as Mr. Biden has pledged to do.
Ms. Merkel and other leaders have
been pressing to complete the deal before the end of the year, while Germany
holds the rotating six-month presidency of the European Council. Last week they
even circulated 126-page draft that was largely completed except for unresolved
issues of wording.
Their efforts, and an expected
announcement on Tuesday, have instead run headlong into the growing
animosity toward China and increasingly vocal opposition in the final
rounds of talks.
In the European Parliament, the
pact faces significant opposition from members who say it does not do enough to
open China’s economy or to stop Chinese human rights violations.
In Washington, members of the
incoming administration openly flagged that they hoped Europe would wait.
Mr. Biden’s choice as national
security adviser, Jake Sullivan, wrote on Twitter on Monday that the new administration
“would welcome early consultations with our European partners on our common
concerns about China’s economic practices.”
The White House also weighed in. A
spokesman for the National Security Council, John Ullyot, warned that any
commitment from China “that is not accompanied by strong enforcement and
verification mechanisms is merely a propaganda win” for the Chinese Communist
Party.
The Trump administration has been
trying, with mixed success, to encourage allies to follow its example in
reducing economic and technological ties with China. As the talks in Europe
have gained momentum in recent weeks, President Trump has
instead been subsumed with trying to overturn the results of the
presidential election, while many top advisers have been focused on the
new stimulus bill or the response to the coronavirus.
If a deal comes to pass, it will be
an unexpected diplomatic victory for China after a year when its international
standing plummeted over its
obfuscation about the pandemic, its
aggressive actions in Hong Kong and the South China Sea, and most
recently a
fierce dispute with Australia.
“The Chinese are keen to weaken any
kind of trans-Atlantic alliance by pushing this through,” said Theresa Fallon,
director of the Center for Russia Europe Asia Studies in Brussels.
After four years of dealing with a
Trump administration that was by turns hostile toward Europe or simply
indifferent, leaders in Brussels want to show that they can cope with China on
their own. At the same time, they hope to rebuild relations with the United
States under a Biden presidency.
Representatives of China and the
European Commission, the European Union’s administrative arm, are continuing to
negotiate and still hope to reach an agreement by the end of the year.
“Progress has been achieved in a
number of areas,” the European Commission said in a statement. “There are still
some important outstanding matters, and talks are continuing this week.”
According to the draft of the deal,
a copy of which has been reviewed by The New York Times, a number of
differences over language remained unresolved last week. The two sides had not
agreed yet on what to call the pact. Europe favors “agreement,” while China
prefers “treaty.”
In a section on investment and
sustainable development, China had also asked to insert a phrase that it often
uses to argue it should be held to different rules from those applied to
industrialized nations. It says “the parties recognize the differences in the
parties’ respective levels of development should be taken into account.”
The agreement also faces opposition
for what it does not address. Critics have already complained that the deal
does not do enough to open China’s markets, to honor previous pledges on trade
and the environment or to address human rights abuses, including forced labor
and the mass internment of Uighurs
and other Muslims in the far western region of Xinjiang.
An investment agreement with China
would require approval by the European Parliament, and opponents may have
enough votes to block it.
“From the moment that the deal is
signed, Europe will thus lose leverage not only on issues critical for future
competitiveness, but also on fundamental value issues, ranging from human
rights to the future of coal power plants,” a group of Chinese scholars in
Europe wrote in an open letter as the agreement neared completion.
European officials consider the
investment agreement a relatively limited effort to ease commercial relations
with China that did not have major geopolitical implications. The pact has
strong support among European companies operating in China because it would
lift requirements that they operate through joint ventures with Chinese
partners and share sensitive technology. The agreement would also open up the
Chinese banking market to European Union firms.
Brussels and Beijing have been
discussing investment rules since the beginning of 2014 without making
significant progress, in part because of China’s wariness about opening its
economy to foreign competitors. The efforts faltered
again this year, but the talks got back on track after the U.S.
presidential election in November.
China’s leader, Xi Jinping,
intervened directly, speaking with Ms. Merkel and President Emmanuel Macron of
France. He told the French leader that relations between China and Europe were
“gaining more global and strategic significance under the new circumstances,”
according to the official Xinhua account of the call.
Officials and analysts in China and
Europe said Beijing had recently offered some concessions — enough to move
negotiations forward, though not enough to assuage everyone. In China, the
progress has been welcomed. A spokesman at the Ministry of Foreign Affairs,
Wang Wenbin, said on Tuesday that the agreement between China and Europe would
“inject more stability into the world.”
Any final deal could be a
significant blow to Mr. Biden’s ambitions on trade. He has sharply criticized
Mr. Trump for antagonizing Europe and other allies with his global trade wars,
and has promised to work more closely with like-minded governments to counter
China’s unfair economic practices.
Although Mr. Biden has not
clarified what such a partnership might look like, it could focus on extracting
more commitments from the Chinese government, including on issues like
intellectual-property enforcement, state-owned enterprises and discrimination
against foreign companies in China.
While a deal with China in the
short term would not preclude other partnerships between Europe and the United
States, it would undercut some of Mr. Biden’s statements and demonstrate that
Western companies are still fiercely competing for access to the lucrative
Chinese market.
One of the main sticking points in
the talks has been China’s willingness to abide by international standards for
workers. Beijing has so far agreed only to “promote” better working conditions,
without explicitly agreeing to observe standards on minimum wages and health
and safety, according to the draft of the deal. Members of the European Green
Party and other groups consider such a promise vague and unenforceable.
European views of China are
conflicted. While China is an important source of investment and a critical
market for industrial goods, acquisition by Chinese companies of assets
like Volvo
Cars or Kuka, a German maker of industrial robots, has prompted the
European Union to give its member states more power to block investments.
As Chinese companies have become
more sophisticated, they have also emerged as competitors in industries such as
machine tools, previously dominated by German companies. With government
backing, Chinese automakers are trying to use the transition to electric
vehicles to become players in the international car market, a challenge to
European carmakers.
Ms. Fallon, of the Center for
Russia Europe Asia Studies, said China would come out ahead even if the
European Parliament scuppered the investment agreement by driving a wedge
between the commission and the Parliament, and between Europe and the United
States.
“They win no matter what,” she
said.
Keith Bradsher and Matina
Stevis-Gridneff contributed reporting. Claire Fu contributed research.