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Weapons of Mass Destruction (WMD)

Is EU-China Investment Deal 'Dead as a Doornail'?

By Natalie Liu April 28, 2021

China may have sabotaged its own prospects for securing a sought-after investment agreement with the European Union when it penalized a long list of politicians, researchers and institutions – including a key member of Germany's Green Party – in response to recent EU sanctions.

The Comprehensive Agreement on Investment, or CAI, was agreed to in principle at the end of last year but remains as much as a year from final ratification by the European Parliament, where support from Germany is seen as crucial to its approval.

Recent polling shows the Greens – who are considered much tougher on China than the current administration in Berlin – as well positioned to participate in or even lead the next German government after elections expected in late September.

And that could leave the investment deal as "dead as a doornail," according to Green Party lawmaker Reinhard Buetikofer, who heads the European Parliament's Delegation for Relations with China and appeared at the top of a list of EU individuals and institutions targeted for sanctions by Beijing last month.

Speaking at a recent virtual event hosted by the Brookings Institution, a Washington research group, Buetikofer added that being sanctioned by China was like being "on the honor roll."

The government of German Chancellor Angela Merkel – whose nation has major automobile and chemical investments in China – pushed hard to conclude the tentative investment pact during the final weeks of December as its term in the rotating EU presidency was winding down.

That set into motion a prolonged process in Europe during which the agreement must be legally "scrubbed" and then translated into the various EU languages before being submitted for approval by the EU Council and ratification by the European Parliament.

But EU-Chinese relations soured dramatically on March 22 after the European bloc announced travel bans and asset freezes for four Chinese officials over their roles in the mistreatment of their nation's Uyghur minority.

China immediately retaliated with a much larger set of sanctions targeting a number of EU lawmakers, researchers and institutions, including Buetikofer.

"Europe is heading into an intense political season, and China has made itself a much higher political priority for many with the sanctions," Brussels-based political economist Jacob F. Kirkegaard told VOA in a written interview. "This bodes very badly for CAI in the near term."

Kirkegaard continued: "It all depends frankly on the German elections – if for instance the Greens actually win and supply the next chancellor, the CAI is surely dead. It may even be dead if the Greens [which seems highly likely] enter the government."

The analyst predicted that when Merkel steps down, and "more importantly [when] a new coalition comes to power, things will change; the only question is how much."

Theresa Fallon, the founder and director of the Center for Russia Europe Asia Studies in Brussels, cautioned in a telephone interview against considering the EU-China investment deal completely dead.

While its current prospects appear dim, "a lot can happen in a year," said Fallon, a former member of the Strategic Advisers Group for the NATO Supreme Allied Commander Europe. She added that the debate over the investment deal reflects a larger discussion taking place within the EU on the appropriate response toward China.

While commercial interests are a factor in the eagerness of Germany and some of its European partners to do business with China, Fallon said that until recently some in Europe had looked at closer relations with China as a potential check on hegemonic U.S. power.

Chinese actions lately, however, have compelled the Europeans to "see China as it is, not as what they imagined it to be," she said. "What are we really doing? Is this the type of world order we want, with China at the top? We talk about strategic autonomy, but autonomy from what?"

Nabila Massrali, EU spokesperson for foreign affairs and security policy, told VOA the bloc continues to regard trade with China as important and sees the CAI as "part of our toolbox" to rebalance its economic relationship with Beijing.

However, "economic interests will not prevent us from standing up for global values, including where necessary, through sanctions," she said. Massrali pointed out that the EU moved before the U.S., Britain and Canada in imposing its sanctions last month.

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