MNI INTERVIEW:China Agreement Would Need Overhaul - EU Chamber

Any re-start to a shelved trade agreement with China would require significant updates to reflect the current geo-political, regulatory and economic environment, a top European business leader in Beijing told MNI, as senior Chinese officials have quietly signalled an interest in reviving the stalled Comprehensive Agreement on Investment (CAI) in the build up to European Commission President Ursula von der Leyen’s visit in July.

Top Chinese policymakers in Beijing have recently raised the prospect of the EU ratifying the 2020 CAI during discussions with European business leaders, said Adam Dunnett, secretary general of the European Union Chamber of Commerce in China. 

“The renewed emphasis from Beijing highlights the continued strategic importance it places on the agreement,” Dunnett said, noting a surge in high-level engagement with the Chamber and China’s recent decision to lift sanctions on Members of the European Parliament, which had initially prompted the EU to freeze the ratification process in 2021.

However, European leaders would likely push for an updated version of the CAI that reflects the present geopolitical landscape, Dunnett said, noting Brussels is currently prioritising trade talks with India and the U.S. that will make an accelerated deal with Beijing unlikely. “Since the last round of negotiations five years ago, China’s trade surplus with the EU has grown significantly and many of its industries have become globally dominant,” he said. “Any new agreement would need to reflect this evolving landscape.”

A chamber survey carried out last month revealed that, while a significant number of members were negatively impacted by the tariff war, some 19% had seen increased business in China due to the trade tensions, Dunnett said, warning that profitability remained very weak.

TRADE IMBALANCE

Although the temporary truce in the U.S.-China tariff dispute this week was a positive signal, its 90-day duration and ongoing policy unpredictability will continue to create uncertainty for businesses, Dunnett warned. Von der Leyen’s concerns about a potential increase in Chinese exports to Europe, amid weaker U.S. demand, were well-founded, he added.

“We have seen a roughly 10% increase in shipments from China to the EU since the trade war began,” he said. Any revived agreement, he argued, should focus on delivering a more balanced and reciprocal trade relationship to address the growing political concerns towards China in Europe.

“Positive rhetoric about cooperation and finding solutions is welcome, but we must remain realistic about what both sides can agree to,” Dunnett said, citing increased national security sensitivities on both sides since 2020 that are likely to limit the scope for deeper bilateral trade ties.

Beijing is expected to push for stronger protections for Chinese foreign direct investment in Europe, while the EU is likely to seek greater market access in areas such as healthcare and agriculture. However, security concerns present significant obstacles to meaningful progress, Dunnett cautioned.