MNI EXCLUSIVE: China Should Quicken Deal With EU: Advisors

China should try to seal a bilateral investment deal with the EU as soon as possible as any warming in the U.S.-EU relationship under Joe Biden could reduce the chances it will eventually be approved, policy advisors told MNI.

The investment deal is facing difficulties, at least five policy advisors on international trade and European relations said. "Currently, negotiation teams have done everything. Now it's up to top decision-makers to decide whether to have the deal or not," a government source briefed on the matter said.

Hopefully the two sides will be able to clinch at least a framework agreement by the end of the year, said He Weiwen, a former economic and commercial counsellor at the Chinese Consulate General in San Francisco and New York.

The EU says its priority issues continue to be market access, a level playing field and sustainable development, and that it needs China to move significantly.

CONCESSIONS

Hopes for the deal have diminished over the course of the year with some in China saying the EU wants an overly-ambitious agreement covering items such as worker rights and environmental protection that usually belong in a free-trade pact.

The EU refers to talks for a Comprehensive Investment Agreement while Chinese officials use the term Bilateral Investment Treaty in public statements.

China should show more determination to close the deal and consider making some adjustments to its positions, said Cui Hongjian, head of European Research at the China Institute of International Studies, without providing more details. "Many issues in the China-EU deal actually overlap with those to be discussed in the Phase Two trade negotiations between China and the U.S.," said Cui. A completed EU deal would lay a good foundation for future negotiations between the EU and the U.S, or between China and the U.S., or even for tripartite cooperation on WTO reform, he said.

Cui noted that the EU's willingness to negotiate has already declined with Biden set to become president. "If Biden is more positive about pushing forward shelved U.S.-EU trade negotiations, they could choose to negotiate with the U.S. first and indirectly pressure China," Cui added.

SOEs

Sticking points in the deal include so-called negative lists of areas closed to foreign investment, and Chinese support for state-owned companies.

Industries in the EU are more developed than those in China, noted Cui, so the bloc has less need of restrictions on investment. "Both sides should seek a rough, not entirely, reciprocal arrangement," Cui added.

The EU has also complained that its companies cannot compete fairly with Chinese state-owned firms and that Beijing interferes too much in their operations. But one advisor said state ownership is not a problem as public shareholders can exert influence in line with market principles in matters such as board appointments.

He Weiwen said the key is to ensure a level playing field for all types of companies, adding that state ownership accounts for 33% of China's GDP, the same level as in France.