A trade deal between the European Union and China is still possible, but both parties may have to wait until 2023 at the earliest to approve the agreement.
After seven years of discussions, the EU and China reached an agreement in December. However, tensions between the two countries which resulted in both sides putting sanctions on each other prompted the European Parliament to put the pact on hold until Beijing lifts its sanctions against EU politicians.
Despite the setback, it is “more likely than not” that the EU and China would approve the Comprehensive Agreement on Investment in the long run. That’s because the pact has overwhelming benefits for Europe, which will keep it alive in terms of EU officials’ and the majority of the bloc’s members’ acceptance and popularity.
Economies such as the European Union and the United States have long expressed worry about Beijing’s industrial tactics, which have hampered international companies’ ability to compete fairly in China. Chinese governmental subsidies for state-owned firms and forced technology transfer from an international corporation to its Chinese partner are among their grievances.
Improved market access for European business in China, as well as better controls on subsidies, state-owned companies, and technology transfer are among the benefits of the EU-China investment agreement.
The Comprehensive Agreement on Investment, on the other hand, may not be ratified until 2023 at the earliest. This is partially due to the fact that events such as Germany’s federal election in September and French President Emmanuel Macron’s reelection campaign in spring 2022 may have an impact on public opinion toward the agreement.
Furthermore, Chinese President Xi Jinping would not want to appear weak by caving into the EU before the Chinese Communist Party’s National Congress in the fall of 2022. Xi is poised to win a third term as General Secretary of the Communist Party of China, thus Chinese sanctions against the EU are unlikely to be eased.
Aside from the economic benefits of the investment pact, if it isn’t ratified, China may lose some geopolitical clout. China’s assertiveness on the international scene has opened room for deeper EU-US collaboration and increased political will in the EU to move closer to the United States.