After more than eight years of negotiation and agreement in principle late last year, ratification of the EU-China Comprehensive Agreement on Investment is stalled in the European Parliament due to the diplomatic deterioration that has occurred between China the the EU this year. At the moment, the prospects for ratification are not good.
It might be many months or years before the CAI is revived, but law firms with clients with investments in China, especially in the automotive and chemical sectors, need to continue to pay attention.
Beginning about six years ago, I began to notice curiosity about, and then increasing interest in, the EU-China CAI by some of our law firm clients, especially ones in Europe and the Americas, The pact, as agreed in principle in 2020 and submitted to the European Parliament, would guarantee unprecedented access by EU investors in China, would level the playing field fo EU companies in China, and -- most importantly, I believe -- would commit the parties to transparency with respect to state-owned enterprises and subsidies.
Notwithstanding the the substantive points in the CAI, perhaps the provisions with the greatest long-term significant importance for both sides -- as well as to the rest of China's trading partners elsewhere -- are what I would call the pact's "process undertakings," such as:
- Equal access to standard setting bodies for EU companies
- Enhanced predictability in authorizations
- Stronger legal certainty through definite rules to protect transparency in regulatory and administrative measures
- Commitments to respect basic ILO principles and to implement ratified ILO conventions
- A specific commitment to ratiffy the ILO fundamental Conventions on Forced Labor
- An agreement to implement the Paris Climate Agreement
- Transparent resolution of agreements by an independent panel of experts and with the involvement of civil society
The willingness of China to agree to these process undertakings are markers of the likely evolution of China's trade and investment policies in the future, not only with respect to the EU but with other countries, as well.
Law firms that keep up with these developments and can give their clients well-informed practical advice will be able to create a signiicant competitive advantage for themselves among majjor multinational enterprises. Moreover, this is intellectual capital and know-how that any law firm, regardless of size, can acquire.
Bottom line: Continue watching. The underlying principles and features of the EU-China CAI may be dormant, but they're not dead.