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EU-China investment pact in jeopardy

Kate Ferguson
March 26, 2021

China's decision to impose sanctions on several European lawmakers has dealt a potentially fatal blow to an investment deal that was seven years in the making, says DW's Kate Ferguson.

A woman walks past the flags of the EU and China in Beijing
Will trade interests eventually prevail in EU-China relations?Image: Jason Lee/REUTERS

Michael Gahler is on the train from Brussels to Frankfurt. It is a day after the German Conservative MEP discovered his name on a list of individuals and entities China is targeting with sanctions.

He was somewhat surprised by the move, he tells me as he passes the River Rhine, because he might have expected Beijing to simply expel some diplomats instead. On the other hand, if MEPs were fair game, he has a good idea of why he's on the list. As well as being the chair of the European Parliament's Taiwan Friendship Group, he is also among some 70 international lawmakers who wrote to their leaders in January demanding a tougher stance towards China.

Their appeal did not fall on deaf ears. Earlier this week, the European Union, United Kingdom, United States and Canada imposed sanctions on four Chinese officials for committing human rights abuses against minorities in Xinjiang. Beijing retaliated by imposing sanctions on several European lawmakers and entities including Germany's Mercator Institute for China Studies.

Untimely row?

The spat comes at an especially sensitive time in EU-China ties. Late last year, the two sides agreed in principle to an investment pact that has been seven years in the making. Proponents in the EU say it offers European companies and investors better market access and a level playing field in China. Critics say it falls short of that aim and ignores human rights violations in the country.

In negotiating relations with Beijing, all major economies face a balancing act. Michael Gahler is an interesting case in point. He is a supporter of the investment pact and says "personal sensitivities" will not prevent him from voting to ratify it. At the same time, he believes there is now a real risk the agreement will not be approved.

"China has to live with criticism," he said, pointing to the suppression of the Muslim minority in Xinjiang, the handling of protests in Hong Kong and the government's crackdown on churches. At the same time, he understands the need to cultivate economic ties with the country.

Crucial relationship

According to the Centre for Economics and Business Research, the Chinese economy will overtake the United States as the world's biggest by 2028. The country's rapid recovery from the pandemic is already speeding up its rise relative to the rest of the world.   

For the European Union, the relationship is indispensable. Last year, China overtook the United States as the bloc's largest trading partner, with imports and exports worth €586 billion ($692 billion).

China is also the world's largest car market and especially essential to the sustained growth of Germany's automobile industry which has been marred by emissions scandals and delays in embracing electric mobility.

Well-known conflict

For many countries, the challenge of holding China to moral account while also pursuing deeper economic ties is all too familiar. 

Slovakian MEP Miriam Lexmann of the center-right Christian Democratic Movement is an outspoken critic of Beijing. She has called for a boycott of the Winter Olympics due to be held in the country next year over evidence of genocide against the Uyghurs. A year and a half ago, she traveled to Hong Kong to observe local elections. Having also found her name on China's sanctions list, she will not be able to return any time soon.

"I couldn't imagine that my efforts are so dangerous for such a big country as China," she said, adding that the sanctions have emboldened her to work even harder on behalf of those fighting for freedom. 

Lexmann's own family's experience of repression has been instrumental in her determination. "My granduncle was killed by the communist regime. Many members of my family were imprisoned for many years."

While she would not say whether she intended to vote in favor of ratifying the EU-China investment pact, she admitted that "a big part of parliament has very big concerns in relation to the deal." She also pointed out that it may be contradictory for the European parliament to scrutinize the agreement as long as some of its members remained blacklisted.

In Lexmann's home country of Slovakia, public opinion has increasingly turned in favor of strengthening economic ties with China, fueled by what she views as a successful propaganda campaign from Beijing.

Where's the way out?

Instead of expounding the virtues of ever closer ties however, she sees it as her duty to communicate the downsides of economic engagement with China, most notably the "appalling human rights situation" there. Instead, she favors a closer alliance with democratic countries including the United States, Australia and Taiwan.

At present, the most worrying aspect of being blacklisted is the uncertainty about what it means for the people associated with her, including those in China. "Their contact with me could be criminalized," she said.

Over the coming months, Miriam Lexmann and Michael Gahler will join their European colleagues in poring over the details of the investment deal, which still needs to be translated into the EU's 24 official languages. They will do so against a backdrop of increasing tension between pragmatism and principle. If ratification was once a foregone conclusion, today it is anything but.

EU seeks level playing fields in China

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