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EU PROPOSES NEW INVESTMENT AGREEMENT WITH CHINA

The European Commission decided to ask the Member States for their agreement on a mandate to open negotiations on an investment agreement with China.

 

eu-china-flagsThe EU is the world’s leading host of foreign direct investment, attracting investments worth €225 billion from the rest of the world in 2011 alone. By 2010 outward stocks of FDI amounted to €4.2 trillion (26.4% of the global FDI stock in FDI) while EU inward stocks accounted for €3 trillion (19.7% of the global total).

This is the first ever proposal for a stand-alone investment agreement since foreign direct investment became the exclusive competence of the EU under the Lisbon Treaty.

An EU-China investment agreement would streamline the existing bilateral investment protection agreements between China and 26 EU Member States into a single, coherent text. The main objectives of an agreement at EU level are to improve the protection of EU investments in China as well as Chinese investments in Europe, improving legal certainty regarding treatment of EU investors in China, reducing barriers to investing in China and, as a result, increasing bilateral investment flows. It should also, crucially, cover improved access to the Chinese market – addressing important issues like mandatory joint ventures.

“An EU-China investment agreement will help deepen our ties and sends the signal that we are firmly committed to building a strong partnership”, said EU Trade Commissioner Karel De Gucht.

Trade flows between China and the EU are impressive, with goods and services worth well over €1 billion traded between both partners every day. However, the current investment flows between the EU and China fall short of the potential of the economic relationship of between two of the most important economic blocks on the planet: in 2011 European companies invested €17.5 billion in China, whereas, according to official Eurostat data, China invested €2.8 billion in the EU in the same year. Although these figures are on the rise, this still represents less than 3% of both sides’ total FDI outflows. Hence, there is huge potential to further develop bilateral investment ties.

The negotiating directives for the EU-China investment negotiations will now be submitted to the Council, whose green light is needed for the Commission to start negotiations.

The decision to launch negotiations on a bilateral investment agreement had been taken by the EU and China at the 14th EU-China Summit held in February 2012 in Beijing.

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