China | Brussels, 23 May 2013
Commission proposes to open negotiations for an investment agreement with China
The European Commission decided today to ask the Member States for their agreement on a mandate to open negotiations on an investment agreement with China. 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 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. “The agreement needs to secure existing openness and deliver new liberalisation of the conditions for accessing each other’s investment market. Crucially, it should also improve the treatment of investors and their assets – including key technologies and intellectual property rights. I look forward to working with the new Chinese government to reach a deal.”
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.
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.
Once the Member States will have adopted the mandate, Europe hopes that formal talks can start soon, pending the Chinese authorities having concluded their internal procedures for adopting a negotiating mandate. This step on both sides confirms the willingness and commitment to a solid and expanding mutually beneficial trade and investment relation.
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 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).
Those investments are secured via Bilateral Investment Treaties (BITs), concluded between individual EU Member States and non-EU countries. They establish the terms and conditions for investment by nationals and companies of one country in another and set up a legally binding level of protection in order to encourage investment flows between two countries. Amongst other things BITs grant investors fair, equitable and non-discriminatory treatment, protection from unlawful expropriation and direct recourse to international arbitration. EU countries are the main users of BITs globally, with a total number of about 1,200 bilateral treaties already concluded.
Since the entry into force of the Lisbon Treaty in 2009, investment is now part of the EU’s common commercial policy, an exclusive competence of the Union (Article 207 TFEU). As a consequence, the European Commission may legislate on investment. According to the Regulation on Bilateral Investment Agreements, adopted by the European Parliament and the Council on 12 December 2012 (IP/12/1362), bilateral Investment Agreements that currently offer investment protection to many European investors will be preserved until they are replaced by EU agreements.
In its Communication "Towards a comprehensive European international investment policy" from 2010 (IP/10/907) the Commission identified China as a potential partner with whom the EU could pursue negotiations for a stand-alone investment agreement at EU level. At the 14th EU-China Summit in February 2012, both sides agreed to move towards negotiations of an investment agreement covering all issues of interest to either side, and this willingness was confirmed at the 15th EU-China Summit in September 2012.
Negotiations on investment at EU level are currently on-going with Canada, Singapore, India, Japan, Malaysia, Mercosur, Morocco, Thailand and Vietnam within the context of the negotiations for Free Trade Agreements. Negotiating directives for deep and comprehensive Free Trade Agreements including investment were also adopted by the Council in December 2011 for Egypt, Jordan and Tunisia. The Transatlantic Trade and Investment Partnership between the EU and the US will also include investment provisions.
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