EU nears China trade deal despite slave labor fears

China and the EU are racing to strike a trade accord in the final days of the year, but political scrutiny over China’s record on forced labor has only just begun.

Negotiators from Brussels and Beijing have made a breakthrough on access to each other’s markets and the EU’s trade chief Valdis Dombrovskis will on Monday try to seal the deal with his Chinese counterpart Liu He, EU diplomats and officials said.

The EU-China Comprehensive Agreement on Investment offers safeguards to EU companies offshoring production to China and will make it easier for EU investors to buy Chinese companies, and vice-versa.

Sabine Weyand, the bloc’s top trade bureaucrat, on Friday briefed EU ambassadors on progress in talks and described a surprisingly good offer from the Chinese side, according to five diplomats and one official. However, she warned that China had not agreed to the binding commitments on labor rights, especially a ban on forced labor, that Brussels would have wanted.

Politicians and activists across Europe say they have fundamental questions about whether Europe should be deepening its economic ties with an increasingly aggressive one-party state just as China is cracking down on democracy in Hong Kong, using mass surveillance technologies to control its population and is reportedly locking up hundreds of thousands of members of the Uighur Muslim minority in work camps.

Despite such concerns, EU countries backed Brussels to move into the “endgame” to lock down the deal, even though several nations asked the Commission to secure more commitments on labor. Two diplomats said that because of these remaining concerns, they would expect Weyand to give them another briefing before concluding the pact. “But with Weyand you never know, she is very autonomous,” said one.

Many European politicians have been pressing Brussels to avoid economic and political alignment with China, but instead stop Beijing from undercutting the EU on lower labor and environmental standards.

“The political signal is disastrous. This deal mocks the concentration camps and enslavement of a people,” said French MEP Raphaël Glucksmann. “I will be active in organizing opposition to this deal. If [EU leaders] think that ratifying this deal will be like posting a letter, they are gravely mistaken.”

Critics also warn that agreeing a deal now risks complicating Brussels’ effort to team up with U.S. President-elect Joe Biden to confront China on everything from human rights to technological standards.

Green MEP Reinhard Bütikofer complained: “A few market access concessions weigh more than both the need to stand tall against the appalling forced labour practises in China, and the opportunity of aligning with the incoming Biden team.”

Cars and banks

In a crucial win for EU companies that have complained about an uneven playing field when doing business with China, the agreement commits Beijing to ease the requirements imposed on joint ventures when EU companies set up shop in China. It will lift foreign ownership bans on certain sectors, which will benefit European car and telecoms firms in particular.

The deal will “increase market access” for EU companies, in particular “financial services,” such as banks, said Jörg Wuttke, president of the EU Chamber of Commerce in China.

China, meanwhile, hopes to invest more broadly in the EU’s sensitive energy and high-tech sectors, EU diplomats said. Brussels and Beijing have in the past also presented the deal as a stepping stone towards a broader free-trade agreement.

Other sectors covered by the deal include air travel, hospitals, water transportation, electric and hydrogen cars, and research and development.

A spokesperson from the Chinese mission to the EU said that talks had “accelerated” over the past two weeks, and that the two sides had achieved “concrete results.”

Diplomats said France and Germany had been the strongest proponents of the agreement, because their firms stood to benefit the most. Firms could sell their products or services without having to share the profits with a local Chinese partner.

Backing down on labor rights

The deal will face intense political scrutiny, as the European Parliament will need to vote on the agreement. Crucially, EU diplomats said the Commission had not secured binding commitments on forced labor, as it had originally hoped.

If Brussels indeed backs down on labor rights to strike a deal, it could fail to secure a majority in the European Parliament, where the Socialists and Democrats and Greens groups have said they would not ratify an agreement without binding labor rights commitments.

China’s worsening track record on human rights, including its treatment of the Uighur minority and its crackdown on pro-democracy protestors in Hong Kong, could also torpedo the deal.

Only on Thursday, MEPs adopted a resolution condemning the arbitrary detention, torture and surveillance of Uighur, Kazakh and other minority groups in China.

As part of the deal, the EU wanted China to commit to ratifying the International Labor Organization’s “fundamental conventions” which abolish forced labor, and allow workers to organize to form independent unions. But China has refused to make binding commitments on this, fearing that independent labor unions could evolve into a political opposition to the communist party, as the Solidarity trade union did in Poland in the 1980s.

Three diplomats said Brussels could instead consider a compromise on labor rights along the lines of the EU’s trade deal with Vietnam. However, in that deal, Vietnam only committed to making “sustained efforts towards ratifying” the ILO’s core conventions. EU trade law experts have warned that such language is not legally binding.

“Parliamentarians might push back on labor rights and sustainability commitments, but also with regard to the broader strategic question of signing this agreement with China now instead of working more closely with like-minded partners,” said Mikko Huotari, executive director of the Mercator Institute for Chinese Studies in Berlin.

France, too, has expressed concern about Beijing’s human rights record, though its President Emmanuel Macron and German Chancellor Angela Merkel have both supported the deal.

Bye bye strategic autonomy

There are also worries that, by signing a deal now, the EU will jeopardize its goal of becoming less economically dependent on China and diversifying its supply chains.

“This is a completely wrong response to what has happened for the past year,” said MEP Glucksmann, from the Socialists and Democrats. “There has really been a questioning in public opinion across Europe of our dependence on China, of our inability to produce masks, of our inability to produce medicines,” he added, arguing the deal undermined the EU’s goal of securing more “strategic autonomy.”

The deal could also undermine the EU’s goal of teaming up with the new administration in the U.S. on an array of China-related issues. While Biden has promised a return to diplomacy in contrast to Trump’s combative “America First” policy, his administration is poised to take a tough line on China, according to analysts.

Reaching the EU-China deal wasn’t easy. “China needs to convince us that it is worth having an investment agreement,” Commission President Ursula von der Leyen warned in September, while trade chief Dombrovskis said that the agreement should be “ambitious” enough to address “imbalances” in the economic relationship.

However, given the economic difficulties Europe is facing amid the coronavirus crisis, its exporters are increasingly reliant on the Chinese market for growth. In the first three quarters of 2020 EU-China trade hit more than €420 billion, meaning China surpassed the U.S. to become the bloc’s top trade partner.

Jacopo Barigazzi contributed reporting.